OklahomaOklahoma CityCity Office Market Summary Year End 2006 OklahomaOklahoma CityCity Office Market Summary
The Oklahoma City office market closed out 2006 on a very successful note. The Contents market absorbed nearly one-half million square feet and experienced a reduction Office Market Summary...... 2-3 in the total market vacancy of 2.3 percentage points – ending the year at 15.7% Office Submarket Map...... 3 vacant.
Central Business District...... 4-5 The suburban markets fared well in almost every submarket and building Northwest...... 6-9 classification. The overall suburban vacancy rate fell from 11.7% to 8.8%. Class A suburban space is a particularly healthy market with a vacancy rate of only North...... 10-12 5.6%. As a frame of reference, at the end of 2002 the Class A suburban vacancy Midtown...... 13 rate stood at 34.6%. As it stands, there are virtually no large blocks of available West...... 14-15 Class A space in the suburban submarkets and very few large blocks of Class B Suburban Analysis...... 15 availabilities. With options that limited, it is only natural that the suburban markets are seeing construction of additional inventory. So far, the local developers have taken a very methodical approach to new construction, with only 42,000 square feet added in 2006 and only 120,000 square feet or so either under construction or on the drawing board for 2007. The market should be easily able to absorb the additional space with no adverse effect.
The continued improvement in the suburban markets is also reflected in rental rates. At the end of 2006 the average asking rate for suburban space had risen to $14.87 per square foot, with Class A rates averaging a robust $19.84 per square foot. Although the local market has never experienced average rates at the current levels, they are still a bargain compared to the rest of the country. As in the last few years, the Class A rate increase is pulling Class B and C rates up as well. Class B rates increased from $13.79 to $14.30 per square foot and Class C rates rose from $11.24 to $11.52 per square foot.
Although the Central Business District’s vacancy decreased from 29.1% to 27.7%, that improvement is tempered by the uncertain status of the former Kerr- McGee headquarters building. The possibility that 450-500,000 square feet could be added to the downtown market is not a pleasant thought for owners and brokers alike. While rumors persist that more than one company is considering the building for its headquarters, any other scenario would put downward pressure on rents and occupancy levels. It should also be noted that similar to past years, The information contained herein has been obtained from reasonably reliable sources. Price Edwards & more than 57% of the CBD’s available space lies within its older, less functional, Company makes no guarantee, either express or Class C buildings. The Class A vacancy rate is actually only 14.9% and the Class implied, as to the accuracy of such information. All data contained herein is subject to errors, omissions B vacancy rate is 16.0%. The outlook for 2006 should be more of the same. The and changes. Reproduction in whole or in part, without better buildings will continue to perform well and the lesser buildings will continue prior written consent is prohibited. to flounder. 2 Oklahoma City Office Submarket Map Oklahoma City Office acancyv 35%
30%
25%
20%
15%
10%
urnpike 5% Kilpatrick Turnpike Turner T 44 0% Lake Hefner Parkway 97 98 99 00 01 02 03 04 05 06 3 Market Vacancy CBD Vacancy Suburban Vacancy
Northwest Expr 77 35
urnpike essway North Submarket
Kilpatrick T Northwest 40 Submarket 235 State Capital Oklahoma City Office inventory Complex 20 44 Midtown 15 CBD 40 10 Interstate 40 West (Millions) Submarket Interstate 40 Squre Feet 5 35 0 97 98 99 00 01 02 03 04 05 06 Sq.Ft. Occupied Sq.Ft. Vacant Interstate 240 240
4
Interstate 4 Office Market acancyv
25%
20%
15%
While 2006 showed only moderate movement in the CBD in terms of vacancy 10% rates and rental rates, physical movement was another story as several 5% downtown users played a small game of musical chairs. The law firm of 0% Phillips McFall McCaffrey McVay & Murrah PC relocated from Leadership 2002 2003 2004 2005 2006 Square to 40,000 SF in Corporate Tower. Grant Thornton doubled its leased space by taking a portion of the space at Leadership Square that was vacated by Phillips McFall. And, Tronox, a former subsidiary of Kerr-McGee, relocated from its former parent’s headquarters to slightly over 100,000 square feet at Leadership Square. In addition to those moves, Devon Energy Corporation total Market absorption which is headquartered at 20 N. Broadway expanded into nearly 90,000 square feet at Corporate Tower. 2002
2003 2007 should prove to be another positive year for the local office market, although probably not quite as strong as 2006. The national economy 2004 is experiencing a steady recovery and leasing activity is brisk. The local 2005 economy, which is still influenced by the petroleum industry should remain 2006 strong and outpace the national economy. Existing tenants continue to expand -300000 -100000 0 100000 300000 500000 Square Feet and more new companies are opening offices in Oklahoma City.
