HOUSTON--Lower oil prices may not have as severe an effect on the Houston commercial real estate market as previously thought. That's according to a recent report released by CBRE.

Fears of a broad-based decline are overblown, says the report, which finds that the degree of impact will vary based on the magnitude of change in employment, and by property type, with expected impact to the retail sector being negligible and the office sector, modestly negative. 

"Retail real estate in Houston is best positioned among the CRE asset types, in the event of an extended downturn in the price of oil, due to limited new construction and a net consumer benefit due to lower oil prices," Spencer Levy, Americas Head of Research for CBRE, told GlobeSt.com.

The report also outlines that:

·      The U.S. economy will benefit on net from lower oil prices, with the positive impact to consumer spending potentially boosting real GDP growth by up to 0.7 percent in 2015, according to Moody's Analytics.

·      Houston's economy is entering this period from a position of strength, having gained four new jobs since 2009 for each one lost during the recession while experiencing income growth about the national average.

·      While energy is a key industry in the Houston economy, the sector has also diversified across the energy industry's three segments – upstream, midstream and downstream – and each is impacted by lower oil prices in different ways. Most notably, the negative impacts to exploration and production (upstream) will be partially offset by positive impacts on petrochemical manufacturing (downstream).

·      Retail is best positioned among the property types because the spending of Houstonians will benefit from lower gasoline prices, the occupancy rate is historically high and construction of new shops has been uniquely constrained in this cycle.

·      The office market is most exposed due to the Houston's concentration of upstream energy headquarters and major operations as well as the amount of new supply coming on line through 2017.

·      Impacts to industrial and multifamily will likely be limited to slower rent growth. Both sectors enter this period with strong occupancy and face offsets to weakness in the upstream segment from downstream expansion and, for multifamily, support for continued demand from a tight single-family market.

“Ultimately, the fall in oil prices results in winners as well as losers. The winners are broadly spread, the losers are usually in specific locations,” says Levy. “Investors are acknowledging the changing global industry dynamics, including the U.S. push for energy independence, the decline in OPEC's power and growing political support for the international trade of domestic liquefied natural gas (LNG) and crude oil – all of which could potentially have positive implications for Houston and the U.S. energy sector.”