Oklahoma City. Year-End 2007 Office Market Summary

Transcription

1 Oklahoma City Year-End Office Market Summary

2 TABLE OF CONTENTS Office Market Summary 1 Central Business District Submarket 2-3 Northwest Submarket 4-6 North Submarket 7-9 Midtown Submarket West Submarket Suburban Submarket 13 Year-End Sales Summary Back Cover 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.

3 Oklahoma City Year-End Office Market Summary was another very good year for the Oklahoma City office market. While absorption was not as strong as the previous year, the market overcame some potentially negative factors to remain very healthy. The market absorbed nearly 170,000 square feet and experienced a reduction in the total market vacancy of nearly a full percentage point ending the year at 14.8% vacant. 35% 3 25% 15% 1 5% '98 '99 OKC Total Office Market Vacancy Market Vacancy CBD Vacancy Suburban Vacancy '00 '01 '02 '03 '04 '05 '06 '07 The suburban markets continue to fare well in almost every submarket and building classification. Although the overall suburban vacancy rate increased slightly from 8.8% to 9. because of new construction, the suburban markets actually absorbed 112,000 square feet during the year. Because the suburban submarkets continue to enjoy low vacancies and increasing rents, those areas continue to experience construction of additional inventory, particularly the Northwest submarket along the Kilpatrick Turnpike. However, local developers continue to take a very conservative approach to new construction. Only 100,000 SF of space was added in and only 160,000 or so is currently under construction or on the drawing board for And of all the new space, not a single building in excess of 45,000 SF has been constructed, as no development group has put its neck on the line for a project of any significant size. As in the past few years, the market should be easily able to absorb the additional space with no adverse effect. (millions of square feet) OKC Total Office Market Inventory 0 '98 '99 Occupied SF '00 '01 '02 Vacant SF '03 '04 '05 '06 '07 continue to be an albatross around the CBD s neck, as the vacancy rate for that building class languishes near 6. While you can t ignore that the Class C vacancy exists, it certainly skews the image of the downtown market, which is actually fairly healthy in the buildings that offer better space and amenities. Overall, the CBD absorbed nearly 60,000 square feet during. The outlook for 2008 also looks good as downtown leasing activity is better than it has been in several years should prove to be OKC Total Office Market Absorption another positive year for the local office market. The national economy bears watching, but we seem to be insulated from any serious downturn locally by the continued growth of the oil and gas sector. New leasing 0 activity should remain brisk and many existing tenants continue to expand their operations in Oklahoma City. As mentioned, the continued improvement in the suburban markets is also reflected in rental rates. At the end of the average asking rate for suburban space had risen to $15.36 per square foot, with Class A rates rising from $19.84 to $20.89 per square foot. As in the last few years, the Class A rate increase is $17.00 $16.00 $15.00 $14.00 $13.00 $12.00 $11.00 OKC Total Office Rental Rates Northwest North Suburban 2003 CBD 2004 West Midtown pulling Class B and C rates up as well. Class B rates increased from $14.30 to $14.56 per square foot and Class C rates rose from $11.52 to $12.19 per square foot. In the Central Business District, it s hard to imagine that the past year could have been better than the final results indicate. Downtown s vacancy rate decreased from 27.7% to 25.8%, but the best news of the year was Sandridge Energy s acquisition of the former Kerr-McGee headquarters building, which averted nearly a half million square feet of inventory being dumped on the market. The downtown Class A vacancy rate is actually only 12.2% and the Class B vacancy rate is 14.3%. The older, less functional Class C buildings Oklahoma City Metro area submarket map 1