3 OklahomaOklahoma CityCity Central Business District
Cbd vacancy
35% 30% 25% 20% 15% 10% 5% 0% 2002 2003 2004 2005 2006
Cbd rental rates
$13 2006 Oklahoma city central business district Review $12 • Aggregate vacancy rates decreased from 29.1% to 27.7%.
$11 • Class A vacancy decreased from 18.4% to 14.9%. • Class B vacancy increased from 16.1% to 16.0%. $10 2002 2003 2004 2005 2006 • Class C vacancy decreased from 61.1% to 60.0%. • Aggregate rental rates increased from $13.23 per SF to $14.22 per SF. • Class A rates increased from $15.93 per SF to $16.67 per SF. • Class B rates increased from $12.62 per SF to $13.06 per SF. Cbd Occupancy • Class C rates increased from $10.84 per SF to $12.98 per SF. 100% • The Oklahoma City Central Business District experienced absorption of 80% 89,000 SF during 2006.
60%
40%
20% 2007 Oklahoma city central business district Forecast
0% • Vacancy rates should remain near current levels throughout 2007. Class A Class B Class C • Rental rates will also remain near current levels. • The CBD’s future remains cloudy with the unknown status of the 450,000 SF Kerr-McGee Tower.
Cbd absorption
2002
2003
2004
2005
2006
-200000 -100000 0 100000 200000 Square Feet
4 Central Business District rentable Sq. ft. Percent Common Building Year Built FloorS Sq. ft. Vacant vacant Rate Area Factor
100 Park Avenue Building 1923/1964 12 99,752 7,882 8% $11.00 12% 100 Park Ave.
101 Park Avenue Building 1936/1974 14 197,042 100,004 51% $13.50 16% 101 Park Ave.
20 N. Broadway 1981 19 307,388 0 0% $16.00 20% 20 N. Broadway
BancFirst Building 1921/1970 11 105,840 0 0% $12.50 12.5% 101 N. Broadway
Bank of Oklahoma Plaza 1972 16 233,808 28,586 12% $14.50 20% 201 Robert S. Kerr
Chase Tower 1971 36 517,454 20,000 4% $13.50 15% 100 N. Broadway
City Place 1931/1985 33 292,304 66,671 23% $11.50 14% 204 N. Robinson
Corporate Tower 1980 14 277,849 29,500 11% $15.00 17.6% 101 N. Robinson
Court Plaza 1923/1979 10 78,381 28,590 36% $10.00 14% 228 Robert S. Kerr
Dowell Center 1926 20 190,000 190,000 100% $9.50 15% 134 Robert S. Kerr
First National Center 1931`/1974 28 983,174 615,279 63% $14.00 16.5% 120 N. Robinson
Hightower Building 1929 10 107,152 12,901 12% $14.00 15% 105 N. Hudson
Leadership Square 1984 21N/16S 735,514 104,489 14% $16.50 20% 211 N. Robinson
Oklahoma Tower 1982 31 568,960 143,383 25% $16.50 20% 210 Park Ave.
One North Hudson 1931/1981 11 73,000 12,500 17% $10.00 12% 401 W. Sheridan
Robinson Plaza 1992 10 183,000 43,000 23% $11.00 0% 50 N. Robinson
Robinson Renaissance 1927/1987 12 174,840 36,739 21% $12.50 25% 119 N. Robinson
Sonic Building 2003 4 100,654 7,530 7% $21.00 8.6% 300 Johnny Bench Drive
SUBMARKET TOTAL 5,226,112 1,447,054 27.7% $14.22
5 OklahomaOklahoma CityCity Northwest Submarket
northwest vacancy
20%
15%
10%
5%
0% 2002 2003 2004 2005 2006
northwest rental rates
$15.00 2006 northwest Oklahoma city submarket Review
$14.00 • Aggregate vacancy rates decreased from 11.3% to 9.2%. • Class A vacancy increased from 6.5% to 7.9%. • Class B vacancy decreased from 12.2% to 10.6%. $13.00 2002 2003 2004 2005 2006 • Class C vacancy decreased from 14.5% to 10.5%. • Aggregate rental rates increased from $14.75 per SF to $15.38 per SF. • Class A rental rates increased from $18.82 per SF to $19.67 per SF. • Class B rental rates increased from $14.04 per SF to $14.62 per SF. northwest Occupancy • Class C rental rates increased from $11.43 per SF to $11.61 per SF. 100% • The Northwest Oklahoma City Submarket experienced absorption of 80% 168,000 SF during 2006.
