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From camp to community: North Dakota boom town maturing through thriving investments

Williston offering energy industry and investors opportunities on par with most major metros

By Glenn LaFollette | glenn.lafollette@am.jll.com | @PRGlenn

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No one would confuse Williston, North Dakota with Houston.

It would be difficult to mistake Williston’s double-wide mobile home trailer serving as a temporary airport terminal with George Bush Intercontinental or even the harsh Dakota winters and balmy gulf summers. But there’s one thing these two cities have in common: they’re both attracting massive amounts of capital from all over the world, thanks to the booming market for shale energy.

“We have investors from all over the world. They’re finding that Williston is one of the places they can come and be guaranteed a return on their investment.”

Tom Rolfstad, Economic Development Executive Director for Williston

U.S. shale will draw an estimated $80 billion in annual investments over the next six years, according to JLL research. Sitting atop gargantuan reserves of shale oil and gas, Williston is already seeing a large portion of that money.

“We have investors from all over the world,” says Tom Rolfstad, Economic Development Executive Director for Williston. “They’re finding that Williston is one of the places they can come and be guaranteed a return on their investment.”

Of course, any conversation about the U.S. energy industry still starts with Houston. According to JLL’s 2014 Energy Outlook, Houston leads the United States with 15 million square feet of office construction in development and tops the country in multifamily and retail absorption. That is primarily driven by the energy business, as many energy companies locate their U.S. headquarters in the vast metropolitan haven of East Texas. But the true opportunity, for those companies and their investors, may actually reside 1,600 miles north, in the Bakken Shale formation.

The U.S. Geological Survey puts the Bakken’s oil potential at about 7.4 billion barrels of oil. The shale zone underneath the Dakotas and Montana already churns out a million barrels per day, output that has made North Dakota the second-largest oil-producing state in the country, behind only Texas. That flow also has international geopolitical ramifications, with the United States set to pass Russia and Saudi Arabia as the world’s top oil producer in 2015.

At the center of it all sits Williston, a rural town less than 100 miles from the Canadian border that until recently was best known for hosting the annual Miss North Dakota Scholarship Pageant and as the hometown of NBA coaching legend Phil Jackson. Five years ago Williston was a town of 14,000 people. Today, it’s home to nearly 35,000. That astounding growth — the town is adding roughly 10,000 workers a year — creates obvious and immediate challenges.

 “We need development,” says Rolfstad. “We need houses. We need more retail. We need more quality of life to bring the families.”

Developments like "Williston Crossing" (above) are quickly evolving Williston from rural North Dakota outpost to full-functioning city, to the benefit of the energy industry.

More Town, Less Boom

The transition in infrastructure has already started as Williston works to shake “man camp” stigma and become a community the energy industry – and its families – can call home. In March, Williston opened a $76 million, 236,000-square-foot community recreation center, the largest park district-owned indoor recreation center in the country.

"When you have a tremendous influx of workers into a place like this, these people have to eat. They don’t work all the time. They’d like to go to the movies. They need to go shopping. All of this demands some infrastructure that doesn’t exist and must be built.”

Bruce Rutherford, Leader for JLL’s Global Energy Practice

Civic leaders are also working to accommodate the fast-growing business community. Reuters reports that the community hopes to build a $150 million convention center in 2016. The proposed 16-story complex would be the tallest building in town and would contain more than 600,000 square feet of space. The plans, which still require city-council approval, include exhibition areas, retail shops, office space, underground parking, a 300-room hotel and a Ruth's Chris Steak House.

In a town with Williston’s extraordinary needs, a single steakhouse, or even a Buffalo Wild Wings – one of 13 restaurants set to open in 2013 – can represent progress.  

“When you have a tremendous influx of workers into a place like this, these people have to eat,” says Bruce Rutherford, Leader for JLL’s Global Energy Practice. “They don’t work all the time. They’d like to go to the movies. They need to go shopping. All of this demands some infrastructure that doesn’t exist and must be built.”

Investors like Stropiq, an international real estate enterprise, have taken notice. The Swiss group is constructing Williston Crossing, a $500 million, 219-acre mixed-use development offering stores, restaurants, bars, hotels, offices and apartments. The average retail rent, per square feet, per person, runs nearly 50 percent lower in North Dakota than the U.S. average.

Sustaining Business Beyond the Boom


Williston’s future presents an obvious question: What happens when the oil runs dry? The 7.4 billion-barrel estimate is, after all, an estimate. And new technology is improving the recovery process, meaning Williston’s development horizon could stretch from 20 years to five decades – or longer.

With its million square-foot investment in commercial property, Stropiq believes Williston’s economy won’t hit the brakes anytime soon. “Technology has changed a lot, and we think it’s an industry and not just a boom,” says Ellen Simone Weyrauch, a principal at the firm. “It’s an investment with a future.”

And even with Williston’s current boomtown opportunities, investors are beginning to take the long view, says Blake Lacher, with JLL’s Capital Markets and leader of firm’s national Structured Capital team.

“It’s been booming now for six or seven years. You’ve got to look at it and say, it’s not so much a boom anymore,” he says. “It’s more of a trend, and that trend is going to continue as they further prove out the potential of the reserves.”

Of course, Williston’s housing market is also undergoing tectonic changes. Thanks to the exploding population, new home prices are expected to jump 9.69 percent by 2018. Lack of residential supply has also pushed local apartment rents upwards of $2.50 per square foot — nearly on par with places like the elite luxury market of Brickell in Miami, and similar to (you guessed it) Houston, which led the nation in units under construction with 25,912 during the second quarter, and where average rents per square foot reach $1.81 in the city’s top submarkets.

"The rents right now are very high relative to the cost to build, which means a shorter investment period to break-even. You have New York, San Francisco-type rents in Williston, North Dakota. It’s just amazing to see that.”

Blake Lacher, with JLL’s Capital Markets and leader of firm’s national Structured Capital team

Those eye-popping rents sweeten Williston’s appeal for investors even more.

“I think the dynamics that are driving a lot of the current construction, and related investment appetite, aren’t so much a function of the long-term (investment) viability,” Lacher says. “It’s the fact that the rents right now are very high relative to the cost to build, which means a shorter investment period to break-even.  You have New York, San Francisco-type rents in Williston, North Dakota. It’s just amazing to see that.”

Particularly in a community that just a decade ago offered little more to see than the vast fields of wheat canola that grew right up to its borders. Today, Williston’s potential appears as endless as the North Dakota sky.

“It seems like it keeps getting bigger,” Rolfstad says. “We see nothing but opportunity.”