Following years of technological change and a record-setting volume of mergers and acquisitions (M&A), the oil and gas industry is transforming. While major enterprises are growing larger, their real estate footprints are becoming more compact and centralized as companies consolidate staff and property portfolios, increasingly relying on technology rather than people.

Almost every major integrated energy company has engaged in M&A activity, but the recent surge has been exceptional. Between mid-2023 and July 2024, M&A among oil and gas exploration and production companies totaled an unprecedented $250 billion, according to Enverus Intelligence Research. All this activity is reshaping the way oil and gas companies acquire space, manage their properties and facilities, and reduce real estate costs.

Factors Driving Industry M&A

Industry consolidation is being driven by the maturation of domestic shale deposits in the Lower 48, including the Permian Basin and Eagle Ford Group in Texas, the Bakken Formation in North Dakota, and the Marcellus Formation on the East Coast. As vast as these resources are, every oil and gas field is finite, and fracking sites deplete much faster than conventional oilfields.

Now, companies are turning to M&A to replenish assets and boost shareholder returns more quickly and cost-effectively than through organic growth. Consolidation also strengthens companies against the rise of alternative energy sources and stakeholder interest in zero-carbon emissions while mitigating market volatility and regulatory risks.

Shrinking Headcounts and Footprints

Consolidation often leads to administrative streamlining and layoffs, reducing the need for office space. This provides oil and gas companies with an incentive to unload outdated, underutilized, or poorly located facilities. The ConocoPhillips-Marathon Oil transaction, for example, merges two Houston-based companies that will no longer need separate headquarters. However, industry footprints were shrinking even before this latest wave of consolidation. Oil and gas exploration is now increasingly driven by geographic information systems and other sophisticated technology, reducing the need for manpower in the field.

With headcounts declining by as much as 30 percent and little projected workforce growth in the near future, many energy companies face space underutilization and excess real estate. The continuation of hybrid work policies, albeit with some in-office requirements, also contributes to underused space. Some companies are actively shedding space, while others continue to carry excess real estate.

JLL Research shows that in Q4 2024:

Technip Energies vacated its approximately 300,000-square-foot U.S. headquarters in Houston’s Energy Tower II and is relocating to a 171,600-square-foot space at West Memorial Place II.

OneSubsea downsized a 212,000-square-foot office at 4646 W. Sam Houston Parkway North to 99,400 square feet at Energy Center V.

Modec reduced its footprint from 168,800 square feet at Energy Crossing II to 116,200 square feet at West Memorial Place I.

Some companies have been actively shedding space, while others continue to carry excess real estate. The oil and gas industry’s response to hybrid work policies has varied, with many firms enforcing some level of in-office attendance while still allowing for flexibility. Companies that do retain space are increasingly focused on optimizing it for collaboration, innovation, and employee well-being.

The Flight to Quality Properties

Many energy companies are not only looking to optimize their real estate portfolios but also to secure high-quality office space that supports talent recruitment and retention. Oil and gas companies compete with many other sectors for tech-savvy workers who expect modern workplaces, short commutes, and hybrid work options. HR executives are increasingly involved in real estate decisions to align office space with workforce strategies.

Today’s office market dynamics enable energy companies to secure space in premium buildings at rents significantly lower than pre-pandemic levels. With Houston’s office vacancy rate at 26.4 percent in Q3 2024, companies have opportunities to lease high-quality, amenity-rich properties in desirable locations near dining, retail, and transit options.

Hybrid work policies are likely to continue, though with some limitations, as many employees prefer flexibility. Yet, most energy companies recognize that in-person work fosters collaboration and innovation. Many are consolidating into premium buildings with generous on-site and neighborhood amenities. They seek workplaces designed for productivity and engagement, featuring natural light, green space, fitness centers, and modern HVAC systems. Flexible workspaces, meeting rooms, and informal collaboration areas also provide adaptability.

Houston’s Continued Strength as an Industry Cluster

In the United States, energy companies have been consolidating into Houston, the long-standing hub of the oil and gas industry. Denver has also become a notable energy sector center, offering a high quality of life and urban amenities. Both cities provide access to talent, capital, and industry resources.

For instance, in 2024, Chevron Corp. announced its headquarters relocation from San Ramon, California, to Houston. Senior leadership is also moving to Houston to enhance collaboration with executives, employees, and business partners. Chevron plans to transition all corporate functions to Houston over the next five years while maintaining crude oil fields, technical facilities, and refineries in California. The company will also continue supplying over 1,800 retail stations in the state.

In addition to Houston and Denver, energy companies continue to establish operations in other Texas markets, as well as in oil and gas centers such as Greeley, Colorado; Oklahoma City and Tulsa, Oklahoma; Pittsburgh; and New Orleans.

Looking Ahead

With energy demand expected to rise in the coming years, the industry will require space to manage growth efficiently. As oil and gas companies consolidate, they aim to optimize their workforce and real estate strategies. However, expectations for quality office environments remain high, particularly in sought-after energy corridors.

Companies are also placing a greater emphasis on environmental, social, and governance (ESG) factors when selecting office space. Many are seeking buildings with improved energy efficiency, sustainability certifications, and enhanced wellness features. Modern office design is playing a key role in retention strategies, particularly as companies aim to attract younger generations of workers who prioritize workplace experience.

By understanding industry consolidation trends and market dynamics, executives can better determine ideal locations to manage their property and facilities while reducing real estate costs— all while ensuring continued energy supply nationwide.