Oil and Gas Boom Causing Real Estate Shortage in NOCO
It’s a good news bad news situation for industrial real estate in Weld County these days. The latest oil and gas boom is driving up demand which in turn is creating a shortage of properties with features required by drilling companies.
KUNC’s Brian Larson spoke to Northern Colorado Business Report publisher Jeff Nuttall about the situation.
Larson: Jeff, the Niobrara Shale formation – which lies pretty much directly under Weld County – is the prime focal point creating this real estate pinch. Just how tight is the industrial market right now?
Nuttall: Data from one of the national real estate companies, CoStar, shows that the industrial vacancy rates in Weld County dropped to 6.5 percent in the fourth quarter of last year. In the fall of 2009, just before the Niobrara shale play was discovered, the vacancy rate was 8.4 percent. That means only 1.2 million square feet of vacant space is available out of the county’s total of 18.6 million. And one broker we spoke with, Steve Kawulok at Sperry Van Ness, said what’s left isn’t always suitable for what oil and gas companies need – including outdoor storage and easy access to highways.
Larson: So that’s kind of the bad news here – but if we look at the other side of the coin, the lack of space means that drilling companies are moving into Northern Colorado.
Nuttall: Absolutely. The two biggest are Anadarko and Noble. Both arrived in 2010, looking to get in on the nearly 700 barrels of oil per day that the Niobrara was producing early on. Other companies quickly followed including servicers, suppliers and distributors associated with the oil and gas industry. For example, Guy Metals is a distributor of stainless steel. They opened a 30,000-square-foot facility in Greeley last year as part of an expansion of its headquarters in Wisconsin.
Larson: This real estate boom isn’t entirely riding on the oil and gas industry, is it?
Nuttall: No. Agriculture has always been vital economic driver to Weld County, and the location of the new Leprino cheese plant in Greeley is also making the dairy industry more important than ever. The company I just mentioned, Guy Metals, also provides resources to companies in the meat-packing and dairy industries, which is why Greeley was such a good choice for them. Estimates are that the number of dairy cows in Weld County is going to more than double in the next few years as production at the Leprino plant gets up speed.
Larson: So what does all this mean for job creation?
Nuttall: Well, it’s difficult to put an exact number on that right now, but according to the experts, industrial real estate is the foundation of job-creation. Here’s a fact to keep in mind too -- towns in southern Weld, such as Fort Lupton, which is also experiencing a crunch in the industrial real estate market, report that as many as 1,000 jobs have been created since the Niobrara was discovered.
Larson: We’ve focused primarily on industrial real estate here – but what about commercial and residential. Are they being impacted by this growth?
Nuttall: Local real estate agents say the activity is indeed spilling over into the commercial sector, as evidenced by the recently completed construction of a more than 66,000-square-foot office building in west Greeley for Nobel Energy. Noble says that they’ll have 300 employees working there. Of course, when more jobs are created, residents have more disposable income, which leads to the need for more retail space. Weld County has also seen an increase in residential real estate activity
Larson: Definitely good news. Thanks Jeff. Jeff Nuttall is the publisher of the Northern Colorado Business Report.