60%
40% 2007 northwest Oklahoma city submarket Forecast 20% • Vacancy rates should continue to drop slightly as this submarket remains 0% Class A Class B Class C strong but also deals with the addition of approximately 100,000 SF of new construction. • quoted rates will rise due to such a small amount of available Class A and B space.
northwest absorption
2002
2003
2004
2005
2006
-250000 -150000 -50000 50000 150000 250000 Square Feet
6 Northwest Submarket rentable Sq. ft. Percent Common Building Year Built FloorS Sq. ft. Vacant vacant Rate Area Factor
4100 Perimeter Center 1982 3 47,317 0 0% $12.00 15% 4100 Perimeter Center Dr.
4101 Perimeter Center 1982 3 47,317 0 5% $12.00 15% 4101 Perimeter Center Dr. 2,277 (S)
4141 Northwest Expressway 1982 3 46,464 0 0% $11.00 16% 4141 Northwest Expressway
4200 Perimeter Center 1981 2 61,327 0 0% $12.00 15% 4200 Perimeter Center Dr.
4701 Gaillardia 2007 2 42,970 7,350 17% $22.00 17.1% 14701 Gaillardia Parkway
4801 Gaillardia 2000 3 71,867 0 0% $24.00 15% 4801 Gaillardia Parkway
5100 Brookline 1974 10 107,496 13,587 13% $14.00 15% 5100 Brookline
American Cancer Society 2001 1 45,000 0 0% $16.50 0% 8400 Silver Crossing
Atrium Towers 1980 6 156,106 19,586 13% $14.50 16% 3501-3503 N.W. 63rd
Avaya Building 1998 1 57,000 0 0% $15.00 0% 14400 Hertz Qual Springs Parkway
Bradley Square 1984 1 30,000 1,600 5% $13.00 10% 2932 N.W. 122nd
Brookline Offices 1971 1 40,920 13,228 32% $10.00 0% 6051 N. Brookline
Center 3000 1972 3 104,500 19,512 19% $11.00 12% 3000 United Founders Blvd.
Chase Park 1981 2 30,281 5,698 28% $13.00 16.5% 4323 N.W. 63rd 2,800 (S)
Commerce Center South 1982 3 65,857 0 0% $13.75 11% 9520 N. May
Coppertree Centre 1982 3 26,928 1,405 5% $15.00 10% 3727 N.W. 63rd
Cross Rock Office Plaza 1 1984 3 52,090 0 0% $18.00 0% 13801 Continental Drive
Cross Rock Office Plaza-II 1992 2 50,500 17,100 34% $22.00 10.6% 3600 NW. 128th
Dobson Communications 2001 3 144,420 0 0% $22.50 16% 14101-14201 Wireless Way
Enterprise Plaza 1981 3 92,542 3,000 3% $15.00 14% 5600 N. May
FBI Building 1999 1 73,380 0 0% $17.00 0% 3301 W. Memorial
Fifty-Six Expressway Place 1982 3 54,592 11,950 22% $12.50 15 % 5601 N.W. 72nd
Five Corporate Plaza 1980 3 49,486 0 0% $15.00 15% 3625 N.W. 56th
7 Northwest Submarket (continued) rentable Sq. ft. Percent Common Building Year Built FloorS Sq. ft. Vacant vacant Rate Area Factor
Grand Centre 1982 5 101,217 22,356 22% $15.50 15% 5400 N.W. Grand Blvd.
Hartford Insurance 1999 1 100,000 0 0% $16.00 0% 7800 N.W. 85th Terrace
Hertz Financial Center 1983 10 276,246 60,780 22% $18.50 15% 3817 Northwest Expressway
ibc bank building 1980 3 69,376 0 0% $15.00 12% 3601 N.W. 63rd St.
