Industrial property market is hot in OKC
Housing isn’t the only humming real estate sector: Industrial, usually as slow and steady as a tortoise, is hopping like a hare in Oklahoma City in response to its own short supply.
In fact, with overall vacancy at a scant 3.5%, it’s “outperforming the national market,” reports Zac McQueen, industrial specialist with NAI Sullivan Group, commercial realty brokerage.
Nearly 1 million square feet more of industrial space went under lease than went on the market in the second quarter — “positive net absorption,” in property parlance — McQueen wrote in NAI Sullivan’s Second Quarter Industrial Market Report.
That’s about 21 football fields (300 feet by 160 feet = 48,000 square feet).
And it’s about 18 Hobby Lobby Stores (55,000 square feet on average).
Speaking of: Hobby Lobby Stores Inc.’s 208,372-square-foot building under way at 7400 SW 44, near its already huge campus, is the biggest industrial building being built here at the moment.
Note: Hobby Lobby is owner-occupied so it doesn’t affect the market for leased industrial space. But big is big and Hobby Lobby just keeps getting bigger. Its campus is nearing 11 million square feet (229 football fields! 200 Hobby Lobby stores!)
City records show the $9 million project, a new home for Hobby Lobby’s Information Systems Department, to be delivered in June 2022. It was among 2,084,478 square feet of industrial space under construction at midyear, McQueen reported.
Other significant projects include an $8.75 million, 191,869-square-foot speculative warehouse by Sealy & Co. at 3700 S Purdue Ave.; and a $7.8 million, 120,000square-foot project at 3401 S Council Road by Industrial Developers of Oklahoma.
In the leased industrial market, the 3.5% vacancy, McQueen said, is 2 percentage points lower than the national average. Class A properties — the best — had a mere 1.5% vacancy at midyear, he said, reflecting a real “supply deficit.”
“Luckily, construction is responding to this supply shortage. ... With the low vacancy rate, the market continued to be more landlord friendly,” McQueen said.
He said the average industrial rental rate at midyear was $6.77 per square foot per year on a triple net basis — tenants pay for property insurance, property taxes, maintenance and utilities. That’s up, again, from $6.53 in the first quarter.
It’s turning Oklahoma City into a destination spot — for capital. NAI Sullivan tracked 68 sales in the second quarter totaling $82,778,164, or $62.74 per square foot, with an average capitalization rate of 11.11%.
The largest transaction was an $8 million sale at 3715 S Radio Road in El Reno.
“The high return rates found in the Oklahoma market continue to make it an incredibly attractive destination for in- and out-of-state investors,” McQueen said. “The overall results of Q2 2021 are very promising signs that Oklahoma City and the state of Oklahoma are becoming a growing and attractive industrial market. We hope to continue to see more positive trends as we move forward towards the end of 2021.”