By Andrew Batt:
Savvy property investors are chasing in on a huge demand in mini-hotels from oil workers on the back of the discovery of oil in the US state of North Dakota.
Over the past decade the United States, the world’s largest oil consumer, has reduced its reliance on foreign oil imports through increased use of its own resources, leading the International Energy Agency to state that by 2020 it expects the US to be the world’s top oil producer.
The discovery of the Bakken Formation oil field in North Dakota and the use of new horizontal drilling technology have shifted the US’s position on importing oil dramatically. One of the world’s largest oil fields, the Bakken Formation is responsible for the production of over 600,000 barrels per day – around 10 percent of total US production.
This huge jump in oil production has led to workers flocking to North Dakota in a migration akin to the early gold rushes seen in California. This time the rush is for black gold, with both skilled and manual workers commanding high wages as they take advantage of the Bakken’s growing production.
The massive influx of oil workers has led to some unique problems for the town of Williston. Workers have arrived in their tens of thousands, swamping the town’s resources and leading to over 15,000 people being in need of accommodation that is simply not available.
Investment company Property Horizons, through its sister USA-based development company North Dakota Developments LLC, is one organisation that has been quick to identify and tackle the problem.
Robert Gavin, Director and Founding Partner, explained: “Thousands of oil workers in North Dakota are sleeping in their cars, tents and mobile homes, in a region where sub-zero temperatures are common. With recent reports estimating there could be as many as 24 billion barrels of oil in the Bakken, and the global need for oil continuing to rise, this situation is not going to go away.”
The company has taken a practical approach to the problem, fabricating mini hotels for the workers to provide them with high quality living accommodation including spacious communal areas and fully fitted kitchens. The production of these mini hotels has led to a unique investment opportunity for Property Horizons’ clients, as the company is the sole, exclusive agent for the developer.
The huge demand for accommodation in the area has driven up rental income, leading to substantial annual returns for those smart enough to invest early. Property Horizons’ mini hotels, currently available to investors for US$44,950 and with a realistic occupancy rate of more than 90 percent, are offering annual returns year-on-year of up to 49 percent – or five-year net rental guarantees at 25 percent.
Andrew Batt, International Group Editor of PropertyGuru, wrote this story. To contact him about this or other stories email andrew@allproperty.com.sg
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