How Rising Gas Prices Could Affect Commercial Real Estate


I recently read an article on Bloomberg about the pressure of higher gas prices on consumers in the European Union.  The reporter interviewed a salesman from London that had “adjusted” his vacation from four weeks at a five star resort to three weeks at a four star resort!  Aside from me wondering how to fit such a vacation in my life, the article raised several issues that have direct impacts on commercial real estate as well as the general economy of the United States.

Bear with me and see if you concur:

  1. Fact: the average price per gallon of gasoline in the US is $3.82 versus the average within the European Union of $8.44 per gallon.  Higher taxes in the EU aside, this is a dramatic differential.  However, I was reminded of my most elaborate vacation in 1998 to London (tuitions and recessions have limited vacations since).  The price of gasoline in London during my trip was approximately $4.00 per gallon and I boldly told my wife that we would never have such prices in the US.  We are there now, so is $8.00 per gallon in our near future?
  2. Gasoline prices have become a major political issue with the Democrats blaming Big Oil and seeking to impose higher taxes (EU has higher taxes on gasoline, how has that helped the consumer?  Yes, I know it is a different tax, but a tax nevertheless.)  Republicans are blaming environmentalist and our inability to drill.  Political wrangling aside, the market will determine gasoline prices, both sides of the political spectrum will simply delay the inevitable and then we may see a spike.
  3. Will the European lifestyle of long vacations and periods of work holidays jump across the “Pond” and influence US work ethic or will EU reverse trend and more closely mirror the US work environment?
  4. Lastly, how does the iPod/Apple generation wish to work?

My assertion in blog format with little to no PhD research is as follows:

  1. Gas prices will increase by $.50 to $.75 per gallon on an annual basis, unless there is a severe, double dip recession and OPEC is forced to increase production.
  2. EU work habits will adjust and create greater competition for US industry.  The recessions/depressions in some EU countries have awakened the younger generation.
  3. US work habits will become increasingly mobile but also very unbalanced work hours.  The young generation thinks nothing of working weekends or late nights in exchange for late starts.

So finally, how does this translate into commercial real estate:

  1. Major cities–Nashville, Knoxville and Chattanooga—need to awaken to the urgent need for affordable and attractive mass transportation.  All three of these cities have a woeful track record.
  2. In fill development will thrive.  The Nashville CBD is very active on the leasing front with corporations seeking to accommodate the new workforce. (see Assurion announcement, Service Source, etc…).
  3. Recent institutional activity (Baker Donelson Center purchased by Sun Life, Terrazzo building on the market and attracting interest, Pinnacle at Symphony Place close to full occupancy) are all indicators of smart money recognizing the trends.
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About Cornerstone Index

Cushman & Wakefield | Cornerstone Nashville | Chattanooga | Knoxville

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2 Comments on “How Rising Gas Prices Could Affect Commercial Real Estate”

  1. benjaminosgood Says:

    Great post, thanks for sharing!


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