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Real Estate Experts Assess Impact of Shale Drilling
BOARDMAN, Ohio -- The Mahoning Valley could let one of the biggest opportunities represented by the oil and gas industry slip away, making use locally of the minerals extracted from the ground, a local real estate agent argues.
“The mistake we’re all going to make is not working to keep the value-added processes here,” said Dan Crouse, an agent with Routh-Hurlbert Co., Warren. Crouse was among the Mahoning Valley commercial real estate agents and brokers in attendance at a roundtable discussion conducted Tuesday by The Business Journal. The roundtable will be published in the Oct. 29 edition.
Routh-Hurlbert is the leasing agent for the Ohio Commerce Center in Lordstown, where Savage Services recently established a transload operation to supply sand for the hydraulic fracturing process as well as other chemicals used by the oil and gas industry. The agency is among the commercial real estate firms that report seeing local benefits from the emerging oil and gas industry, even if only short term in some cases.
As pipeline projects are discussed and get under way in the region, “what it’s essentially doing is sending our raw material out of the area,” Crouse remarked. “We’re working every day on value-added processes that we can keep here,” he said.
One of the products coming out of the ground is ethane, and if there’s no way to process that ethane locally “to some degree it’s considered a waste, and the same with methane,” elaborated Chuck Joseph, broker/owner with Routh-Hurlbert. “We don’t want that ethane to leave the area.” The goal is to attract ethane processing plants and end users who will make plastics out of the materials extracted from the ground and have the manufacturers that use those materials build their plants in the Valley.
“If you look at the cost of a pipeline versus the cost of a processing plant or the cost of a mini-cracker, they’re not significantly different. It’s a tremendous amount of capital regardless,” Crouse said. “One thing we’ve seen on the oil and gas side, there's no shortage of capital coming through the oil and gas.”
Added Joseph, “Our vision is that the downstream of the Mahoning Valley should be plastics, not steel. What the oil and gas industry uses today is what made the steel industry so big. It’s the infrastructure and it’s the natural resources. We have all that for the oil and gas industry, and that’s going to mean jobs down the road. Tomorrow? No. Five, 10 years down the road, yes, but we need to be working at that now. … We somehow have got to capture the desire to keep all these natural resources here and use them here, make the products here.”
The oil and gas industry is “one of the brightest lights” the Mahoning Valley has seen for many years, remarked Joe Sylvester Jr., president of Joseph Sylvester Construction Co., Boardman. His business is seeing the industry’s impact and is getting calls for industrial space and vacant land for drilling companies to use as staging areas.
Marlin Palich, general manager of Northwood of Ohio, which has offices in Mahoning, Trumbull and Columbiana counties, reports his company has had to add space itself due to increased residential and commercial business resulting from the oil and gas industry, including a “big increase” in the Columbiana residential market.
As a result of the industry’s growth locally, Jim Grantz, broker associate with Edward J. Lewis Inc., Youngstown, recently received a request he had never before encountered. The inquiry was for “a list of our corporate housing” for a company that needed to place executives who provide engineering services. Grantz also noted he recently sold a property on Ohio Works Drive that “for the first time in a long time” was the subject of a bidding war. The property sold for more than the asking price, he said.
Many of the deals are for short-term office space, for two or three years, said Bill Kutlick, broker-owner of Kutlick Realty, Boardman. “Business is on track for a strong year but the oil and gas [business] still has to prove itself,” he said. Oil and gas is “a great shining star,” he acknowledged, but he cautioned against focusing just on that industry to the exclusion of other opportunities.
“There are other things out there. Diversification is what’s going to make this area strong,” Kutlick emphasized.
Other topics addressed during the roundtable included the impact of the Hollywood Gaming at Mahoning Valley Race Course, the overall health of the area real estate market and issues related to government regulation. The roundtable transcript will be published the November edition of The Business Journal.
Copyright 2013 The Business Journal, Youngstown, Ohio.
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