Industrial vacancies
New construction has created more empty space in warehouse-distribution properties than turmoil in the energy sector.
Don’t blame the oil patch for hikes in industrial property vacancies the past year — warehousing and distribution hardly noticed the collapse in crude oil prices and fast-evolving technology.
New construction increased the supply of space, especially for bulk warehouse, which is considered an economic bellwether, according to Price Edwards & Co.’s midyear industrial market summary. The firm tracks multitenant, investment-grade buildings of at least 35,000 square feet in size.
Subleasing arrangements further softened the numbers for bulk warehouse space, which saw vacancy rise from 8.7 percent in midyear 2016 to 12.2 percent at midyear 2017, the firm reported.
Bulk warehouse space has a ceiling height of 24 to 32 feet or greater, and with amenities including large truck courts and high-output, high-volume ESFR (early suppression, fast response) sprinkler systems, according to Price Edwards.
“Bulk warehouse space is a crucial indicator of the economic health of a market. The spaces are large, tend to be occupied by national credit tenants, and exist to support the retail, manufacturing, and construction sectors,” according to the report by industrial broker Bob Puckett.
With just 10.8 million square feet of multitenant industrial property in the city — most of it leased in swaths of tens of thousands of square feet — even a few empty spaces can cause big changes in the numbers, Puckett wrote.
Some 1.3 million square feet of space in planning, construction or leasing accounts for most of the increase in vacancy across building types, according to the report, available at www. priceedwards.com.
Vanguard Development Co. has added to the bulk warehouse market since last year, successfully, said Steve Cottom, principal.
Lockheed Martin took 30,000 square feet, leaving 30,000 to be leased, at the latest building at Vanguard’s Oak Hollow Industrial Park. It was finished earlier this year at 1320 SE 89, Cottom said.
Next door at 1300 SE 89, GE Oil & Gas Compression Systems LLC, now part of Baker Hughes, a GE company, took all 60,000 square feet of that building, constructed in 2014.
Cottom said Vanguard “hit a home run” with Oak Hollow, which started with a 60,000-squarefoot warehouse in 2001, one of the first speculative industrial buildings in Oklahoma City since the 1980s oil bust.
Flex and service space
In addition to the rise in bulk warehouse vacancy, industrial flex space vacancy rose from 11.7 percent last summer to 14.5 percent at midyear, Price Edwards reported.
Flex space generally has ceiling height of less than 18 feet, according to Price Edwards, and can be susceptible to the churning oil industry’s effects on small business.
Service warehouse space was especially volatile, according to Price Edwards. Service warehouses generally have heights from 18 to 23 feet but also include some older properties with lower ceilings.
Puckett said changes at one property were responsible for most of the nearly doubling of service warehouse vacancy from 14.1 percent last year to 27.6 percent this year: 1.3-million-square-foot Will Rogers Business Park, 7501 SW 29, has a “large true vacancy” now after years of being treated as fully occupied “catering to the seasonal needs of retailers.”
Equipment yards
Demand for equipment yards — specially developed, graded, layered, compacted, drained, lighted and fenced — isn’t tracked in the report, but Puckett said it hasn’t waned with the turmoil in the oil business.
During the recent boom, energy service companies went wanting for equipment yards needed essentially as staging areas for the expanding industry. When the bottom fell out, yards were needed to store idled equipment. Now, Puckett said, demand for yards falls along restructured credit lines.
“Nothing has changed as to that need for yard space because of all the equipment in storage. There have been, occasionally, a few coming available,” he said. “They come on the market and are absorbed pretty quickly. It would be very helpful to have a few more yard spaces right now.
“There’s a real difference in the service sector, and we’re talking about oil field service companies, primarily. And the difference is between those that were heavily in debt and those that were not. The ones that were heavily in debt are going away, or being absorbed, or being sold. The ones that are not are expanding into markets they have not been present in before to capture all the market share they can, and so there’s still a demand for those properties.”