Jamestown Office Park 1972/1979 2 78,283 650 1% $12.50 10% 3037 N.W 63rd
Lakepark Tower 1983 6 103,084 22,628 50% $13.50 13% 6525 N. Meridian 28,842 (S)
Lakepointe Towers 1981 6 177,746 70,567 40% $14.50 10% 4005-4013 Northwest Expressway
Lakepointe West 1982 6 85,246 6,314 7% $12.50 12% 4045 N.W. 64th
Lakeshore Tower 1982 3 29,761 0 0% $12.00 15% 4301 N.W. 63rd
Landmark Towers 1969/1972 10 290,000 14,725 5% $12.00 12 % 3535-3545-3555 NW 58th
Mercury Insurance Building 1986 2 100,103 0 0% $12.50 12.5% 7301 Northwest Expressway
Mutual Assurance Building 1999 2 40,000 3,147 8% $18.00 12% 3121 Quail Springs Parkway
North Shore Office Plaza 2001 5 55,570 0 0% $20.50 15% 10900 Hefner Drive
Northwest Office Center 1973 2 85,833 13,000 15% $12.00 12% 4334 Northwest Expressway
Oil Center 1973/1978 13 249,654 34,661 14% $14.00 13% 2601 Northwest Expressway
One Corporate Plaza 1979 1 63,011 2,232 4% $15.50 15% 3525 NW. 56th
Portland Plaza 1969 3 35,425 1,383 4% $11.00 14% 5700 N. Portland
Quail Creek Commerce Center 1998 1 128,500 0 0% $15.50 0% 3201 Quail Springs Parkway
Quail Creek North 1973 2 34,780 750 2% $10.00 15% 11032 Quail Creek Rd.
Quail Ridge Tower 1975 4 46,950 16,122 34% $12.00 16.5% 11212 N. May
Quail Springs Parkway Plaza I & II 1986 6 321,312 7,017 2% $19.50 14% 14000 Quail Springs Parkway
Quail Springs Professional Building 2002 2 25,420 0 0% $17.50 16% 14313 N. May Avenue
Rees Plaza at East Wharf Nov-2002 3 42,000 0 0% $20.50 15.3% 9211 Lake Hefner Parkway
8 Northwest Submarket (continued) rentable Sq. ft. Percent Common Building Year Built FloorS Sq. ft. Vacant vacant Rate Area Factor
Rockwell Office Center 1982 2 30,000 6,231 21% $12.00 13% 8621 N. Rockwell
Signature Place 1982 7 101,146 6,649 7% $13.50 13% 5909 Northwest Expressway
Sprint PCS Building 1999 1 90,000 0 0% $18.00 0% 8525 Silver Crossing
St. Martins Building 1990 2 59,712 0 0% $14.00 13% 9020 N. May
Summit Executive Building 1975 5 50,000 3,290 7% $10.50 10% 5929 N. May
The Expressways 1974 6 65,737 4,505 7% $12.00 13% 2525 Northwest Expressway
Three Corporate Plaza 1980 3 49,920 17,003 34% $15.00 14% 3613 NW. 56th
Two Corporate Plaza 1982 3 85,551 0 0% $15.00 14.5% 5555 NW. Grand Blvd.
Union Plaza 1982 18 247,379 19,669 8% $18.00 14% 3030 Northwest Expressway
Williams Sonoma 1998 1 36,000 0 0% $16.00 0% 7720 NW. 4th St.
SUBMARKET TOTAL 4,853,322 481,614 9.2% $15.38
Northwest Construction rentable Sq. ft. Percent Common Building Year Built FloorS Sq. ft. Vacant vacant Rate Area Factor
14201 Rubye redbud circle apr - 07 3 40,760 6,536 16% $23.00 17.2% 14201 Rubye Redbud Circle
14301 Rubye redbud circle apr - 07 3 40,760 21,046 52% $23.00 17.2% 14301 Rubye Redbud Circle
CONSTRUCTION TOTAL 81,520 27,582 34% $23.00
9 OklahomaOklahoma CityCity North Submarket
north vacancy
15%
12%
9%
6%
3%
0% 2002 2003 2004 2005 2006
north rental rates
$15.00 2006 north Oklahoma city submarket Review
$14.00 • Aggregate vacancy rates decreased from 12.2% to 7.0%. • Class A vacancy decreased from 11.9% to 0.8%. • Class B vacancy decreased from 11.3% to 7.3%. $13.00 2002 2003 2004 2005 2006 • Class C vacancy decreased from 16.4% to 13.0%. • Aggregate rental rates increased from $14.48 per SF to $15.17 per SF. • Class A rental rates increased from $18.75 per SF to $20.00 per SF. • Class B rental rates increased from $14.13 per SF to $14.68 per SF. north Occupancy • Class C rental rates increased from $11.07 per SF to $11.56 per SF. 100% • The Oklahoma City North Submarket experienced absorption of 80% 176,000 SF during 2006.
