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NMLS ID # NMLS # 228246

William Rapp, based in Houston, TX, US, is currently a Capital Advisor at Medallion Funds, bringing experience from previous roles at eXp Commercial, NEXA Mortgage, Viking Enterprise LLC and Sun Realty - Houston. William Rapp holds a 1997 - 2001 BBA in Finance @ Texas A&M University. With a robust skill set that includes REO, Sellers, SFR, FHA financing, Reverse Mortgages and more, William Rapp contributes valuable insights to the industry.

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Energy Sector Consolidations Impact Houston Office Market!

Houston Faces Office Space Surplus Amid Energy M&A Boom!

June 28, 20243 min read

Houston Faces Office Space Surplus Amid Energy M&A Boom!

Last year saw a staggering $207 billion in oil and gas company consolidations, the highest since 2012. This year, an additional $55 billion in mergers and acquisitions (M&A) have already taken place, according to JLL data. This trend is poised to temporarily reduce the office demand in Houston, a market that recorded a 25.8% vacancy rate in the first quarter.

Industry experts predict other repercussions, including significant layoffs. For instance, ConocoPhillips’ $22.5 billion acquisition of Marathon Oil, both headquartered in Houston, is expected to result in job cuts.

JLL Executive Managing Director Louis Rosenthal noted that M&A activity is not new to the oil and gas sector. He emphasized that companies are becoming more efficient with their staffing and space usage, regardless of M&A trends.

“You can look at almost every major integrated energy company and see that along the way to where they are now, they have merged, acquired, or been acquired by another company in the same industry,” Rosenthal said.

Last year’s unprecedented M&A activity is remarkable, and Rosenthal expects this trend to persist.

Savills Managing Director Alecia Schneider pointed out that financially strong companies are likely to acquire those in need of capital, potentially leading to more sublease space hitting the market. This could increase the sublease vacancy rate, which had stabilized in recent quarters.

Houston currently has 10 sublease blocks of at least 90K square feet available, six of which belong to energy and utility companies, according to Savills. Exxon Mobil Corp. alone has listed 206K square feet for sublease at 1725 Hughes Landing Blvd. in The Woodlands. In May, Exxon finalized its $59.5 billion purchase of Irving-based Pioneer Resources. Pioneer’s Irving office is expected to remain open for at least two years, offering jobs with Exxon Mobil, potentially increasing Houston’s workforce.

“Some of the largest firms have completed these billion-dollar acquisitions,” Schneider said. “With that comes consolidations, efficiencies, etc.”

ConocoPhillips anticipates saving $500 million annually post-merger with Marathon Oil, primarily from salaries, benefits, and facilities. ConocoPhillips is headquartered on North Eldridge Parkway in the Energy Corridor, near Marathon’s headquarters at CityCentre in West Houston. Marathon’s previous headquarters at 5555 San Felipe, which was vacated two years ago, left 600K square feet available and was later foreclosed upon.

Chevron’s $53 billion acquisition of Hess Corp. is also noteworthy. Hess is headquartered in New York, but its exploration and production office is located at 1501 McKinney St. in Downtown Houston.

While M&A activity is expected to continue, advancements in technology and operational efficiencies also significantly impact how energy companies utilize office space. Rosenthal noted that modern technology and software have reduced the need for extensive staffing, particularly in exploration.

“You don’t need the same kind of staffing anymore that you needed 10, 15, 20 years ago because of the advances that have been made in technology,” Rosenthal said.

Many companies have already downsized to accommodate a smaller workforce, but others still maintain redundant office leases and buildings, which become even more dispensable when merging with another company.

“I suspect that those are going to be targets for the companies who are in acquisition mode,” Rosenthal added.

Despite these trends, energy companies will continue to lease significant office space in Houston. The industry needs space to research and develop solutions for increasing energy demand and transition components, including hydrogen, renewable natural gas, geothermal energy, solar power, wind power, and carbon capture.

Houston will remain the epicenter for this research and activity across all forms of energy, Rosenthal said.

“I think we have the skill sets, we’re developing the skill sets, and the resources,” he said. “So I think in the long run, this is going to be very good for our office market.”

Should you need an experienced Commercial Real Estate Mortgage Broker, please feel free to contact me at 281-222-0433.

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© 2023-2024 Bill Rapp, Medallion Funds LLC, Director of Capital Advisory


Energy company consolidationshouston office vacancyOil and gas mergersoffice demandConocoPhillips acquisitionMarathon Oilsublease spaceExxon MobilPioneer ResourcesChevron acquisitionHess CorpEnergy transitionrenewable energyOffice market
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Bill Rapp - Commercial & Residential Mortgage Broker

Whether you're a first-time homebuyer, a seasoned investor, or a business owner with ambitious plans, securing the right financing is crucial. At Medallion Funds, we take the guesswork out of mortgages, offering a comprehensive suite of residential and commercial loan options to fit your unique needs. Looking for Your Dream Home? We understand the excitement and challenges of navigating the residential real estate market. Our experienced mortgage brokers will guide you through every step, from pre-qualification to closing. We offer a variety of loan programs to suit your financial situation, including: • Fixed-rate mortgages: Offering stability with predictable monthly payments. • Adjustable-rate mortgages (ARMs): Providing competitive rates for a set period. • FHA loans: Making homeownership accessible with lower down payments. • VA loans: Rewarding veterans with attractive rates and flexible terms. Investing in Your Business Future? Growth often requires capital, and we can help you unlock the potential of your commercial property. Our brokers specialize in a wide range of commercial loan options, including: • Purchase loans: Financing the acquisition of new buildings or land. • Construction loans: Facilitating the development of your project. • Refinance loans: Restructuring your existing mortgage for better terms. • SBA loans: Providing access to government-backed financing for qualified businesses. The Medallion Funds Difference: We go beyond simply finding a loan. We take the time to understand your goals and develop a personalized strategy. Here's what sets us apart: • Expertise: Our brokers have a deep understanding of both residential and commercial lending. • Competitive Rates: We leverage our strong lender relationships to secure the best possible terms. • Streamlined Process: We handle the paperwork, keeping you informed every step of the way. • Exceptional Service: We're committed to providing you with a positive and stress-free experience. Ready to Take the First Step? Contact Medallion Funds today for a free consultation. Let's discuss your financing needs and help you achieve your dreams!

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Copyright ©2021 | Mortgage Viking Team Licensed to Do Business | NMLS # 228246

This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply

Corporate | NMLS ID NMLS # 1825831

Corporate Address : 11920 Southern Highlands Parkway, Suite 302, Las Vegas, NV 89141 https://medallionfunds.com/bill-rapp/