Feb. 10, 2016
By: Bruce Rutherford, International Director of JLL’s Global Energy Practice Group
Real estate is typically the second highest cost of business for an energy company and is a crucial element in recruiting and retaining STEM talent. Particularly when times are tough, real estate can be leveraged to significantly improve operations, reduce costs and plan for tomorrow.
JLL’s Energy Practice Group will offer market insights and expertise on these topics at the NAPE Summit, Feb. 10-12, in Houston. The annual three-day event brings together more than 17,000 prospects, producers and purchasers from the upstream oil and gas business to connect and make deals.
Given the current environment, planning for the future can be daunting, but those companies that can see beyond the next 12 months should take advantage of this time to reassess how well-aligned their real estate footprint is to their business objectives.
After nearly 18 months of sustained low oil prices, most companies are finding themselves in one of three camps as it relates to their space needs. The first is that despite the difficult energy environment, there are opportunities for some companies to take advantage of this cycle. For instance, companies that cut back on capital spending early and still have a strong balance sheet, may consider taking advantage of current market conditions by inexpensively acquiring assets. In this case, real estate can support opportunistic expansion activities. Others that may be highly leveraged and in need of additional cost containment should look to lessen their real estate footprint, restructure leases or explore alternative deal structures to reduce costs. A third group may be on the buy side of an acquisition and will need to address a near-term space realignment.
Whatever camp they find themselves in, all companies must continue to execute strategies for recruiting and retaining STEM (science/technology/engineering/math) workers. Fifty-five percent of the energy industry’s current workforce may retire over the next decade, exacerbating the talent shortage. Two trends are worth noting in planning for a highly qualified STEM workforce, and both represent drastic changes to ‘old school’ workplace strategies and corporate locations.
The first trend is to bring jobs to workers, not vice-versa – even when it’s expensive. JLL research indicates that STEM talent is not moving to where the jobs are, but instead want to choose where to live and have jobs come to them. In many cases they are not choosing traditional energy hubs. Expansion into STEM-educated, Millennial-rich markets like Denver, Pittsburgh, Nashville and Austin is being driven by both Canadian and U.S. energy companies.
Secondly, to compete with tech companies for STEM talent, energy companies will increasingly have to use their office space to attract the best and brightest. Fun cultures that boast work-life-balance have long been a draw of the tech industry for STEM workers. To recruit and retain top talent, oil and gas companies will need to employ real estate that creates the high-quality lifestyle STEM workers desire.
For a demonstration on the “Workplace of the Future” and to learn more about how well-executed real estate strategies can reduce costs and improve operations, stop by booth #3031 at NAPE.