4 Year-End Oklahoma City Office Market Summary Central Business District Submarket Year-End CBD Vacancy 35% 3 25% 15% 1 5% Year-End CBD Rental Rates by Class $19.00 Class A Class B Class C $17.00 YEAR-END CENTRAL BUSINESS DISTRICT REVIEW Aggregate vacancy rates decreased from 27.7% to 25.8% Class A vacancy decreased from 14.7% to 12.2% Class B vacancy decreased from 16.2% to 14.3% Class C vacancy decreased from 60. to 58.6% Aggregate rental rates increased from $14.43 per SF to $14.61 per SF Class A rates increased from $17.06 per SF to $17.08 per SF Class B rates increased from $13.26 per SF to $13.66 per SF Class C rates increased from $12.98 per SF to $13.00 per SF The CBD absorbed 60,000 SF in Central Business District $15.00 $13.00 $11.00 $ Year-End CBD Occupancy by Class CENTRAL BUSINESS DISTRICT FORECAST Vacancy rates should decrease in 2008 Rental rates will remain near current levels 4 Class A Class B Class C Year-End CBD Absorption Downtown Oklahoma City

5 Year-End Oklahoma City Office Market Summary Central Business District Submarket CBD Year Built Floors RSF Vacant SF Vacant % Rate CAF 100 Park Avenue Building 1923/ ,752 7,882 8% $ % 100 Park Ave 101 Park Avenue Building 1936/ ,042 67,545 34% $ % 101 Park Ave 20 N. Broadway ,388 0 $ N Broadway Bank of Oklahoma Plaza ,808 26,724 11% $ Robert S Kerr Ave Chase Tower ,454 16,500 3% $ % 100 N Broadway City Place 1931/ ,304 71,968 25% $ % 204 N Robinson Ave Corporate Tower ,849 12,974 5% $ % 101 N Robinson Ave Court Plaza 1923/ ,381 28,692 37% $ % 228 Robert S Kerr Ave Dowell Center , , $ % 134 Robert S Kerr Ave First National Center 1931/ , ,687 6 $ % 120 N Robinson Ave Hightower Building ,152 15,000 14% $ % 105 N Hudson Ave Leadership Square N/16S 735,514 96,844 15% $ N Robinson Ave 11,777 (S) Oklahoma Tower ,960 98,000 17% $ Park Ave One North Hudson 1931/ ,000 16,818 23% $ % 401 W Sheridan Ave Robinson Plaza ,000 43,000 23% $ N Robinson AVe Robinson Renaissance 1927/ ,840 29,467 17% $ % 119 N Robinson Ave Sonic Building ,654 1,930 2% $ % 300 Johnny Bench Dr The Reserve 1922/ ,284 14,631 25% $ Dean A McGee Ave CBD Totals 5,168,649 1,332, % $14.61 Central Business District 3

6 Year-End Oklahoma City Office Market Summary Northwest Submarket Year-End Northwest Vacancy 15% 1 5% Year-End Northwest Rental Rates by Class $21.00 Class A Class B Class C $19.00 $17.00 YEAR-END Northwest submarket REVIEW Aggregate vacancy rates increased from 9.2% to 9.5% Class A vacancy increased from 7.9% to 16.1% Class B vacancy decreased from 10.6% to 6.9% Class C vacancy decreased from 10.5% to 8.4% Aggregate rental rates increased from $15.38 per SF to $15.95 per SF Class A rental rates increased from $19.67 per SF to $20.49 per SF Class B rental rates increased from $14.62 per SF to $14.99 per SF Class C rental rates increased from $11.61 per SF to $12.31 per SF The Northwest Oklahoma City Submarket experienced absorption of 124,000 SF during Northwest $15.00 $13.00 $ Year-End Northwest Occupancy by Class northwest submarket FORECAST Vacancy rates should continue to drop slightly as this submarket remains strong but also deals with the addition of approximately 100,000 SF of new construction Quoted rates will rise due to such a small amount of available Class A and B space Class A Class B Class C Year-End Northwest Absorption The Caliber Center

