Oil Plunge Hits Office Market, But “So Far” No Apocalypse
“Here in Houston a number of projects have been canceled. Engineers are put on ‘hold.’ There have been some contract engineers laid off, and hiring has been suspended. Everyone is waiting for the other shoe to drop.” That’s how an engineer in the energy sector saw it. And it captured the mood.
So the sky isn’t quite falling on the Houston property market. Not yet. With 18.4 million sq. ft. of office space under construction, the epicenter of the US energy industry is far ahead of number two, New York City with 7.6 million sq. ft. under construction. Dallas is number four with 7.5 million sq. ft. Much of the growth in Texas over the last few years has been spawned by the “shale revolution.”
But the layoff announcements in the oil-and-gas sector are hailing down on the industry.
Weatherford International – headquartered in Houston – announced last week, after reporting a quarterly loss of $475 million, that it was axing 5,000 employees, or 8.9% of its global workforce, to save $350 million per year. Yesterday, Halliburton announced 6,400 job cuts, on top of the 1,000 announced in December. Baker Hughes, which is being acquired by Halliburton, announced 7,000 job cuts. In January, Schlumberger announced 9,000 layoffs. This brings the layoff announcements of the four largest oil-field services companies to 28,400. It’s all about cash flow, now that pricing chaos has swept over the once flush industry.
Oil majors and smaller companies have chimed in with their own layoffs. Privately held companies might quietly proceed with cuts. And many of these folks would have needed some office space.
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