Oklahoma City 2018 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 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 2018 Mid-Year Office Market Summary The first half of 2018 brought expected healthier occupancy levels in the next results for the Oklahoma City Central couple of years. OKC Total Oce Market Vacancy Business District with increased 30% Market Vacancy CBD Vacancy Suburban Vacancy vacancy due to the addition of the The Central Business District’s vacancy 24% BOK Park Plaza Building to available rate rose from 18.1% to 22.9% during inventory and negative absorption of the first half of 2018. There are lots 18% 84,000 square feet. However, there of moving parts in the CBD these are continued signs of improvement days with the announced relocation 12% in the suburbs as 157,000 square feet of Enable Midstream Partners from was absorbed in those submarkets. Leadership Square to over 150,000 6% The net absorption for the entire square feet at BOK Park Plaza and 0% market was a positive 73,000 square the anticipated purchase of Cotter '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 feet; the first positive absorption total Tower by BancFirst. The 514,000 in the past seven semi-annual reports. square foot tower is almost half empty and BancFirst plans significant OKC Total Oce Market Inventory 20 So, is the bad news behind us? improvements that will benefit existing Occupied SF Vacant SF Certainly not - as additional buildings and future tenants as well as provide a continue to come online and delay home for BancFirst’s own employees. 15 any significant improvement in the This purchase does more than provide market as a whole. In the first half growth for BancFirst’s operations. It 10 of the year an additional 820,000 saves the building from its economic square feet of new buildings were malaise brought about by deferred feet) (millions of square 5 added to the market at BOK Park Plaza maintenance and inattention to and Building 13 on the Chesapeake the needs of its existing tenants by 0 Energy campus. There has been previous ownership. '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 quite a bit of speculation regarding Chesapeake’s excess space, so the Looking ahead to the second addition of this building came as no half of 2018, we anticipate minor OKC OFFICE MARKET RENTAL RATES $25.00 CBD Northwest North surprise. It will bear watching to see if improvement in the vacancy rate, Midtown Suburban West the energy company adds more space but success will be very fractured to the market over time if they can depending on location. In general, we successfully backfill this first building. see the suburban market continuing $20.00 a trend of modest improvement. The biggest improvement in the Every time this market has a bit of $15.00 market occurred in the Northwest. good news, it seems to be offset by Since the peak oil price in June 2014, the addition of excess space by a large this submarket had experienced energy company. We knew the CBD $10.00 negative absorption of 460,000 square would have a tough time in 2018 and 2014 2015 2016 2017 2018 feet and contributed 62% of the we don’t anticipate that to change in market’s overall negative absorption the second half of the year. There through the end of 2017. However, in are lots of large deals that will impact OKC TOTAL OFFICE MARKET ABSORPTION the first half of 2018, this submarket downtown and the suburban markets 300000 showed improvement with 100,000 in the next 6-12 months, but for the 200000 square feet of positive absorption and most part they are lateral moves within 100000 a reduction in the vacancy rate from those specific submarkets. However, 0 19.1% to 17.3%. The Class A sector of most should have a net positive effect -100000 this market experienced a dramatic as they will provide expansion space -200000 reduction in its vacancy rate; falling for those users. -300000 -400000 from 