YEAR-END REPORT
Oklahoma City's office market is `stuck in neutral but racing its engine'
Oklahoma City's office market is “stuck in neutral but racing its engine,” according to Price Edwards & Co.'s 2018 year-end summary.
There wasn't much change considering all the leasing activity, which included some especially prominent businesses and buildings.
Overall vacancy across property classes and locations ended the year at 20.8 percent, up from 18 percent at the end of 2017, according to the report, prepared by Craig Tucker, managing broker and office specialist.
Downtown was 21.8 percent vacant compared with 18.1 percent at the end of 2017.
Vacancy in the Northwest submarket, west of May Avenue, north to Edmond and south to NW 39 Expressway, ticked up from 19.1 percent to 20.3 percent.
“While vacancies increased, so did absorption of space. That is a rare occurrence, but the amount of space added outpaced the rate it could be absorbed,” according to Tucker.
The market absorbed almost 200,000 square feet of space, but more than 800,000 square feet came onto the market, according to the report, available online at www. priceedwards.com.
“For now, at least, the market isn't moving forward or backward, instead it seems to be stuck in neutral,” Tucker wrote. “The market is actually quite active, with several large leases being signed in 2018
“While vacancies increased, so did absorption of space. That is a rare occurrence, but the amount of space added outpaced the rate it could be absorbed.” Craig Tucker, managing broker and office specialist
and several more to come in 2019. In fact, it might be more apropos to say the market is not only stuck in neutral but racing its engine.”
Downtown, the biggest moves were the addition of 27-story BOK Park Plaza, 499 W Sheridan Ave., and its 690,000 square feet of space, in January. Bank of Oklahoma leased 100,000 square feet and got naming rights.
Last summer, Enable Midstream Services signed a lease for 155,000 square feet in BOK Park Plaza. It will move later this year, leaving behind about 150,000 square feet at 782,000-square-foot Leadership Square, 211 N Robinson Ave.
Leadership Square, Class A, its two towers built in 19821984, is “historically a very popular building, and should continue to be,” Tucker said. “But they're losing their anchor tenant.”
BOK Park Plaza faces its own challenges, he said. The building has at least 380,000 square feet for lease, according to its website.
“There are only so many tenants that can afford to pay the rate that is necessary to make that deal work, and they have to fund a lot of improvements. To do so, you're going to need at least a 10-year lease. It gets to be a short list of prospects that can do that,” Tucker said.
Two much-smaller office buildings started last year, one downtown and one in Midtown, are still under construction but already almost fully leased, Tucker said.
At 606 N Broadway Ave., the 111,530-square-foot buildto-suit project for Heartland Payment Systems, and at 1133 N Robinson Ave., the 53,347-square-foot Monarch Building, built on speculation but fully leased by Ackerman McQueen, are affecting average lease rates, he said.
The brand-new space for Heartland is fetching $32 per square foot per year, and the spec space at the Monarch is bringing $32.50, Price Edwards said.
The overall market average lease rate in 2018 was $19.61, the firm said.
Heartland paid to get “exactly what it wanted” in the build-to-suit, Tuckersaid, but the open market determined Monarch's lease rate.
For Monarch, “That's a pretty big speculative step to take, and it's already full, and they got their (desired) rental rate, they got their pro forma. That's been a very successful building,” Tucker said. He said the developers, Midtown Renaissance Group — partners Bob Howard, Mickey Clagg, and Chris Fleming — are “obviously a very successful Midtown developer. They get Midtown. They know who's out there and who wants to be there.”