7 Year-End Oklahoma City Office Market Summary Northwest Submarket Northwest Submarket Year Built Floors RSF Vacant SF Vacant % Rate CAF Caliber Drive 2 81,520 0 $ % Caliber Dr 2525 Expressway ,110 6,280 8% $ % 2525 NW Expressway 4100 Perimeter Center ,317 5,577 12% $ % 4100 Perimeter Center Dr 4101 Perimeter Center ,317 0 $ % 4101 Perimeter Center Dr 4141 Northwest Expressway ,464 0 $ % 4141 NW Expressway 4200 Perimeter Center ,327 0 $ % 4200 Perimeter Center Dr 4801 Gaillardia ,867 0 $ % 4801 Gaillardia Parkway 5100 Brookline ,496 7,711 7% $ % 5100 Brookline AVe 5909 NW ,146 15,407 15% $ % 5909 NW Expressway American Cancer Society ,000 0 $ Silver Crossing Atrium Towers ,106 8,471 5% $ % NW 63rd St Avaya Building ,000 0 $ Hertz Qual Springs Parkway Bradley Square ,000 2,700 9% $ NW 122nd St Brookline Offices ,920 13,228 32% $ N Brookline Ave Center ,500 12,886 12% $ % 3000 United Founders Blvd Chase Bank Building ,943 17,654 42% $ % 6303 N Portland Ave Chase Park ,281 2,495 17% $ % 4323 NW 63rd St 2,800 (S) Commerce Center South ,857 0 $ % 9520 N May Ave Coppertree Centre ,928 1,405 5% $ NW 63rd Ave Cross Rock Place ,090 0 $ % Continental Dr Cross Rock Place ,500 9,824 19% $ % 3600 NW 128th St Dobson Communications ,420 0 $ % Wireless Way Enterprise Plaza ,542 0 $ % 5600 N May Ave FBI Building ,380 0 $ W Memorial Rd Fifty-Six Expressway Place ,340 10,859 19% $ NW 72nd St Five Corporate Plaza ,486 0 $ % 3625 NW 56th St Gaillardia II 2 42,970 8,401 $ % 4701 Gaillardia Parkway Grand Centre ,217 13,360 13% $ NW Grand Blvd Hartford Insurance ,000 0 $ NW 85th Terrace IBC Bank Building ,376 0 $ % 3601 NW 63rd St Jamestown Office Park 1972/ , % $ NW 63rd St Northwest 5

8 Year-End Oklahoma City Office Market Summary Northwest Submarket Northwest Northwest Submarket con t. Year Built Floors RSF Vacant SF Vacant % Rate CAF Lakepark Tower ,084 25,550 25% $ % 6525 N Meridian Ave Lakepointe Towers ,746 10,872 6% $ % NW Expressway Lakepointe West ,246 11,161 13% $ % 4045 NW 64th St Lakeshore Tower ,761 1,834 6% $ % 4301 NW 63rd St Landmark Towers 1969/ ,000 11,239 4% $ % NW 58th St Mercury Insurance Building ,103 0 $ % 7301 NW Expressway Mutual Assurance Building ,000 3,147 8% $ % 3121 Quail Springs Parkway North Shore Office Plaza ,570 0 $ % Hefner Dr Northwest Office Center ,833 11,803 14% $ % 4334 NW Expressway Oil Center 1973/ ,654 28,685 11% $ % 2601 NW Expressway One Corporate Plaza ,011 2,237 4% $ % 3525 NW 56th St Portland Plaza ,425 1,009 3% $ % 5700 N Portland Ave Quail Creek Commerce Center ,500 0 $ Quail Springs Parkway Quail Creek North ,780 1,042 3% $ % Quail Creek Rd Quail Ridge Tower ,950 11,621 25% $ % N May Ave Quail Springs Parkway Plaza I & II ,312 9,774 3% $ % Quail Springs Parkway Quail Springs Professional Building ,420 0 $ % N May Ave Rees Plaza at East Wharf Nov ,000 0 $ % 9211 Lake Hefner Parkway Rockwell Office Center ,000 6,231 21% $ % 8621 N Rockwell Ave Sprint PCS Building ,000 0 $ Silver Crossing St. Martins Building ,712 0 $ % 9020 N May Ave Summit Executive Building ,000 1,170 2% $ N May Ave The Caliber Center , ,868 62% $ % 3817 NW Expressway Three Corporate Plaza ,920 10,577 21% $ % 3613 NW 56th St Two Corporate Plaza ,551 0 $ % 5555 NW Grand Blvd Union Plaza ,379 17,519 7% $ % 3030 NW Expressway Williams Sonoma ,000 0 $ NW 84th St Northwest Submarket Totals 4,996, , % $15.95 Northwest Construction Year Built Floors RSF Vacant SF Vacant % Rate CAF 4811 Gaillardia May ,451 41, $ % 4811 Gaillardia Parkway 4727 Gaillardia Dec ,000 24,000 8% $27.00 n/a 4727 Gaillardia Parkway Northwest Construction Totals 71,451 65, % $

