by Kirby Lee Davis
The Journal Record
The number of downtown Tulsa commercial properties actively listed for sale has reached its highest point since the 1980s, according to a study by Nick Probst, Corporate Realty Advisors commercial broker.
A large chunk of that reflects Kanbar Properties putting much of its 2-million-square-foot portfolio on the sales block, several Tulsa commercial brokers said. Many of those buildings represent Class B, C and D properties that may have floor plates or infrastructure not easily adaptable to modern needs.
But even with those listings by downtown Tulsa’s largest property holder, Probst stressed that several other owners also chose to market their buildings at this time – which he considered a solid development.
“There’s this significant part of the market that hinges upon sellers willing to transact their properties,” he said. “Every building is always for sale at any given time. There’s only so many that say they’re willing to sell.”
Probst said a dozen downtown multitenant office buildings exceeding 20,000 square feet have hit the sale lists, including more than five major structures.
Kanbar’s flagship First Place Tower may top the list, Probst said, both in its 650,000 square feet of leasable space and its 40-story, 516-foot height. That earned the 39-year-old building its designation as Tulsa’s third-tallest office building.
But a non-Kanbar tower follows close behind, the 474,000-square-foot, 28-story, 110 W. Seventh St. Building. Its 388-foot height ranks 110 W. Seventh as Tulsa’s seventh-tallest tower.
With several prominent foreclosures hitting the courts this year, the sales moves raise questions of whether cashflow demands may have caught up with some property owners after several years of recessionary pressures. As some brokers noted, Kanbar is not the property owner dealing with aging building costs.
But with downtown’s office occupancies on the rise over the last two years in Class A and B buildings, not to mention the incentivized success some developers have enjoyed over the last five years converting downtown buildings to hotels or residential units, Probst sensed that many owners may be opportunity-driven.
“I think it’s actually a good sign,” said Jim Burcham, president of Look Properties. “The last three years have been pretty down, for lack of a better term. But this year we’re kind of having a banner year, primarily in land sales.”
Midyear office market reports by both Xcelligent and CB Richard Ellis of Oklahoma cited downtown’s continued strength, with significant new leases at BOK Tower, the 110 W. Seventh St. Building and the Sun Building. Costar Properties recorded downtown’s Class A vacancy rate at 8 percent, while Class B buildings finished June 30 with 22.6-percent vacancies.
“Demand for quality Class A and B buildings is still stable downtown,” said Patrick Coates, the owner of Coates Commercial Properties.
That’s why Probst sees downtown’s biggest opportunity in office building rehabilitation. Both the Sun Building and 110 W. Seventh St. Building have recorded strong occupancy turnarounds over the last four years under owners willing to invest in property improvements.
Probst said this surge in listings could bring similar-minded developers to Tulsa’s door.
“That attracts attention from local entrepreneurial developers, as well as nationally and internationally,” he said. “I’ve had calls from people from different parts of the world that have contacted us, interested in what downtown Tulsa has to offer.”
Coates doubted that Tulsa presented such opportunities for hospitality projects. Downtown has already seen two prominent office buildings transformed into hotels over the last four years, and a third started. It also has a new hotel under construction and another in discussion for the One Place development. All of that followed major remodels by the city’s three largest existing players.
“I don’t know if downtown can support another hotel beyond what we already have,” he said.
Probst was more positive, particularly toward building rehabilitation into residential units. But with a few projects advancing toward completion, along with lingering questions over the future of state tax credits and other public development incentives, Probst that suggested developers might want to wait a few months.
“You need to see how those fill up to properly gauge demand,” he said.