OKLAHOMA CITY, OK-Much like its neighbor to the south, Texas, Oklahoma in general and Oklahoma City in particular, were just brushed by the Great Recession and its financial aftermath, rather than submerged in it. In fact, within that aftermath, the city saw the construction and opening of Devon Energy's new center, an 850-foot-tall, 1.8-million-square-foot office behemoth that is the tallest building in Oklahoma.
Given this and other factors, it's little wonder that Mark Beffort and Tim Strange with Newmark Grubb Levy Strange Beffort point out that Oklahoma City has seen a lot of growth in recent years. In a recent interview with GlobeSt.com, Strange and Beffort discussed fundamentals that impacted commercial real estate trends occurring throughout the area.
One of those trends, of course, was the 1.8-million-square-foot elephant in the room – the Devon Tower. "While that was going up, a lot of people were concerned that the vacating of other space by Devon to move into that building would be a drain on the market," Beffort says. But that drain never happened. "We saw more than 60% absorption within the past year and a lot of positive absorption in downtown," Beffort observes. He goes on to say that more than 20 new firms moved into the CBD within the past year and a half, with the suburban office sector just as active.
Though energy is a driving fundamental in OKC, Strange pints out that, since 2008, the economy has diversified into many areas, including bioscience, aviation and aerospace. In the middle of 2012, Boeing Co. opened its new, six-story building, having moved about 1,000 jobs from its Wichita, KS facility. It was estimated that, by the end of 2013, upwards of 2,100 people could be working for the aerospace company. Strange also points out that the University of Oklahoma Health Sciences Center's campus continues to grow. "We're seeing world-class talent in the biosciences on that campus now," he says. "We have people with multiple PhDs., top scientists, moving to Oklahoma City to work in biosience."
All of this paints a nice picture for the near-term future of Oklahoma's commercial real estate sector. Quality industrial space is hard to find, bringing up the potential of speculative development before the end of the year. Both Strange and Beffort believe the area will experience continued positive absorption among office product. Multifamily complexes will continue changing hands as well.
"There isn't enough quality product for sale to these investors," Strange says. "When we do have it, we see multiple investors interested, which is creating a feeding frenzy and driving prices up."
When it comes to investment sales on the office side, Beffort points out that Oklahoma City is an interesting sector when it comes to quality assets – about four to give groups control 60% to 70% of the quality assets. "It's hard to enter the market," he says. "But I think some people will be willing to accept lower yields to come in. I anticipate we'll see one or two assets sell before the end of the year to large, out-of-state investors."
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