Dallas faces less risk from the drop in oil prices compared to other parts of Texas, shared a panel of oil and gas, economic, and real estate experts with about 300 early risers over breakfast at the Dallas Country Club on March 3. They also predicted that the price of West Texas Intermediate would reach somewhere between $62 and $79 a barrel before the end of the year. The event was sponsored by Briggs Freeman Sotheby’s International Realty and Thompson & Knight.
Attendees also received another bonus with their breakfast…a chance to meet potential Republican presidential candidate, Rick Santorum, who stopped by to shake some hands with this influential group before the panel commenced.
Emily Parker, managing partner of Thompson & Knight LLP, moderated the distinguished panel.
Panelist Dr. Bernard Weinstein, associate director of the Maguire Energy Institute at the SMU Cox School of Business, said, “Oil and gas comprised 11 percent of the Texas economy in recent years. But in DFW, it’s just 3 percent of the economy. Unless that second shoe drops and oil goes to $20 to $30 a barrel, we may not see much overall impact at all on real estate in DFW. The areas hardest hit have been the producing areas like the Permian Basin and Houston.”
Dennis Grindinger, executive vice president, South America, for Hunt Oil Company, also provided his perspective on the current state of the oil market:
1. Discount the headline. We’ve cut capital expenses and operational expenses at a radical rate.
2. Technology allows us to be more efficient and sustain levels of production at lower prices, but we will likely have one more reduction in production as rig counts decline.
3. Money is chasing deals. In 1984 and 1991, there was not a strong equity market looking to snap up deals, but now there is equity ready to invest.
4. Be prepared for volatility. We don’t know what the Saudis are doing. It’s going to be very hard to predict.
Holt Foster, partner with Thompson & Knight LLP, added, “Energy is like property. It is a limited resource, so it will go back up. We’ll probably have a secondary dive and then settle out between $60-$80.”
Robbie Briggs, president and CEO of Briggs Freeman Sotheby’s International Realty, said, “The oil and gas industry may only be 8 percent of the Texas market, but it may be the upper 8 percent. We’ll see some effects at the upper end of the residential real estate market. Instead of people looking at a $15 million house, it may be a $10 million house.”
Phil Puckett, executive vice president of CBRE, compared Dallas/Fort Worth commercial real estate with Houston. “DFW right now may be experiencing the best commercial real estate market that Dallas will see. New companies are coming or expanding and there are more deals running under the radar, especially more million square foot deals. In DFW, less than 2 percent of occupied real estate space is energy related. Dallas for the first time has not overbuilt, and may actually have a shortage of Class A space.”
In Houston, the story is different. Houston has 17.6 million square feet of new construction vs. 7.1 million under construction in Dallas. Much more of it is speculative and still available for lease, or even being put back on the sublease market.”
Bill Jackson, senior vice president and managing director of NorthMarq Capital, LLC, said, “The whole bottom line is jobs.” He also said that he liked the low interest rates because it made borrowing funds more attractive.
Briggs also talked about residential real estate in light of the global economy. “The eyes of the entire world are on Texas. This is no longer a local real estate market. We have to look beyond the borders. International investors are long-term investors, and that’s how we ought to be focused.”
Parker asked about the Fort Worth market where Briggs Freeman is about to open a new office. Briggs said, “That market is incredibly strong.” He mentioned his top Fort Worth agent as having sold $100 million last year. Also, with all the corporate relocations, “They want ranches, so our ranch division is going off the charts.”
When Parker asked each one to give a prediction of the price of West Texas intermediate will be one year now, here were the replies:
Robbie Briggs: $65
Bud Weinstein: $62
Dennis Grindinger: $78
Holt Foster: $64
Phil Puckett: $63.50
Bill Jackson: $79
Only the future knows which panelist will be the closest to predict the price. “If we could predict the price of oil, I would be living on my own island,” Parker joked.