Oil prices have dropped significantly in the last few months, and the impact is far bigger than the price you’re seeing at the pumps. The near 50 percent decrease in price has many in the corporate real estate energy industry being asked to be more cost strategic in their companies’ business plans for the coming year. To put this into perspective, it’s like the house someone bought two months ago for $1 million now is worth $500,000. The note on the property is $800,000 (80% loan-to-value), and you are now upside down.

Of course, business is more complex, but that is what businesses are dealing with. They are now at risk of being upside-down on their revenue and need to readjust their business plans. Smaller companies are at risk of being upside-down with banks and need to finds ways to generate cash as their notes are typically based off oil prices. The longer this goes on, they will have to shut their doors or sell to a competitor at discounted rates.

One of the main reasons for the drop in oil prices is because OPEC has decided not to cut back on oil production and have forecast a surplus of oil consumption next year. Saudi Arabia, the key decision maker of the group, stated it will not cut back on oil production even with prices dropping to a five-year low of WTI benchmark $55 price per barrel. Last year, Saudi Arabia produced an average of 9.65 million barrels per day and accounted for 32 percent of OPEC’s total oil production. Even with a majority of the counties not being able to balance their budgets from oil revenue at $70 to $80 a barrel, many believe the price drop was done to shut down the competition with the new shale exploration found within the United States.

Here is the catch: Production levels have stayed constant in the U.S. as a majority of producers are making a profit and will do so unless prices drop below $50 a barrel. What U.S. producers are doing is shifting their focus on the wells that are making profits and slowing down the ones that are least efficient. The big question is how long those wells will last and what they will do with the cost of the assets that perform at $80 to $90 a barrel.

The next step is to see who blinks first as markets balance themselves out on supply and demand. It is speculated that the Saudis have three years’ worth of revenue to balance their state budget, but it is the other OPEC countries and Russia that we need to keep in mind. What we are going to see is many of the energy companies and suppliers cut back on their budgets and find ways to save money. The other big move is going to be in mergers and acquisitions (M&A) activity. We are already seeing several big moves: Halliburton acquiring Baker Hughes, for example. You will see several more especially in the small to midcap range.

So what, you ask? This will affect the corporate real estate (CRE) industry as it will have to find creative ways to house employees with less space and even more pressure to dispose of surplus assets. Technology, performance and key performance indicators (KPIs) will be monitored at a much higher level since a lot of the time real estate costs are the low hanging fruit to cut cost. This is a great opportunity for CRE experts to strengthen their position within senior management and even the c-suite of their organizations. Real estate is generally the second-most expensive line item on the balance sheet and is responsible for housing employees.

In conclusion, the best way to think about the price-drop within the energy industry is how it helps companies add value to the bottom line — either through cost reduction or strategic assets that help generate revenue.

Don is Managing Director of Integrated Client Services, Corporate Solutions, and National Director of the Energy Practice Group for Colliers International in Houston. Focused on account management, he specializes in representing clients globally for their real estate services.