Will Saudi Arabia impact Colorado Real Estate?
I hope everyone had a great Thanksgiving. From the title you are probably wondering what Saudi Arabia has to do with Colorado Real Estate.
First, to understand why Saudi Arabia matters to Colorado it is important to understand the impact of oil/gas in the Colorado economy. For example with Denver’s diverse economy (high tech, financial services, etc…). What industry is the largest user of office space, utilizing almost 20% of all available space? My first guess was not oil and gas, but a recent Denver post article answered this question.
This leads to the question; what does Saudi Arabia have to do with Colorado. Over the holiday break, Saudi Arabia (the largest member of OPEC) left the current oil production unchanged continuing the glut of oil in the market (see Bloomberg article); their objective: drive out American Shale producers (aka Colorado production) as Colorado’s production prices are higher than many of the opec members. There are predictions of a US shale decline on par with the dot-com bust (see article with Russian Tycoon prediction)
What does this mean for Colorado Real Estate? The gas industry is in for a doozy the next couple years. This will especially impact areas heavily reliant on oil/gas jobs (think of the growth in Greeley/ Weld County where 58% of the drilling has taken place) along with the office market in Denver. How long and deep remains to be seen Anyone who owns real estate in Colorado should take head, like it or not gas is a huge driver of the Colorado economy. As a Russian oil tycoon says: The shale boom is on a par with the dot-com boom. The strong players will remain, the weak ones will vanish. This spells trouble for many areas throughout Colorado.
Written by Glen Weinberg: COO Fairview Commercial Lending
To learn more about Colorado Hard Money: coloradohardmoney.com
Reference Articles: