OKLAHOMA CITY 2019 Year-End Office Market Summary Photo Credit: Steve Johnson 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 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 2019 Year-End Office Market Summary The calendar year 2019 showed minimal space on the market in the first half of 2020. OKC TOTAL OFFICE MARKET VACANCY change in the Oklahoma City office market, Additionally, the usually well-occupied IBC Market Vacancy CBD Vacancy Suburban Vacancy but what change occurred was mostly Center will soon have approximately 80,000 25% negative. In general, the market began to square feet made available by the relocations give back much of the 400,000 square feet of Echo Energy and EOG Resources. 20% of positive absorption that occurred in 2018. 15% Vacancies increased from 20.1% to 20.9% 2020 will be critical year for the local office and absorption of space totaled a negative market. Despite a brief rebound from the 10% 68,000 square feet as more space was 2014-2015 plunge in energy prices, the market vacated than leased during the year. Although has still not recovered. And, with increased 5% the Central Business District experienced investor emphasis on bottom line cash flows positive absorption of 56,000 square feet, rather than reserves or production growth, 0% the suburban markets had approximately we will likely see bankruptcies, mergers and '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 124,000 square feet of negative absorption. consolidations within the industry resulting Some suburban areas actually had relatively in a significant increase in vacant space. The healthy absorption, but that was offset by current rig count for the state of Oklahoma OKC TOTAL OFFICE MARKET INVENTORY 217,000 square feet of negative absorption currently stands at 50, compared to 141 a 20 Occupied SF Vacant SF in the North submarket. year ago as both investor enthusiasm and exploration in the Stack, Scoop and Merge 15 The Central Business District is currently 21.1% basins of the state are in decline. Although vacant compared to 21.8% vacant a year ago. it should be noted a significant portion of the Average rental rates downtown increased from decrease in the rig count is due to improved 10 $22.23 at $22.47 per square foot due to the drilling efficiencies, but those same efficiencies addition of higher priced new product at result in staff reductions and office space feet) (millions of square 5 The Monarch Building. The vacancy rate in requirements. the CBD could improve slightly in the next 6 0 months as another mostly pre-leased building, Make no mistake; the Oklahoma City '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 606 N. Broadway, is added to the rolls. 606 N. office market is still largely dependent on Broadway is set to become the headquarters the hydrocarbon industry. While no actual for Heartland Payment Systems with very numbers are calculated, we estimate that OKC OFFICE MARKET RENTAL RATES little space remaining to be leased to others. the industry uses approximately 15% of the $25.00 CBD Northwest North Another factor that could assist the CBD’s total multi-tenant space in the local office Midtown Suburban West Suburban improvement is that nearly 60% of the vacant market with some pockets, particularly the West space is located in desirable Class A buildings North and Northwest submarkets, being $20.00 as opposed to previous years when the bulk as high as 30%. The CBD, which was not Midtown of the space was in less desirable Class B and previously considered energy-heavy in terms North C buildings. of multi-tenant office buildings now is with $15.00 the addition of primary vacancy or sublease Northwest The largest hit to vacancies occurred in the space at Sandridge Tower, BOK Park Plaza and CBD North submarket where Ackerman McQueen Leadership Square. A significant amount of the $10.00 vacated approximately 60,000 square feet space occupied by local energy companies 2015 2016 2017 2018 2019 when they moved downtown and Central is in their corporately owned and occupied Park reclassified approximately 68,000 square buildings and therefore not included in our feet of sublease space as primary vacancy. An report which tracks occupancy levels in multi- OKC TOTAL OFFICE MARKET ABSORPTION additional 64,000 square feet of newly vacant tenant buildings only. Unfortunately, some 300000 space was added at 9400 Broadway, formerly of those owned and occupied buildings may 200000 One Benham Place. Those losses helped end up in the multi-tenant market leading to 100000 cause the vacancy rate in this submarket to still higher vacancy rates in the coming years. 