9 Year-End Oklahoma City Office Market Summary North Submarket Year-End North Vacancy 15% 12% 9% 6% 3% Year-End North Rental Rates by Class $22.00 Class A Class B Class C $20.00 $18.00 YEAR-END North submarket REVIEW Aggregate vacancy rates decreased from 7. to 5.6% Class A vacancy decreased from 0.8% to 0.4% Class B vacancy decreased from 7.3% to 3.9% Class C vacancy increased from 13. to 17.5% Aggregate rental rates increased from $15.17 per SF to $16.07 per SF Class A rental rates increased from $20.00 per SF to $21.75 per SF Class B rental rates increased from $14.68 per SF to $15.34 per SF Class C rental rates increased from $11.56 per SF to $12.36 per SF The Oklahoma City North Submarket experienced negative absorption of 3,000 SF during $16.00 $14.00 $12.00 $ Year-End North Occupancy by Class north submarket forecast Vacancy rates should continue to drop as local energy companies continue to acquire space and buildings Rental rates will show a slight increase particularly in the Class B segment of this submarket North Class A Class B Class C Year-End North Absorption The Waterford 7

10 Year-End Oklahoma City Office Market Summary North Submarket North Submarket Year Built Floors RSF Vacant SF Vacant % Rate CAF North 1001 Wilshire ,316 0 $ % 1001 W Wilshire Ave 50 Penn Place ,315 9,927 9% $ N Pennsylvania Ave 6, 319 (S) 5101 Circle Building ,799 1,984 3% $ % 5101 N Classen Blvd 7 & 9 Broadway Executive Park ,201 6,640 23% $14.50 NW 63rd St and N Broadway Ext Broadway Plaza ,726 0 $ % 16 NW 63rd St Broadway Sixty-Eight ,000 0 $ % 6801 N Broadway Ext Central Park One ,134 7,454 7% $ % 525 Central Park Dr Central Park Two ,463 0 $ % 515 Central Park Dr Chase Bank Building ,367 2,531 6% $ % 1200 NW 63rd St Columbus Square ,559 2,009 5% $ NW 63rd St Five North Broadway ,805 0 $ % 6601 N Broadway Ext Glenbrook Centre East ,503 25,726 41% $ % 1120 NW 63rd St Glenbrook Centre West ,905 8,725 16% $ NW 63rd St Harvey Parkway ,807 2,538 3% $ % 301 NW 63rd St Lincoln Plaza Office Park ,300 22,206 9% $ % 4545 N Lincoln Blvd MidFirst Plaza ,043 0 $ % 501 NW Expressway Nichols Hills Executive Center , % $ % 1000 W Wilshire Blvd Northgate ,704 13,000 27% $ , 4020, 4024, 4030 N Lincoln Blvd One Benham Place ,959 1,157 1% $ % 9400 N Broadway Ext One Broadway Center ,984 0 $ % 100 NW 63rd St One Broadway Executive Park ,832 0 $ % 201 NW 63rd St One Grand Park ,694 0 $ % 777 NW Grand Blvd One Western Plaza ,948 9,968 $ % 5500 N Western Ave Paragon Building ,791 14,532 13% $ % 5801 N. Broadway Pavilion Building ,895 3 $ % 6701 N Broadway Ext Penn Park ,643 13,370 17% $ % 5001, 5005, 5009, 5015 N Pennsylvania Ave Regency Center ,272 0 $ % 701 NW 63rd Ave Registry ,176 5,871 6% $ NW 50th St Richmond Square ,606 5,694 21% $ % 4900 Richmond Square 8

