By Ioana Neamt, Associate Editor
Oklahoma City—As 2014 is drawing to a close, Oklahoma’s economy remains stronger than the rest of the nation, driven mainly by the state’s oil, gas and energy industries. The unemployment rate in the state’s primary economic anchors—Tulsa and Oklahoma City—remains steady at 4.8 to 4.9 percent, well below the national average of 6.1 percent, according to recent data collected by CBRE. Job growth, rising rents and the state’s position as a major player in oil and gas production continue to draw investors to the area. Oklahoma City was ranked seventh on Forbes’ list of Best Places for Business in 2014.
CBRE reports that 9,000 jobs were created in the area from May 2013 until May 2014, most of them in the energy sector. The office market continues to tighten as large companies are expanding their existing locations or moving into newer, higher-quality office buildings. In Oklahoma City, the office market vacancy rated dropped from 8.40 percent at the end of the second quarter to 7.90 percent in the third quarter, while Class A office occupancy in Tulsa increased from 94.9 percent at the end of 2013 to 96.4 percent.
NAI Sullivan Group predicts that 436,530 square feet of office space will be delivered in Oklahoma City in the fourth quarter, including the massive, 150,000-square-foot expansion of the Hobby Lobby campus at 44th and Council. Notable developments include the future OGE headquarters in downtown Oklahoma City, Hogan Assessments’ new $15 million headquarters in Tulsa, as well as the $12.45 million sale of the 134,000-square-foot Union Pines building to U.S. Cellular.
The Tulsa and Oklahoma City metro areas are also doing well when it comes to the multifamily market. As the state recovers from the recession, experts predict a growing interest in Oklahoma’s multifamily scene. Furthermore, with job growth fueling multifamily demand, construction is booming and businesses continue to expand. In Oklahoma City, the Central Business District (CBD) is highly sought after due to job growth in the area, according to data gathered by NAI Sullivan Group. The city saw $77 million in total sales volume in the third quarter of 2014, a significant increase from $23 million in the second quarter. Additionally, 1,425 units totaling 1.2 million square feet of multifamily space were proposed at the end of the third quarter, mostly in downtown Oklahoma City. The largest multifamily transaction in the city was the $38 million sale of the 324-unit Liberty Pointe, NAI Sullivan Group reports. In Tulsa, the multifamily vacancy rate was 5.6 percent in the third quarter, compared to 5.9 percent in the second quarter and 6.1 percent in the first, according to data collected by REIS. The asking rental rate per unit remained steady throughout the year: $631 in the second quarter and $636 in the third quarter. Recent transactions in the area include the sale of The Galleria, a 256-unit multifamily community in South Tulsa.
As more and more businesses look for locations in the Tulsa and Oklahoma City metropolitan areas, there is also growing interest in the retail market in these cities. Public REITs remain the most active buyer type in Oklahoma City, according to CBRE, accounting for nearly 70 percent of the transaction volume in the first half of 2014. Some of the most notable transactions in the area were Glimcher Realty Trust and Blanton Property Company’s purchase of Nichols Hills Plaza, Classen Curve and the Triangle at Classen Curve for the total amount of $51.8 million. The retail market is prospering in Tulsa as well; recent developments include the announcement of the $80 million Cherokee Outlets at Hard Rock Hotel and Casino Tulsa, expected to generate 1,000 permanent jobs and $120 million in annual sales.
The state’s industrial market is also experiencing positive growth, driven mostly by the increase in construction and lease rates. According to NAI Sullivan Group, 269,180 square feet of industrial space is expected for delivery in Oklahoma City in the fourth quarter. The total sales volume has increased in the second half of the year, with 53 industrial sales totaling nearly $44 million in the third quarter. NAI reports that the industrial vacancy rate remains steady at 5.40 percent in Oklahoma City, while in Tulsa, the vacancy rate is expected to remain low in the fourth quarter of 2014. Notable industrial transactions included Sealy’s purchase of the $17 million ShurTech Distribution Center and the 322,129-square-foot leased by Alliance Steel in the Oklahoma City area.