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2016 Mid-Year Office Summary Oklahoma City 2016 Mid-Year Office Market Summary TABLE OF CONTENTS Office Market Summary 1 Central Business District Submarket 2–3 Northwest Submarket 4-7 North Submarket 8-10 Medical Office Submarket 10 Midtown Submarket 11 West Submarket 12–13 Suburban Submarket 13 Office Sales Summary 14 Submarket Map The information contained herein has been obtained from reasonably reliable sources. Price Edwards & Company makes no guarantee, either express or implied, as to the accuracy of such information. All data contained herein is subject to errors, omissions and changes. Reproduction in whole or in part, without prior written consent is prohibited. Oklahoma City 2016 Mid-Year Office Market Summary 2015 proved to be quite eventful for the local climbed significantly from $18.15 to $20.15 expect to see a very competitive landscape with office market. Major projects were announced, per square foot. Obsolete space is finally being landlords increasing concessions such as free but some were delayed as the city faces the flushed through the system and we are getting rent for larger financially sound tenants. It’s hard continuing downturn in in the oil and gas a truer reading on the health of the CBD. to say no to large oil and gas companies when industry, a major demand driver in our market. times are good, but recent events have been a As a major center for the petroleum industry, Another bright spot for downtown was the wake-up call to landlords to seek diversity in Oklahoma City dealt with the slump in oil prices, commencement of construction on 499 their tenant mix. but managed to remain fairly strong heading into W. Sheridan. Devon Energy will occupy what appears to be another challenging year. approximately half of the 690,000 SF building Accounting for some necessary reconciliations and in October Bank of Oklahoma announced it to a handful of buildings in our report, the would relocate its Oklahoma City headquarters overall market experienced negative absorption to the building and occupy approximately of nearly 60,000 square feet despite seeing its 100,000 square feet and the building would be overall vacancy rate plummet from 15.2% to branded as BOK Park Plaza. The building is set 12.3%. We realize that’s a bit of a head-scratcher for a late 2017 completion date. to see the vacancy rate drop despite experiencing negative absorption. The primary reason for that Unfortunately, one of the casualties of depressed dichotomy is the mostly vacant First National oil prices is the OG&E Energy Center just across Center was removed from the market. The First the street from the BOK Park Plaza location. National Center is a story in and of itself, but OG&E recently announced that it is shelving the net result is approximately 1 million square the project indefinitely. The planned 500,000 feet of space was removed because the building SF building was intended to provide space for ceased to be available for occupancy and plans OG&E and others, but the developers determined have just been announced for the property to be there was insufficient demand for additional redeveloped into a combination of residential, downtown space. That is especially true when hospitality and retail space. Through the you consider the space offered would demand sales process it also became apparent that the rental rates significantly higher than what Class A building’s occupancy levels had been inflated in space is currently commanding in the CBD. That previous reports. demand is further weakened as many oil and gas companies deal with the travails of their market The First National Center has been owned for and the lowest commodity pricing since 2008. years by various out of town groups who felt the low acquisition price was too good to pass up, but The story in the suburbs is very similar, each of those previous owners failed to provide particularly in the Northwest submarket which the necessary capital or a comprehensive plan has a preponderance of oil and gas tenants. for redevelopment. After months of haggling Vacancy rates rose from 8.5% to 10% during among various parties claiming ownership, the the year and increased vacancy is anticipated for building was placed in the hands of a receiver, 2016 as over 300,000 square feet of Class A space Jim Parrack of Price Edwards & Company. Under will be vacated by existing users. Consequently, his purview several buyers were identified and several new projects that were in the planning the judge eventually approved a