0 rise steeply from 15.0% to 23.6%. -100000 -200000 The large Northwest submarket actually had a fairly uneventful year with 29,000 square feet -300000 of negative absorption and a small increase in -400000 vacancy from 18.0% to 18.4%. However, this -500000 -600000 market will face serious challenges in 2020 as 2015 2016 2017 2018 2019 Hertz is set to vacate its 225,000 SF building in the Quail Springs area and place that RSF Vacant SF Vacant % Rate 2019 Year-End OKC Office Market Totals 16,768,741 3,418,867 20.9% $19.53 1 2019 Year-End Oklahoma City Office Market Summary CENTRAL BUSINESS DISTRICT SUBMARKET HISTORICAL CBD VACANCY 2019 YEAR-END CENTRAL BUSINESS DISTRICT REVIEW 25% 20% • Aggregate vacancy rates decreased from 21.8% to 21.1% 15% • Class A vacancy increased from 18.8% to 21.4% 10% • Class B vacancy decreased from 26% to 21.3% 5% 0% • Class C vacancy decreased from 23.3% to 16.7% 2015 2016 2017 2018 2019 • Aggregate rental rates increased from $22.23 per SF to $22.47 per SF. HISTORICAL CBD RENTAL RATES BY CLASS Class A Class B Class C $30.00 Class C • Class A rates increased from $25.20 per SF to $25.28 per SF. Class B $26.00 • Class B rates increased from $18.50 per SF to $19.00 per SF. Class A $22.00 • Class C rates decreased from $16.94 per SF to $16.63 per SF. $18.00 $14.00 • The CBD experienced absorption of 56,000 SF during 2019. $10.00 2015 2016 2017 2018 2019 2020 CENTRAL BUSINESS DISTRICT FORECAST CBD OCCUPANCY BY CLASS • Vacancy rates will level off. 100% • Average rental rates will remain near current levels. 80% 60% 40% 20% 0% Class A Class B Class C CENTRAL BUSINESS DISTRICT HISTORICAL CBD ABSORPTION 120000 90000 60000 30000 0 -30000 -60000 -90000 -120000 -150000 2015 2016 2017 2018 2019 2 Downtown Oklahoma City 2019 Year-End 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 55,441 56% $14.50 16% 100 Park Ave 101 Park Avenue Building 1936 14 197,042 70,921 36% $16.50 16.34% 101 Park Ave. 20 N. Broadway 1981 19 307,388 0 0% $20.00 20% 20 N Broadway 201 RSK 1972 16 201,694 43,483 22% $18.00 20% 201 Robert S. Kerr 701 N. Broadway 1930/1999 5 51,288 2,183 4% $22.00 15% 701 N. Broadway BancFirst Tower 1971 36 507,038 32,277 6% $18.50 15% 100 N. Broadway BOK Park Plaza 2018 27 663,297 300,000 45% $30.00 13% 499 W. Sheridan Braniff Building 2013 10 90,000 0 0% $24.00 20% 324 N. Robinson Buick Building 1924/2015 4 59,500 0 0% $27.50 15% 1101 N. Broadway Century Center Building 2014 2 98,000 21,945 22% $21.00 20% 100 W Main City Place 1931/85 33 251,449 60,095 24% $20.00 14% 204 N. Robinson Corporate Tower 1980 14 277,849 51,797 19% $22.00 17.59% CENTRAL BUSINESS DISTRICT 101 N. Robinson Court Plaza 1923/79 10 79,115 34,244 43% $16.00 14% 228 Robert S. Kerr Federal Reserve Building 1922/97 4 77,813 0 0% $18.00 20% 226 Dean A. McGee Avenue Hightower Building 1929 10 107,152 0 0% $18.00 15% 105 N. Hudson Leadership Square 1984 21 735,514 169,990 23% $24.00 20% 211 N. Robinson Metropolitan Building 1929/2011 3 69,560 8,577 12% $15.25 10% 400 N.. Walker Monarch Building 2019 4 53,347 0 0% $32.50 10% 1133 N. Robinson Oklahoma Tower 1982 31 568,960 49,526 9% $24.00 20% 210 Park Ave. Parkside Building 2015 6 76,413 0 0% $30.00 0% 120 Robert S. Kerr Robinson Plaza 1992 10 195,702 60,000 31% $18.00 17.8% 55 N. Robinson Robinson Renaissance 1927/88 12 174,840 70,271 40% $18.00 25% 119 N. Robinson Sandridge Center 1973/2008 30 493,185 175,000 35% $24.00 0% 123 Robert S. Kerr Sonic Building 2003 4 100,654 0 0% $26.00 8% 300 Johnny Bench Drive The Candy Factory 1914/2009 7 67,600 0 0% $25.00 0% 1 E.