For so many years we’ve become accustomed to the price of energy rising, so now that energy prices have been falling throughout 2014, what does this no mean for commer-cial real estate? Well for everyone who’s not tied to making money from rising energy pric-es, generally speaking this is good. It means that the price of energy for manufacturing is lower, the price of fuel for shipping and transportation is lower, and the price for heating and air conditioning within many of our homes is now lower, too. In addition, the price for commuting by car long distances to work is now lower, which puts more spending money back into the pockets of those people who have had to make these long commutes.
For us here in the U.S., one great contributing factor to the price of oil coming down is the fact that many of the normal oil-producing countries are now having their own eco-nomic challenges. When in the past these countries would all bond together to set prices and production levels, they now recognize during these challenging economic times that selling more oil means that their individual economies will be doing better, so collectively they’re no producing oil in quantities that are leading to these greatly reduced oil prices.
So what does this mean to all of us? For many of us it brings us a sigh of relief from the pinch that increased energy prices had been putting on our wallets. Energy prices are still higher that they were years ago, but today’s prices represent the best ones we’ve seen in a long time. The price of both oil and natural gas were approximately 45% higher early in 2014 than they are right now, and this represents a huge difference!
For many people owning businesses, this brings them some solid relief. With reduced energy prices now for manufacturing, distribution, and transportation, many businesses now are retaining more money, giving them greater profits. But this of course will remain only as long as these reduced energy prices remain with us, too.
For landlords, what this could mean is getting their rent checks on time more often from tenants who have been stressed financially, as well as experiencing fewer tenants going out of business.
So if these reduced energy prices sustain themselves, both people and businesses are likely to have more money in the bank, making it easier for this money to then help sustain and drive up both rents and the overall demand for real estate. But this will also depend on how our local economy is performing, also.
Having these reduced energy prices, though, is great for both businesses and consumers. The price of energy has been causing a much bigger drain on people’s pocketbooks in recent years, and getting some welcome relief from all this puts more spring in our step, and more money into our bank accounts.