60%
40% 2007 north Oklahoma city submarket Forecast 20% • Vacancy rates should continue to drop as local energy companies continue 0% Class A Class B Class C to acquire space and buildings. • Rental rates will show a slight increase particularly in the Class B segment of this submarket.
north absorption
2002
2003
2004
2005
2006
0 50000 100000 150000 200000 Square Feet
10 North Submarket rentable Sq. ft. Percent Common Building Year Built FloorS Sq. ft. Vacant vacant Rate Area Factor
1001 Wilshire 2003 4 43,316 0 0% $19.51 13% 1001 West Wilshire
50 Penn Place 1973 16 178,315 11,668 7% $15.00 10% 5100 N. Pennsylvania
5101 Circle Building 1982 6 74,799 1,984 3% $14.00 14% 5101 N. Classen Blvd.
7 & 9 Broadway Executive Park 1979 1 29,201 5,500 19% $14.00 0% NW. 63rd and Broadway
Broadway Plaza 1982 3 38,726 0 0% $13.50 13% 16 N.W. 63rd
Broadway Sixty-Eight 1979 3 40,000 2,490 6% $13.00 14% 6801 N. Broadway
Central Park One 1982 6 113,134 9,620 9% $15.50 14% 525 Central Park Dr.
Central Park Two 1984 6 124,463 13,119 11% $16.00 14% 515 Central Park Dr.
Chase Bank Building 1981 4 41,943 7,587 18% $14.00 12% 6303 N. Portland
Columbus Square 1982 3 36,559 2,696 7% $14.50 10% 1001 N.W. 63rd
Five North Broadway 1972 3 44,805 0 0% $16.00 15% 6601 N. Broadway
Glenbrook Centre East 1970 3 62,503 0 0% $13.00 14% 1120 N.W. 63rd
Glenbrook Centre West 1972 5 52,905 4,059 8% $12.00 10% 1140 N.W. 63rd
Harvey Parkway 1982 6 98,807 8,678 9% $15.00 17% 301 N.W. 63rd
Lincoln Plaza Office Park 1970 2 238,300 22,206 9% $11.00 12% 4545 Lincoln Blvd.
MidFirst Plaza 1982 6 95,043 0 0% $13.00 12% 501 Northwest Expressway
Nichols Hills Executive Center 1981 2 53,996 1,850 3% $15.00 14% 1000 W. Wilshire
Northgate 1974 2 48,704 13,000 27% $10.00 0% 4010-4020-4024-4030 Lincoln Blvd.
One Benham Place 1983 8 152,959 1,157 1% $17.50 15% 9400 N. Broadway
One Broadway Center 1980 3 34,984 9,756 28% $14.00 9% 100 N.W. 63rd
One Broadway Executive Park 1979 3 58,832 656 37% $14.00 12.3% 201 NW. 63rd 21,174 (S)
One Grand Park 1982 6 100,694 0 0% $13.00 14% 777 NW. Grand Blvd.
One Western Plaza 1972 2 50,948 8,484 17% $12.00 16.5% 5500 N. Western 11 North Submarket (continued) rentable Sq. ft. Percent Common Building Year Built FloorS Sq. ft. Vacant vacant Rate Area Factor
Paragon Building 1981 5 110,791 14,532 13% $15.50 15% 5801 N. Broadway
Pavilion Building 1974 3 39,895 3 0% $11.50 12% 6701 N. Broadway
Penn Park 1973 2 78,643 21,299 27% $12.50 13% 5001-5005-5009-5015 N. Penn
Regency Center 1982 5 67,272 0 0% $14.00 12% 701 NW. 63rd
Registry 1980 2 93,176 19,566 21% $13.00 15% 2200 NW. 50th
Richmond Square 1982 2 27,606 4,665 17% $14.00 12% 4900 Richmond Square
Santa Fe North 1981 4 44,000 0 0% $14.00 11% 6 NE. 63rd
Six Broadway Executive Park 1981 3 50,347 0 0% $14.00 12% 6600 N. Harvey
The Tower 1984 22 299,137 0 0% $21.50 17.8% 1601 Northwest Expressway
Three Broadway Executive Park 1977 3 45,256 5,152 11% $14.00 10% 6501 N. Broadway
Three Grand Park 1985 6 100,813 0 0% $14.00 13% 999 NW. Grand Blvd.