11 Year-End Oklahoma City Office Market Summary North Submarket North Submarket con t. Year Built Floors RSF Vacant SF Vacant % Rate CAF Santa Fe North ,000 0 $ % 6 NE 63rd St The Tower ,137 2,121 1% $ % 1601 NW Expressway Three Broadway Executive Park ,256 5,152 11% $ N Broadway St Three Grand Park ,813 0 $ % 999 NW Grand Blvd Two Broadway Executive Park ,205 3,991 8% $ % 205 NW 63rd St Waterford A ,000 0 $ % 6301 Waterford Blvd Waterford B ,468 0 $ % 6303 Waterford Blvd Waterford C ,575 0 $ % 6305 Waterford Blvd Waterford D ,087 0 $ % 6307 Waterford Blvd North Totals 3,068, , % $16.07 North 9

12 Year-End Oklahoma City Office Market Summary West Submarket Year-End West Vacancy 15% 1 5% Year-End West Rental Rates by Class $13.00 Class B Class C YEAR-END West submarket REVIEW Aggregate vacancy rates increased from 15.6% to 17.2% Class B vacancy totals increased from 11.3% to 14.2% Class C vacancy totals decreased from 25.2% to 23. Aggregate rental rates decreased from $12.24 per SF to $11.87 per SF Class B rental rates decreased from $12.55 per SF to $11.94 per SF Class C rental rates increased from $11.53 per SF to $11.72 per SF The West Oklahoma City Office Market experienced absorption of 14,000 SF in $ West submarket FORECAST Vacancy rates should remain near current levels in 2008 $11.00 Rental rates in the will also stay near current levels West $ Year-End West Occupancy by Class Class B Class C Year-End West Absorption The Parkway

13 Year-End Oklahoma City Office Market Summary West Submarket West Year Built Floors RSF Vacant SF Vacant % Rate CAF 300 Meridian Place ,559 8,051 26% $ % 300 N Meridian Ave 12,400 (S) Bank 2 Tower ,598 6,898 12% $ % 909 S Meridian Ave Corporate West One ,031 12,645 33% $ W Reno Ave Corporate West Two ,000 0 $9.00 8% 309 S Ann Arbor Ave Metro Office Park ,750 18,000 3 $ Highline Blvd Sovereign Office Park ,260 8,000 19% $ Sovereign Row The Parkway ,960 14,021 14% $ % 1300 S Meridian Ave Westpark Office Center ,607 5,865 8% $ Metropolitan Will Rogers Office Park ,170 15,116 28% $ % 4400 Will Rogers Parkway Will Rogers Office Park ,748 0 $ Will Rogers Parkway West Totals 587, , % $11.87 West 11

14 Year-End Oklahoma City Office Market Summary Midtown Submarket Year-End Midtown Vacancy 15% 1 5% Year-End Midtown Rental Rates by Class $14.00 Class B Class C YEAR-END midtown submarket REVIEW Aggregate vacancy rates increased from 2.1% to 13.1% Class B vacancy rates increased from 2.4% to 14.1% Class C vacancy rates increased from 1.1% to 2.9% Aggregate rental rates increased from $12.08 per SF to $12.88 per SF Class B rental rates increased from $12.43 per SF to $13.04 per SF Class C rental rates average $10.64 per SF to $11.35 per SF The Midtown Submarket experienced negative absorption of 23,000 SF during Midtown $13.00 $12.00 $11.00 $ Year-End Midtown Occupancy by Class midtown submarket FORECAST Vacancy rates will remain low as more users recognize Midtown as the most economical submarket Rental rates will remain at or near current levels Class B Class C Year-End Midtown Absorption The Cameron Building

