Industrial Market Looks `Exciting'
Puckett, Bob, THE JOURNAL RECORD
The new year will be an exciting one in the Oklahoma City industrial real estate market. The days of high vacancies and bargain-basement rental rates and building values have given way to low availability, appreciating rates and values, and new development.
CB Commercial surveys industrial vacancy in 53 metropolitan statistical areas (MSAs) through 131 offices across the United States. With a total population of 1.03 million, the Oklahoma City MSA covers six counties and includes Oklahoma City proper and suburbs.
Oklahoma City's total employment growth has consistently outperformed the CB national average for both the last decade and the last four quarters. Of the 53 major metropolitan areas covered, Oklahoma City leads the nation in the lowest industrial vacancies for buildings 10,000 square feet and larger, with a current vacancy of 3.7 percent. This compares with a rate of 6.9 percent nationally. This is a dramatic change from 1987, when our vacancy hit an all- time high of 13.4 percent. Net absorption is the measure of space becoming vacant vs. space being leased or purchased in a given time period. Positive net absorption refers to more space being taken off the market than is coming on and goes hand in hand with declining vacancy rates. Since 1987, the Oklahoma City industrial market has had a net positive absorption of over 5.7 million square feet. We expect a net positive absorption of over 600,00 square feet for calendar year 1997. These conditions lead naturally, through the laws of supply and demand, to rising rental rates and appreciating building values. Since the high vacancies of the 1980's, rates for bulk warehouse properties have risen from lows of $2 to $2.25 per square foot per year to current levels of $3 to $3.25 (a 30 percent increase), for existing Class A space. Construction prices have also risen, making rates of $4 necessary for the most basic new space with minimal office buildout. However, even at these rates, Oklahoma City ranks 49th out of 53 in industrial rental rates. The national average for equivalent space approaches $5 per square foot. Service Center rates for flex space with higher office buildout ratios similarly have increased with some 100 percent buildout rates approaching $9. Building values have shown similar appreciation. Warehouse properties have shown as much as a 60 percent increase in value from the late 1980s to present. …