by Kirby Lee Davis
The Journal Record
Tulsa commercial property brokers foresee signs of opportunity
You could see the pleasure in Mendy Parish’s eyes as she spoke of Tulsa’s surging retail property sales.
After four years of weakened activity, Parish told her NAIOP Tulsa Trends 2012 Conference audience that seven Tulsa-area properties have sold so far this year, with most of those closing since June. That brought that category to $45 million in sales volume, just short of the $45.5 million enjoyed in 2007.
And that’s with more than a month to go in 2012, the CB Richard Ellis of Oklahoma broker reminded NAIOP’s Tulsa Chapter Thursday morning.
Carl Vincent shared a similar tale concerning Tulsa’s office sector. The Ruffin Properties broker recalled how Tulsa office broker Greg Roberson couldn’t list a single major office sale at last year’s conference. Vincent ran through several deals completed so far this year, topped by last week’s $120 million closing on One and Two Warren Place and this week’s announcement that Stuart and John Price had bought an interest in Kanbar Properties, with John taking over as president.
“I can’t remember the last time I was excited about the Tulsa office market,” said Vincent, quoting Xceligent data showing third-quarter vacancy rates below 20 percent and absorption of 311,000 square feet this year. “I believe there are some dynamics in play driving it forward.”
So ran the undercurrent of optimism at the NAIOP’s annual conference Thursday in the Tulsa Marriott Southern Hills Hotel. Although national conditions drew some concern, local market representatives presented upbeat views on prominent trends and 2013 expectations for their city’s commercial real estate sectors.
Absorption in Tulsa’s industrial market hit 788,304 square feet at the close of the third quarter, according to data by Xceligent.
“There’s a good chance we can pick up 1 million square feet by year-end,” said Patrick Coates, the head of Coates Commercial Properties.
With Tulsa running out of quality crane space, he said the city could see more build-to-suit projects follow the three witnessed so far this year at the Greenhill Distribution Center. But he doubted that many spec builders would step forward.
“Kansas City Life could develop something next year,” Coates said. “We haven’t heard any formal announcement on that, but that’s very possible as things fill up.”
With several million square feet of space added in the last decade, Parish said she doubted that Tulsa would see much in terms of new retail construction. She pointed out two growth areas to watch: food sellers, whether specialty grocers or convenience stores, and the intersection of S. 91st Street and Yale, which has two shopping centers under development.
“This is what will help us get our vacancies to start to go down,” she said, noting a second-quarter CBRE report quoting Tulsa’s retail vacancy rate at 13.8 percent.
Multifamily construction plans generated about the only major concerns Tulsa analysts raised Thursday. With 3,529 apartment units added to the metropolitan area since 2007, and another 3,394 units planned or under construction, Case and Associates Executive Vice President John Miller shared fears that Tulsa could face a multifamily bubble.
But with a 93-percent occupancy rate, and rental rates rising 2 to 3 percent this year, Miller said Oklahoma’s second-largest city could assimilate these additions – many of which have or will come from his own company.
“I wouldn’t be in this business if I wasn’t optimistic, and I am optimistic,” he said. “I think we’ll be fine, but there may be a slowness that occurs simply because of the volume that gets built.”
Miller said the multifamily sector is aided not just by low interest rates – which Mutual of Omaha Bank Executive Vice President Dwayne Sieck said could stay that way into 2014 – but also by a developing American psychology that home ownership may no longer be that great of a deal. Tulsa contractors also are producing good product for competitors Miller considered quality operators.
“I’ve never in my career been more excited, more interested and more pumped up about what’s going on in Tulsa, about the multifamily market, than I am today,” he said.
With interest rates and construction costs remaining low, Tulsa’s Class A office space reaching nearly full occupancy, and a surging oil and gas sector that consumes more office space per employee than most other industries, Vincent said the city stands poised for “opportunity and gain,” as he reconfigured the O&G acronym.
He pointed in particular to downtown, where Tulsa claims a number of buildings up for sale with hundreds of thousands of square feet in office space ripe for purchase and improvement.
“I think the Price brothers figured this out before I started writing this report,” he said.
Parish also expressed optimism about downtown Tulsa development, noting how she has started bringing prospective clients back to Tulsa’s central core. But she reminded the NAIOP audience that retail follows residential growth, and not the other way around.
Although Tulsa has added several small and medium complexes, with others planned, downtown residency estimates still fall below 3,000.
“You can’t build them and hope they’ll come,” she said.