Who Benefits From The Persian Gulf War?

The Real Estate Espresso Podcast

Who Benefits From The Persian Gulf War?

Spotify Google Podcast Apple Podcast Subscribe via RSS Leave a Review

Who Benefits From The Persian Gulf War?

Welcome to The Real Estate Espresso Podcast, your morning shot at what’s new in the world of real estate investing. I’m your host, Victor Menasce.

Today we’re talking about the war in the Persian Gulf and why a market like Lake Charles, Louisiana could be the real beneficiary, even if the war were to end today. That might sound counterintuitive at first. After all, war is destructive, creates uncertainty, it interrupts trade, and raises risk across the board.

But when you step back and look at the global energy map, Lake Charles occupies a very special place. The Strait of Hormuz is the most important energy choke point in the world. A meaningful share of global oil and gas moves through that corridor. When conflict disrupts flows through the region, the world starts looking for stable, dependable alternatives. That includes Australia. It also includes Louisiana, and according to Louisiana economist Lawrence Scott, the disruption could be a relatively positive development for an energy state like Louisiana, and specifically for LNG.

He believes one of the biggest effects could be to accelerate LNG projects that have already been announced but have not yet reached final investment decision. Lake Charles is not just another Gulf Coast city. It sits at the epicenter of a network of natural gas pipelines, and it’s really become a hub for not just LNG, but for petrochemical, for pipelines, for export infrastructure, and for abundant low-cost natural gas. The world is becoming concerned about energy security, then places with reliable low-cost energy suddenly become more valuable.

The benefit to Lake Charles is not just about today’s commodity price spike. It’s about what happens when global buyers, lenders, insurers, and sponsors reassess geopolitical risk. If you’re a buyer in Europe or Asia, you’re going to want to have more diversity in your supply base. If you’re allocating capital to energy infrastructure, you’re going to favor those projects in places where rule of law is pretty clear, where shipping risk is lower, and the feedstock is dependable.

This could also increase demand for natural gas out of the Haynesville Shale, one of the closest major gas plays to the Gulf Coast. And that matters because natural gas is very inconvenient to work with, so distance matters, and transportation cost matters. The shorter and more efficient the path from the wellhead to the export terminal, the stronger the economics.

The war is also widening the price gap between U.S. natural gas and gas in Europe and Asia. If you’re a chemical manufacturer deciding where to build, and gas is, say, $14 in Germany but $3 in Louisiana or Texas, that’s not a hard decision. It makes Louisiana much more attractive not just for LNG, but for petrochemical and energy-intensive manufacturing as well. If you’re building a fertilizer plant or a chlorine plant, anything like that that is energy intensive will benefit from that lower-cost energy.

Now, for real estate investors, that can translate into a stronger demand for workforce housing, for furnished rentals, for neighborhood retail, industrial space. That doesn’t mean, of course, that every single project is going to be a great project. That would be the wrong conclusion.

In fact, we launched a workforce housing RV park in Lake Charles back in 2018, and that project has struggled for many years with low occupancy. It’s only now, in the past few months, performing at an acceptable level, and if that is sustained, it’s actually going to turn into a profitable project. We also have an assisted living and memory care facility in Lake Charles that’s currently operating at 100 percent occupancy, with strong monthly rates. Now that performance is a reflection of both demand, of course, and a really strong operations team.

So real estate is always hyper-local here as well. You still need to underwrite the neighborhood product by product. You need to ask whether the asset serves the actual customer. Is the housing for short-term contractors? Is it for permanent employees? Is it for port workers? You really need to understand who the customer is.

If you’re already invested in places like Texas that do have an energy component to the investment thesis, Lake Charles, Louisiana may be worth a second look. The rental rates are quite strong. Rental rates bottomed out after the hurricanes in 2020, and a moratorium on new LNG from the Biden administration did suppress demand. Those hurricane-damaged units that were repaired and re-entered the market in 2022 increased supply.

Today that situation is completely reversed. We have the Woodside LNG facility under construction. That’s a multi-billion dollar project. Venture Global announced final investment decision just last week on an eight-and-a-half-billion-dollar expansion to the next phase of their LNG facility. Then Commonwealth LNG just got past their environmental for expansion of their facility.

There’s a lot happening in Lake Charles. Even if the war in the Persian Gulf were to end today and things return to normal, Lake Charles is still going to be the beneficiary of this global instability.

As you think about that, have an awesome rest of your day. Go make some great things happen. We’ll talk to you again tomorrow.

Stay connected and discover more about my work in real estate and by visiting and following me on various platforms: