Whenever people get together to discuss business in Lafayette these days, the talk often turns to the price of a barrel of oil, which is about half what it was this time last year.
“In the marketplace, it’s a constant conversation I’ve been having,” said David Gleason, a real estate agent specializing in industrial developments who spoke Thursday at the annual Acadiana Commercial Outlook for the 2015 real estate market.
Last year was a good one for commercial real estate — the market of industrial sites, retail space and office buildings.
The boom times were driven in part by oil floating happily above $100 a barrel.
But oil was trading at less than $50 a barrel as real estate professional and businesses leaders gathered Thursday at LITE in the University of Louisiana at Lafayette Research Park to divine the future of the commercial real estate market.
There was cautious optimism, despite scattered announcements of oil patch layoffs in recent weeks and some predictions that oil’s dive is not done.
Although unemployment has ticked up, other indicators such as home sales and retail spending remain strong.
Lafayette Economic Development Authority President and CEO Gregg Gothreaux said regardless of what the future holds, he does not envision the bottom falling out of the local economy as it did when oil prices plunged in the 1980s.
At the time, oil and gas businesses accounted for more than 70 percent of economic activity in Lafayette.
Gothreaux said that figure is now at 45 percent, thanks largely to the emergence of Lafayette as a regional health care hub, its growing entertainment economy and a nascent technology sector.
“We are going to create 1,000 new technology jobs just with three companies,” he said. “We are in a game-changing environment.”
Even within the oil and gas sector, business owners seem better prepared for a downturn than in the 1980s, said Ryan Pecot, a senior leasing executive with Stirling Properties, a major commercial real estate firm that does work throughout the South.
“I think the business community has been very prudent in the lessons they’ve learned,” he said.
Pecot said he doesn’t expect the commercial real estate market to break any records this year, but it should “end up OK at the end of the day.”
Still, Lafayette could be in store for some lean times.
Oil and gas companies will likely be asking vendors to cut their rates, and any plans for expansion will be carefully reconsidered, said Joseph Zanco, chief financial officer of Lafayette-based Home Bank.
“We are having a heck of a lot more discussions with our clients,” he said. “... You don’t want to be overextending yourself if you’re in the oil business now.”
Still, Zanco said, the local banking industry is solid and has yet to feel any major impacts from the downturn in the oil market, and many customers in the oil and gas sector seem prepared should times get tougher.
“Our clients have been stockpiling cash for a while,” he said.
They might need it.
Louisiana Oil & Gas Association Vice President Gifford Briggs said oil supplies continue to grow, a factor that tends to keep prices low, and the market is not expected to stabilize any time soon.
“We are probably looking at a new normal,” he said. “You are going to have fewer employees and less profitable companies.”
Briggs said one bright spot is the boom in industrial activity in the Lake Charles region, which could absorb laid-off oil and gas workers.
“So we many not see it on the employment side,” he said.