Thursday, March 1, 2012

Will Marcellus Shale Boom Lead to Commercial Construction Boom?

Will the expected boom in Marcellus Shale natural gas drilling lead to a construction boom in West Virginia?  A recent article in the Charleston Gazette suggests that it just might.  The article, appearing in the February 18, 2012 issue of the Gazette, reports that Charleston’s five downtown “Class A” office towers are at “effective full occupancy”.  The increase in demand for office space is reported to be based, in part, on an increase in energy sector firms locating in downtown Charleston. 

A local Real Estate Broker is quoted in the article opining that this increased demand is likely to lead to the construction of one or more additional office towers in downtown Charleston, or possibly lead to spillover demand of “Class B” office space, which would likely have to be retrofitted into modern attractive office space.  In fact, the article reports that a group of developers are currently planning to build a Marriot Courtyard on Kanawha Boulevard, along with 10,000 to 15,000 square-foot office building to be constructed at the same time.  Apparently, the group has already fielded inquiries from potential tenants who are interested in the office space. 

There can be little doubt that an increase in drilling activity in West Virginia is likely to lead to positive economic consequences for West Virginia.  Part of these benefits are likely to trickle down to the local construction industry, in the form of well and pipeline construction, construction of office space, and construction of manufacturing and processing plants. It has been widely reported that the State government has worked overtime as of late to attract companies to locate one or more ethane cracker plants in West Virginia.  An ethane cracker plant is a facility that converts natural gas into products used in the manufacture of plastic, such as ethane, ethylene, and polyethylene.  Several construction projects would be created if the State is successful in its endeavors.  First, as the Gazette article points out, the location of an ethane cracker in West Virginia could mean the construction of more than one new office building in downtown Charleston to house the executives, management teams, and administrative personnel of this burgeoning industry.  The cracker facility(ies) themselves would also have to be constructed.  Additionally, an ethane cracker plant could lead to increased construction activity by attracting new ancillary industries, such as plastic manufacturing facilities. 

For now, we will have to wait and see whether our cracker dreams will come to be the reality.  But it is clear now that the uptick in the local oil and gas industry is good news for local construction contractors.

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