Two Broadway Executive Park 1980 3 52,205 3,991 8% $14.00 11.4% 205 NW. 63rd
Waterford A 1983 4 147,000 4,955 3% $18.50 16% 6301 Waterford Blvd.
Waterford B 1983 2 35,468 0 0% $18.50 16% 6303 Waterford Blvd.
Waterford C 1984 2 81,575 0 0% $18.50 16% 6305 Waterford Blvd.
Waterford D 1984 2 34,087 0 0% $18.50 16% 6307 Waterford Blvd.
SUBMARKET TOTAL 3,121,207 219,847 7.0% $15.17
12 Oklahoma City 2006 Midtown Oklahoma Midtown vacancy Oklahoma City City submarket Review 20% Midtown Submarket • Aggregate vacancy rates decreased 15% from 9.2% to 2.1% 10% • Class B vacancy rates decreased from 11.1% to 2.4%. 5% • Class C vacancy rates remained 0% 2002 2003 2004 2005 2006 at 1.1%. • Aggregate rental rates increased from $11.45 per SF to $12.08 per SF.
• Class B rental rates average Midtown rental rates $12.43. $12.00 • Class C rental rates average $10.64. • The Midtown Submarket $11.00 experienced absorption of 42,000 SF during 2006. $10.00 2007 Midtown Oklahoma 2002 2003 2004 2005 2006 City Submarket Forecast • Vacancy rates will remain low as more users recognize Midtown as the most economical submarket. Midtown absorption • Rental rates will remain at or near current levels. 2002
2003
2004
2005
2006
-40000 -30000 -20000 -10000 0 10000 20000 30000 40000 50000 Square Feet
rentable Sq. ft. Percent Common Building Year Built FloorS Sq. ft. Vacant vacant Rate Area Factor
2000 Classen Center 1966/1976 6 318,321 0 0% $13.50 10% 2000 Classen Blvd.
3700 Classen Building 1980 2 52,800 7,000 13% $11.00 13% 3700 Classen Blvd.
3800 Classen Building 1982 3 52,800 4,300 8% $11.00 13% 3800 Classen Blvd.
4801 Classen Building 1974 2 33,151 0 0% $9.75 0% 4801 Classen Blvd.
Cameron Building 1955/1957 5 81,493 1,286 2% $11.00 10 % 2901 Classen Blvd.
Santa Fe Building 1954/1982 4 55,203 0 0% $9.00 10% 3814 N. Santa Fe Ave.
SUBMARKET TOTAL 593,768 12,586 2.1% $12.08
13 OklahomaOklahoma CityCity West Submarket
west vacancy
15%
12%
9%
6%
3%
0% 2002 2003 2004 2005 2006
west rental rates
$12.00 2006 west Oklahoma city submarket Review
$11.00 • Aggregate vacancy rates increased from 14.4% to 15.6%. • Class B vacancy totals increased from 9.8%to 11.3%. • Class C vacancy totals increased from 24.8% to 25.2%. $10.00 2002 2003 2004 2005 2006 • Aggregate rental rates increased from $11.94 per SF to $12.24 per SF. • Class B rental rates increased from $12.25 per SF to $12.55 per SF. • Class C rental rates increased from $11.23 per SF to $11.53 per SF. • The West Oklahoma City Office Market experienced negative absorption west Occupancy of 5,000 SF in 2006.
100% 80% 2007 west Oklahoma city submarket Forecast 60% • Vacancy rates should remain near current levels in 2007. 40% • Rental rates in the Oklahoma City West Submarket will also stay near 20% current levels. 0% Class B Class C
west absorption
2002
2003
2004
2005
2006
-25000 -15000 -5000 0 5000 15000 25000 Square Feet
14 West Submarket rentable Sq. ft. Percent Common Building Year Built FloorS Sq. ft. Vacant vacant Rate Area Factor
300 Meridian Place 1982 2 77,559 12,972 17% $12.00 11% 300 N. Meridian
Bank 2 Tower 1975 7 58,598 18,638 32% $13.00 12% 909 S. Meridian
Corporate West One 1980 3 38,031 14,428 38% $12.00 10% 5208 W. Reno
Corporate West Two 1983 3 39,000 0 0% $9.00 8% 309 S. Ann Arbor
Metro Office Park 1981 3 60,750 18,000 30% $9.50 0% 4300 Highline Blvd.
