Oklahoma City—Oklahoma City’s relatively diverse economy has made the city’s apartment market surprisingly strong, given the state of the national economy.
In addition to employment from the state capitol and Air Force Base, the city has a relatively strong medical and education base, which bodes well for the local economy, “given that education and healthcare [have been] the only growth markets,” points out Ryan Severino, CFA, senior economist at Reis Inc.
The unemployment rate in Oklahoma City was 6.2 percent as of February 2010, according to the latest numbers from the Bureau of Labor Statistics.
“The other thing that it has going for it,” Severino tells MHN, “is that it has a fairly decent energy market.” Additionally, Google recently announced plans to purchase a power agreement for wind energy here, according to the Associated Press.
Apartment vacancies peaked in the second quarter of 2010 at 10.2 percent, but that number has dropped significantly as of late. Preliminary first quarter 2011 data shows that average market-wide vacancies are 7.5 percent, Severino reports. However, there’s a significant difference in performance among asset classes; as of the fourth quarter 2010, A product saw 5.8 percent vacancies, while B and C Class assets were 8.9 percent vacant.
Meanwhile, asking and effective rents were up 2.5 percent and 2.9 percent, respectively, for 2010.
“The construction pipeline might be the only thing to slow recovery” in Oklahoma City, points out Severino. With 1,100 units slated to come online in 2011, it’s “a significant enough number that it might mute the recovery a little bit, relative to what would happen if you didn’t see supply coming online.” Oklahoma City doesn’t typically see this sort of new supply on an annual basis; in fact, the metro hasn’t seen this number of completions since 2002, Severino adds.
The good news, however, is that the new product is slated to come online in some of the better-performing submarkets, including Norman, South Oklahoma City and Northeast Oklahoma City.
Not surprisingly, the transaction market has taken somewhat of a hit, with only five deals closing in 2010. However, as Severino points out, Oklahoma City only saw about 26-38 transactions even in the best of times.
The average cap rate for 2010 was about 7.4 percent, Severino reports.