23.1% to 18.0%. This remains -500000 a very popular area of the city and -600000 leasing velocity is on the rise, so this 2014 2015 2016 2017 2018 submarket should bounce back to RSF Vacant SF Vacant % Rate 2018 Mid-Year OKC Office Market Totals 15,736,667 3,042,968 19.3% $19.66 1 2018 Mid-Year Oklahoma City Office Market Summary CENTRAL BUSINESS DISTRICT SUBMARKET HISTORICAL CBD VACANCY 2018 MID-YEAR CENTRAL BUSINESS DISTRICT REVIEW 25% 20% • Aggregate vacancy rates increased from 18.1% to 22.9% due to the addition of the BOK Park Plaza building 15% 10% • Class A vacancy increased from 14.6% to 20.1% 5% • Class B vacancy increased from 22.7% to 27.0% 0% 2014 2015 2016 2017 2018 • Class C vacancy increased from 12.4% to 22.3% HISTORICAL CBD RENTAL RATES BY CLASS • Aggregate rental rates increased from $21.30 per SF to $22.70 per SF Class A Class B Class C $30.00 • Class A rates increased from $24.61 per SF to $26.25 per SF $26.00 • Class B rates remained level at $17.86 per SF $22.00 $18.00 • Class C rates increased from at $15.89 per SF to $16.73 per SF. $14.00 • The CBD experienced negative absorption of 84,000 SF during $10.00 2014 2015 2016 2017 2018 the first half of 2018. CBD OCCUPANCY BY CLASS 2018 CENTRAL BUSINESS DISTRICT FORECAST 80% 70% • Vacancy will continue to rise before year-end. 60% 50% 40% 30% 20% 10% 0% Class A Class B Class C CENTRAL BUSINESS DISTRICT HISTORICAL CBD ABSORPTION 60000 30000 0 -30000 -60000 -90000 -120000 -150000 2014 2015 2016 2017 2018 2 Downtown Oklahoma City 2018 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 21,142 21% $14.50 12% 100 Park Ave 101 Park Avenue Building 1936 14 197,042 81,235 41% $14.50 16.34% 101 Park Ave. 20 N. Broadway 1981 19 307,388 0 0% $20.00 20% 20 N Broadway 201 RSK 1972 16 212,816 81,375 38% $18.00 20% 201 Robert S. Kerr BOK Park Plaza 2017 27 690,000 300,000 43% $35.00 13% 499 W. Sheridan Braniff Building 2013 10 90,000 0 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 52,086 20% $18.00 14% 204 N. Robinson Corporate Tower 1980 14 277,849 16,204 5% $20.00 17.59% 101 N. Robinson Cotter Ranch Tower 1971 36 514,317 228,181 44% $18.00 15% CENTRAL BUSINESS DISTRICT 100 N. Broadway Court Plaza 1923/79 10 78,244 33,524 43% $15.00 14% 228 Robert S. Kerr Federal Reserve Building 1922/97 4 71,616 0 0% $18.00 20% 226 Dean A. McGee Avenue Hightower Building 1929 10 107,152 7,826 7% $18.00 15% 105 N. Hudson Leadership Square 1984 21 735,514 35,009 5% $24.00 20% 211 N. Robinson Oklahoma Tower 1982 31 568,960 74,181 13% $24.00 20% 210 Park Ave. Parkside Building 2015 6 76,413 13,000 17% $30.00 0% 120 Robert S. Kerr Robinson Plaza 1992 10 195,702 20,000 10% $17.00 17.8% 55 N. Robinson Robinson Renaissance 1927/88 12 174,840 58,529 33% $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 Heritage 1923/2017 6 102,740 39,925 39% $25.00 20% 621 N. Robinson Totals 5,443,633 1,243,967 22.9% $22.70 3 2018 Mid-Year Oklahoma City Office Market Summary NORTHWEST SUBMARKET HISTORICAL NORTHWEST VACANCY 2018 MID-YEAR NORTHWEST SUBMARKET REVIEW 20% • Aggregate vacancy rates decreased from 19.1% to 17.3% 15% • Class A vacancy decreased from 23.1% to 18.0% 10% • Class B vacancy decreased from 18.2% to 17.8% 5% 0% • Class C vacancy decreased from 15.5% to 14.3% 2014 2015 2016 2017 2018 • Aggregate rental rates increased from $18.49 per SF to $18.95 per SF HISTORICAL NORTHWEST RENTAL RATES BY CLASS Class A Class B Class C $25.00 • Class A rental rates decreased from $22.47 per SF to $22.37 per SF • Class B rental rates increased from $17.67 per SF to $17.74 per SF $20.00 • Class C rental rates increased from $14.60 per SF to $14.89 per SF $15.00 • The Northwest Oklahoma City submarket experienced absorption of 100,000 SF during the first half of 2018. $10.00 2014 2015 2016 2017 2018 2018 NORTHWEST SUBMARKET FORECAST NORTHWEST OCCUPANCY BY CLASS • Vacancy rates should continue to shrink as the worst seems behind us in this submarket.