WILLISTON, ND—The American boom in oil and gas production hastransformed far more than the energy market. The boom has alsoswelled the population of towns such as Williston, ND and Hobbs,NM, among many others, and created the need for every imaginabletype of real estate. JLL responded to thistransformation by creating a special oil and gas practice aboutthree years ago that helps people in real estate understand therapid shifts occuring in the economy.

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“The real estate industry was largely ignorant of what was goingon in energy,” Bruce Rutherford, the Houston-basedinternational director of JLL's oil and gas practice, tellsGlobeSt.com. As reported in GlobeSt.com last week, the firmrecently published its 2014 North AmericanEnergy Outlook study, which predicted that $80 billion inannual investments over the next six years will pour into the newenergy-producing regions, turning small outposts into genuine boomtowns.

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The expansion, largely driven by fracking and other technologieswhich allow energy companies to extract oil and gas from shaleformations, “really did take most of the world by surprise,”Rutherford adds. “Pieces of the technology have been around for avery long time,” especially fracking, or fracturing the shalethrough hydraulic engineering, but only after recent advances ingeology and seismic technology were energy companies able toconsistently locate oil in the shale formations. “It's only in theUS that people were working on these things.”

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The advent of these extraction technologies will in a few yearstransform the US into a net exporter of energy, according toexperts. Geologists tout the area around Williston, known as theBakken, as the next Saudi Arabia. In fact, by 2017, the US willsurpass Saudi Arabia and Russia as the world's leading oilproducer.

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“Anywhere there is an energy boom,” Rutherford says, “you'regoing to see the real estate market change dramatically. It createsa business that has to be supported regionally which means jobs anda surge of economic activity in cities like Houston, Denver, Dallasand Pittsburgh.” Furthermore, the cities and towns that sit atopthe shale formations have become the fastest growing small citiesin the US. Williston, for example, has grown from about 12,000residents to 37,000. “That has brought many benefits but manyproblems as well.”

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“The man-camps are everywhere,” he explains, a reference to thevast collections of temporary housing that municipal officialsworry will turn into slums. “They are anxious for developers tocome up with plans for more permanent housing. But they also have adesperate need for more roads, hotels, retail, restaurants andgrocery stores.”

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However, the area has seen so little development for so manyyears that local banks and other local sources of capital can'tsatisfy the extraordinary demand. But Rutherford says that theright projects can find investors. A new industrial park inWilliston, for example, would "lease like hotcakes.” The developerof such a project could promise prospective investors in Denver,Chicago and New York to “get it 100% leased before finishingconstruction.”

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A few major developers have already started remaking thelandscape. For example, Stropiq, an internationalreal estate firm, has just launched WillistonCrossing, a $500-million, open-air project that willprovide 1-million-square-feet of retail, entertainment and hotelspace, with a mix of office and residences. The company plans tobreak ground in March 2015 and finish the project by April 2017. AJLL team is handling the pre-development marketing efforts. SinceSeptember 2013, Stropiq has invested about $20 million in Willistonprojects.

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“Little Hobbs in New Mexico is like Williston; it needseverything,” Rutherford says. But no two boom towns are alike. Thetype of real estate needed “depends on the character of each town.”A place like Eagle Ford in Texas seems to have enough multifamilyhousing. And Pittsburgh does not require new industrial parks.“There is plenty of industrial real estate there left over from theRust Belt days.”

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And the impact of the revolution in energy production will reachfar beyond certain local markets. In fact, Rutherford expects thatthe boost in natural gas production will produce ripple effectsthroughout US manufacturing. The export of gas, for example, willrequire a new set of industrial infrastructure, includingprocessing plants, in states like Texas, Louisiana, Colorado andOklahoma. And the cheap electricity that will come from gasproduction will help “American manufacturing experience arenaissance for decades to come.”

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Rutherford advises people to notice where the shale formationsare located, regions like the Midwest, the Northeast and the South,because those areas will have the best access to inexpensiveenergy. “That is where manufacturing will probably blossom. That'swhere I would be focusing my investments in industrial realestate.”

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Brian J. Rogal

Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.