contract with stages will likely be delayed. The bright side is a well-qualified redevelopment team led by that nearly all of those projects had not yet come local developer Gary Brooks. The removal of out of the ground, so we do not expect there to be the building dramatically dropped the vacancy an overabundance of supply as demand remains rate for the Central Business District from 20.7% strong from other industries. In the aggregate, at the beginning of 2015 to 10.8% at year-end. the suburban submarkets ended the year about Cities and their office markets tend to be judged where they started. Vacancy rates rose modestly by their downtown vacancy rates and although from 12.5% to 12.9% and average rental rates locals have known for years that the downtown rose from $17.46 to $17.65 per square foot. market for quality space is actually very tight, the adjustments attributable to the removal The coming year will certainly test the of First National finally bear that out. Because diversification efforts of the last 30 years that nearly 1 million square feet of Class C space were undertaken after the 1980’s oil bust. So far was deleted, the average downtown rental rate the signs for a lessened impactRSF are strong, but weVacant SF Vacant % Rate 2016 Mid-Year OKC Office Market Totals 14,654,472 2,165,449 14.8% $18.47 1 2016 Mid-Year Oklahoma City Office Market Summary CENTRAL BUSINESS DISTRICT SUBMARKET 2016 MID-YEAR CENTRAL BUSINESS DISTRICT REVIEW • Aggregate vacancy rates increased from 10.8% to 12.3% • Class A vacancy increased from 2.7% to 4.4% • Class B vacancy increased from 17.6% to 18.6% • Class C vacancy increased from 12.5% to 18.8% • Aggregate rental rates remained level at $20.15 per SF • Class A rates were level at $23.35 per SF • Class B rates were level at $17.81 per SF • Class C rates were level at $15.47 per SF • The CBD experienced negative absorption of 61,000 SF 2016 CENTRAL BUSINESS DISTRICT FORECAST • Vacancy rates will remain near current levels until new buildings hit the market. Rental rates will plateau. CENTRAL BUSINESS DISTRICT HISTORICAL CBD ABSORPTION 100000 50000 0 -50000 -100000 -150000 -200000 2012 2013 2014 2015 2016 2 Downtown Oklahoma City 2016 Mid-Year Oklahoma City Office Market Summary CENTRAL BUSINESS DISTRICT SUBMARKET CBD Year Built Floors RSF Vacant SF Vacant % Rate CAF 100 Park Ave Building 1923/64 12 99,752 17,644 17% $14.50 12% 100 Park Ave 101 Park Avenue Building 1936 14 197,042 74,435 37% $14.50 16.34% 101 Park Ave. 20 N. Broadway 1981 19 307,388 0 0% $20.00 20% 20 N Broadway Bank of Oklahoma Plaza 1972 16 212,816 8,001 3% $17.50 20% 201 Robert S. Kerr Braniff Building 2013 10 90,000 819 0% $24.00 20% 324 N. Robinson Century Center Building 2014 2 98,000 6,750 7% $22.00 20% 100 W Main City Place 1931/85 33 251,449 19,883 8% $18.00 14% 204 N. Robinson Corporate Tower 1980 14 277,849 21,063 7% $20.00 17.59% 101 N. Robinson Cotter Ranch Tower 1971 36 514,317 190,446 37% $18.00 15% 100 N. Broadway Court Plaza 1923/79 10 78,381 21,779 275 $12.00 14% CENTRAL BUSINESS DISTRICT 228 Robert S. Kerr Hightower Building 1929 10 107,152 13,013 12% $18.00 15% 105 N. Hudson Leadership Square 1984 21 735,514 40,399 5% $24.00 20% 211 N. Robinson Oklahoma Tower 1982 31 568,960 38,593 7% $24.00 20% 210 Park Ave. Robinson Plaza 1992 10 195,702 0 0% $17.00 17.80% 55 N. Robinson Robinson Renaissance 1927/88 12 174,840 50,875 29% $18.00 25% 119 N. Robinson Sonic Building 2003 4 100,654 0 0% $24.50 8% 300 Johnny Bench Drive The Reserve 1922/97 4 71,616 0 0% $18.00 20% 226 Dean A. McGee Avenue Totals 4,081,432 503,700 12.3% $20.15 CBD Construction Year Built Floors RSF Vacant SF Vacant % Rate CAF BOK Park Plaza 2017 27 690,000 125,000 18% $38.50 0% 499 W. Sheridan The Heritage 1923/2017 6 101,875 62,893 62% $25.00 20% 621 N. Robinson 791,875 187,893 23.7% $36.76 3 2016 Mid-Year Oklahoma City Office Market Summary NORTHWEST SUBMARKET 2016 YEAR-END NORTHWEST SUBMARKET REVIEW • Aggregate vacancy rates increased from 10.0% to 12.5% • Class A vacancy increased from 7.5% to 17.2% • Class B vacancy decreased from 10.2% to 9.8% • Class C vacancy increased from 13.4% to 14.1% • Aggregate rental rates increased from $18.33 per SF to $18.41 per SF • Class A rental rates increased from $23.03 per SF to $23.10 per SF • Class B rental rates remained level at $17.40 per SF • Class C rental rates increased from $14.16 per SF to $14.35 per SF • The Northwest Oklahoma City submarket experienced negative absorption of 43,000 SF during the first half of 2016.
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