Rising confidence continues to spur the office market but we see caution ahead as average asking office leasing rates continue to rise, new construction comes on line, and vacancy rates increase. With Chesapeake Energy increasing their office holdings by $40 million with the purchase of over 500,000 SF over the last three years, this could be considered a “false” strength of our office market.
However, this could be overcome by…..
Strong financial forecast for the City of Oklahoma City…. A five year economic forecast prepared for the City of Oklahoma City indicates that the per capita income for Oklahoma City is 107% of the national average. These factors along with city leaders that are pro-business make Oklahoma a business friendly city.
NBA ownership relocating to OKC will bring a need for more office space in the CBD.
The demand for class A space will be driven by the energy, finance, and medical sectors.
However, proposed new construction of approximately one million square feet of office space along the Memorial and Broadway Extension corridor will impact absorption. Planned new construction is priced at $24.00 per SF.
Rates:
2007 experienced a rise in overall office leasing rates for full service properties from an average of $12.95 per square foot at the beginning of 2007 to $13.39 per square foot at the end of 2007, an increase of 3.4%. Leasing rates for full service office properties at the end of the second quarter of 2008 rose to $13.93 per square foot, a rise of 5.4%.
Absorption:
The first half of 2008 shows a net negative absorption of 180,397 square feet, with much of this negative absorption coming from the sale of the Hertz building at 3817 NW Expressway, and the completion of office properties along Memorial being counted as available properties for lease.
Vacancy:
Overall vacancy at the end of the first half of 2008 was 10.4% compared to the end of 2007 which registered 9.8%. Vacancy at the beginning of 2007 stood at 8.6%. The 18 month period saw a rise in vacancies of 1.8%.
To view the full report visit:
http://www.naisullivangroup.com/marketreports/OfficeMarketReport-MidYear2008.pdf?MarketID=21
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