15 Year-End Oklahoma City Office Market Summary Midtown Submarket Midtown Submarket Year Built Floors RSF Vacant SF Vacant % Rate CAF 2000 Classen Center 1966/ ,605 22,000 7% $ N Classen Blvd 3700 Classen Building ,800 7,000 13% $ % 3700 N Classen Blvd 3800 Classen Building ,800 4,300 8% $ % 3800 N Classen Blvd 4801 Classen Building ,151 0 $ N Classen Blvd Cameron Building 1955/ ,493 3,263 4% $ N Classen Blvd Santa Fe Building 1954/ ,203 0 $ N Santa Fe Ave Shepherd Mall Office Complex 1964/ ,000 45,000 7% $ NW 23rd St 80,000 (S) Midtown Totals 1,234, , % $12.88 Year-End Oklahoma City Office Market Summary Suburban Submarket Year-End Suburban Rental Rates by Class $18.00 $16.00 $14.00 $12.00 $10.00 Northwest North West Midtown Year-End Suburban Absorption YEAR-END Suburban submarket REVIEW Aggregate vacancy rates increased from 8.8% to 9.2% Class A vacancy increased from 5.6% to 11.1% Class B vacancy decreased from 8.8% to 7.7% Class C vacancy increased from 12.4% to 12.6% Aggregate rental rates increased from $14.87 per SF to $15.36 per SF Class A rental rates increased from $19.84 per SF to $20.89 per SF Class B rental rates increased from $14.30 per SF to $14.56 per SF Class C rental rates increased from $11.52 per SF to $12.19 per SF Suburban Oklahoma City experienced absorption of 112,000 SF during Midtown - Suburban SUburban submarket FORECAST Suburban rental rates will continue to climb Suburban vacancy rates will decrease particularly in Class B projects Class A space vacancies should also remain very low Some new construction will add approximately 100,000 SF during 2008 Suburban Submarket Totals 9,886, , % $15.36 OKC Office Market Totals 15,055,574 2,242, % $

16 Oklahoma City Year-End Office Market Sales Summary Oklahoma City experienced another active year of office building sales transactions in. For properties in excess of 25,000 square feet, a total of 12 office buildings changed hands in the suburban and downtown submarkets. Total sales volume was just under $100 million on approximately 2,000,000 square feet of properties. These figures are slightly down from 2006 where 16 properties sold, with total volume of $107 million on 2,250,000 square feet. These results do not include sales of medical office buildings which are considered a different asset class from general office buildings. for their real estate investment dollar. The only Class A property to sell in was the Hertz Financial Center at 3817 NW Expressway. Purchased in December by Caliber Development, the building has been renamed The Caliber Center and will bring to the market approximately 100,000 square feet of space formerly occupied by Hertz. This sale represents one of the few true valueadd opportunities seen in Oklahoma City in several years. The downtown area saw the most significant transaction of the year with Kerr McGee Tower selling to Sandridge Energy. This sale averted what would have been a black eye for Oklahoma City, a major downtown high-rise office building sitting empty. Given that Sandridge will ultimately utilize all of the space, it also avoids additional square footage being injected into the already competitive downtown submarket. The other notable downtown transaction was the sale of BOK Plaza. This 234,000 square foot project was already well leased; however, the seller, a Philadelphia based REIT, took a $4 million loss on the sale to a group of local investors from when it bought the property in As in years past, the suburban market saw the bulk of the sales activity. With occupancies and rental rates at historical highs, most investors perceive a more comfortable risk/reward environment It is anticipated 2008 will see more diligence by both lenders and investors in order to consummate transactions. The confluence of a weakening economy, a nervous lending community, and a presidential election, should combine to drive everyone back towards more conservative views of the future. As such, there should be a recognition and re-pricing of the risk associated with real estate ownership, something which has been in relatively short supply the last several years. Lenders are already widening loan spreads and decreasing loan-to-value ratios which will have a direct effect on leveraged yields, overall equity requirements, and ultimately, asset value. The result is likely to be disappointed sellers who missed their window of opportunity to sell for historically low capitalization rates, and what may turn out to be, depending on how the presidential election plays out, historically low capital gains tax rates. Nevertheless, compared to many other markets across the United States, Oklahoma City represents a solid economic environment for those looking to take advantage of investment opportunities at pricing well below replacement cost, and with reasonable upside potential. Price Edwards & Company 210 Park Avenue, Suite 1000, Oklahoma City, OK P (405) F (405)