The energy sector is a growing driver of the U.S. commercial real estate market, spurring activity in markets as far-flung as parts of North Dakota, Tulsa, Okla., and Denver. REFIs Samantha Rowan recently sat down with Dan Lisser, a principal at Johnson Capital, and Norman Radow, founder and ceo of The Radco Companies, to discuss the longevity of the sector and the challenges to getting established in these markets.
Radco has made a number of investments in markets that have a strong energy component, including deals in Tulsa and Denver. Energy is an important part of the equation but isnt the only part, he said. In Tulsa, its not just playing production but its playing the pipeline.
While Radco hasnt been active in North Dakota, Johnson Capital has been a working to arrange loans in that market for several years. Based on the current technology, the expectation is that the energy sector in these markets will have a 30-40 year run, Lisser noted. Lenders are mainly originating loans of five years, with 10-15 year amortization periods.
Youve seeing an explosion of investment by major companies. That has translated into increased economic activity and increased building, Lisser said. While most of the activity has been in the apartment and hotel sectors, the retail sector is starting to emerge. The goal is to get the workers to move their families up there. Were seeing bowling alley and indoor water parks being constructed, he said.