All year, commercial realtors have watched as market after market drowned in the financial undertow.
A midyear report released last week by commercial real estate giant CB Richard Ellis/Oklahoma, however, seems to indicate that while other office markets are struggling to tread water, Tulsa is steadily poised at the starting block.
Steady As We Go
Tulsa’s biggest advantage is its sound footing.
Over the last 12 months, U.S. vacancy rates have trended upward with little or no signs of stability, according to the report, which was based on a survey of 142 office buildings totaling 21,183,758 SF. The Tulsa office market, however, has primarily maintained its rates and even increased occupancy in some market segments.
Angela West, vice president of CB Richard Ellis/Oklahoma, said this market stability could be in large part attributed to the fact that the market hadn’t overextended itself in the first place.
“Tulsa has never had so much new construction that there was suddenly an overabundance of office space,” she said. In fact, the report lists only 18 Class A office spaces in Tulsa, totalling 5,240,488 SF.
“In some of our markets, there are half-built buildings back in the hands of creditors because there isn’t anyone to fill them once they’re built.”
As a result of the appropriate ratio of supply and demand, Tulsa has maintained a strong rate of absorption. According to the report, Tulsa had a net absorption of 86,332 SF in the first half of 2009.
“Any absorption in 2009 is considered very good,” West said.
Additionally, of the Tulsa buildings disclosing their occupancy rates for the Tulsa Business Journal’s list of largest office spaces (see Focus 3), more than half were more than 90 percent occupied.
West said there also wasn’t as much inflation in lease rates as in other markets.
“We also haven’t had a lot of appreciation, so our rates haven’t had to adjust as much,” she said. “If you threw all the commercial real estate across the country into a bucket together, you would have lease rates down about 25 percent.”
Tulsa’s lease rates have stayed relatively stable, according to the report, and have even been able to increase in the suburban Class A market.
According to the report, downtown Tulsa has fared particularly well, with a 2.35 percent increase in occupancy within the CBD
This could be related to business owners looking for savings. According to Lee Cohen, owner and CFO of Chinowth and Cohen Commercial, the average weighted price of Class A space downtown is $17/SF, compared to $19/SF in south Tulsa.
Ready for Takeoff
In such a volatile national market, just standing still is winning the race. But while solid ground is nice, growth is better.
“You’ve got an enormous amount of potential growth in all parts of the Tulsa market,” Cohen said.
And he should know. C&C Commercial is in charge of an impressive mixed-use, smart-growth development slowly taking root at the north end of Jenks proper called the Village on Main.
Announced earlier this year, Village on Main will be comprised of 150,000 SF of retail and restaurants, 100-plus units of urban residential living, 120,000 SF of office space, a 22,000 SF Hillcrest Utica Park Clinic health care facility, 100-plus room hotel and community events center packaged as a live-work-play complex. The Duane Phillips development is just one piece of the rapidly developing Jenks riverfront and the larger Arkansas River corridor, the development of which has been hailed as one of the key ingredients to making Tulsa desirable to future workforce.
Cohen was equally excited about downtown development.
“We’ve got a lot to look forward to downtown,” Cohen said. “There are hotels and lofts coming in, which will bring in entertainment. I think you are going to see an increasing number of people looking to live close to work and walk to entertainment after work. Both ends of Tulsa are moving toward that.”
Likewise, CB Richard Ellis/Oklahoma’s report seemed optimistic about the type of effect of improvements like the BOK Center and OneOK field would have on downtown office spaces.
“The type of improvements planned in that area will add to the amenities and should increase the desirability for tenants to locate downtown,” the report read. “When the city is enhanced… commercial real estate is enhanced.”