Cushman & Wakefield Occupier Research - Oil: The Commodity We Love to Hate

33 / 36

Cushman & Wakefield / 33
Energy producing provinces feel the bite
China is the world’s largest net oil importer and the second largest
oil consumer. Petroleum and total liquids production in China in
2014 was nearly 4.6 million bpd, a 50% increase from 20 years ago.
Recently, energy and production activity has been concentrated
in the offshore regions of the South China Sea and Bohai Bay, as
well as onshore regions in central and western provinces such
as Sichuan, Inner Mongolia, Gansu, and Xinjiang. China’s national
oil companies dominate the oil and natural gas upstream and
downstream market in the country. International oil companies,
however, do have access to the more technically challenging
onshore and offshore fields.
National and international HQs favor Beijing
Beijing is home to both the headquarters of China’s large national
oil companies and the China headquarters of international
oil companies doing business in the country. Other energy-
centric markets in the region are the preferred locations for
the divisional and sub-regional offices of both national and
international oil companies. But there are city-level specific
energy-centric markets. In Xinjiang, Karamay’s energy sector
accounts for a substantial 77% of overall city GDP. However, office
users in markets like Karamay tend to own rather than lease.
Other markets, specifically Dalian and Tianjin, not only boast a
significant energy component in their local economies, but they
also have established office leasing markets.
High prices – Dalian job growth; Low prices – Shanghai job growth
As oil prices rose prior to the end of 2014, energy sector-
dominated markets such as Dalian and Tianjin experienced the
largest job growth in percentage terms. When oil prices declined
in late 2014, job growth in both of these areas slowed sharply,
but remained positive. Conversely, non-energy centric cities such
as Shanghai saw significant job growth over that same period.
Benefiting from the net positive economic effects of cheaper oil,
companies in the non-energy centric markets consequently used
their profitability to raise headcounts in an attempt to gain greater
market traction.
Substantial office supply expected in coming years
In the next two and a half years, office supply is expected to
increase across a number of oil-centric markets in China, leading to
an increase in space availability.
CHINA OIL PRODUCTION
Source: EIA, Cushman & Wakefield Research
CHINA GAS PRICE
Source: National Development & Reform Commission, Cushman & Wakefield Research
CHINA ENERGY SECTOR EMPLOYMENT,
ANNUAL GROWTH
Note: 2015 figure is estimated
Source: National Statistics Bureau, Cushman & Wakefield Research
OIL PRICE VS. CHINA RENT CORRELATION
Note: Rental is average rent for the eight tracked oil markets in China
Source: EIA, Cushman & Wakefield Research
2,500
3,000
3,500
4,000
4,500
19951997 199920012003200520072009
2011 20132015
Thousands of bpd
5,000
6,000
7,000
8,000
9,000
10,000
11,000
Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11Jan-12Jul-12Jan-13Jul-13Jan-14Jul-14Jan-15Jul-15Jan-16Jul-16
RMB per ton
0
50
100
150
200
250
$0
$20
$40
$60
$80
$100
$120
$140
20072008200920102011 20122013 20142015
Q2-2016
RM per sq m per month
$ per barrel (Brent)
Oil Price Office Rent -100
0
100
200
300
400
500
600
20042005200620072008200920102011 2012201320142015
Thousand people