Sovereign Office Park 1983 1 42,260 8,000 19% $10.00 0% 1300 Sovereign Row
The Parkway 1982 6 96,960 15,710 16% $13.00 15% 1300 S. Meridian
Tinker Federal Credit Union 1986 2 69,229 0 0% $12.00 12% 4140 West I-40
Westpark Office Center 1986 1 58,786 6,500 11% $16.00 0% 715 Metropolitan
Will Rogers Office Park 1 1984 1 54,170 5,657 10% $15.00 16% 4400 Will Rogers Parkway
Will Rogers Office Park 2 1985 1 46,748 0 0% $11.00 10% 4350 Will Rogers Parkway
SUBMARKET TOTAL 642,091 99,905 15.6% $12.24
OklahomaOklahoma CityCity 2006 Suburban Oklahoma city Office market Review Suburban Submarket • Aggregate vacancy rates decreased from 11.7% to 8.8%. • Class A vacancy decreased from 8.2% to 5.6%. Suburban Rental Rates • Class B vacancy decreased from 11.6% to 8.8%. North Northwest West Midtown
$15.00 • Class C vacancy decreased from 15.6% to 12.4%. • Aggregate rental rates increased from $14.23 per SF to $14.87 per SF. $13.00 • Class A rental rates increased from $18.80 per SF to $19.84 per SF. $11.00 • Class B rental rates increased from $13.79 per SF to $14.30 per SF.
$9.00 • Class C rental rates increased from $11.24 per SF to $11.52 per SF 2000 2001 2002 2003 2004 2005 2006 • Suburban Oklahoma City experienced absorption of 382,000 SF during 2006.
Suburban absorption 2007 Suburban Oklahoma city Office market Forecast • Suburban rental rates will continue to climb. 2002 • Suburban vacancy rates will decrease particularly in Class B projects. 2003
2004 • Class A space vacancies should also remain very low. 2005 • Some new construction will add approximately 100,000 SF during 2007. 2006
-150000 -50000 0 50000 150000 250000 350000 Square Feet
Suburban Oklahoma City Market Total 9,210,388 813,952 8.8% $14.87
Oklahoma City Market Grand Total 14,436,500 2,261,006 15.7% $14.64 15 Oklahoma City 2006 OfficeOklahoma Market Sales City Summary
The Oklahoma City office market experienced a continued high level of investment sales activity in 2006. For office properties in excess of 25,000 square feet, sixteen transactions closed resulting in a total sales volume of just over $107 million and involving approximately 2.2 million square feet of space.
While 2006 office investment activity was significant, it did not match 2005 which was the highest ever recorded for Oklahoma City. Nevertheless, it was certainly in the higher range when looking at transactional history over the past 10 years.
The downtown area saw a very significant sale with a California investor acquiring the historic First National Center. This nearly one million square foot asset has been a victim of the previous owner’s unwillingness to invest in critically needed improvements. Until this happens the property will continue to be a non-factor in the downtown leasing market. The other notable downtown sale was the Federal Reserve Bank selling its 80,000 square foot facility, which was acquired by local investors with the intent of positioning the building as a new leasing alternative for downtown businesses. Boasting underground parking, a favorable location, and a beautiful façade, the property should see its share of leasing success. The wild card in the downtown market is the Kerr-McGee Tower. Containing almost 500,000 square feet, intentions remain unclear what its new owner, Anadarko Petroleum, is planning for this asset. A couple of corporate users have shown some interest, but if the building is sold to an investor and injected into the leasing market, downward pressure on rental rates, and therefore asset values, could be the result.
Suburban office market transactions included six office projects containing roughly 400,000 square feet which were acquired by Chesapeake Energy as part of the firm’s long term campus expansion and redevelopment plan. Other sales were a mix of class “B” and “C” properties involving both local and out of state investment groups. For the first time in many years no class “A” assets changed hands.
Given the overall condition of the economy, both nationally and locally, 2007 should see a healthy pace of investment sales activity. Historically low interest rates, coupled with Oklahoma City being perceived as an “up and comer” on the national scene, should serve to help investors view this market as one which can provide favorable risk related returns and a reasonable degree of downside risk protection. Problems could arise if the abundance of debt and equity capital is combined with investors lacking the experience in evaluating future cash flows and physical plant issues.
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