2012 Year-End Retail Survey
The Retail Market
2012 was a good year for Oklahoma City retail, particularly for national tenants. Oklahoma City probably saw the most national tenant leasing in the last ten years. Much of our report this year end will focus on tenants new to our market, new concepts and expanding tenants. Newer well located space is generally well occupied. If you take only centers opened from 2000 till now, vacancy is 5.2%. There isn't much space available for tenants in the best locations which is a hindrance for attracting more national and big-name tenants. Consequently, a number of new projects are in some stage of development; expect announcements of new construction in 2013.
The overall market is healthy but not without concerns. We've talked before about the importance of consumer confidence in an economy that is 70 percent driven by consumption. 'Consumer Confidence Rises to 4-year High', Chain Store Age; 'The Mighty Consumer is on the Ropes', Wall Street Journal; 'Consumer Confidence Points to Growing Optimism', National Retail Federation; 'Consumer Confidence is on the Wane', Wall Street Journal. These four headlines were all from the last few months and highlight the retail market's continued issues with slow national growth and related uncertainties in our economic and political environment. Locally, we have some issues that contribute to this uncertainty as well: low natural gas prices, shareholder/management issues at Chesapeake and Sandridge, health care changes - to name a few.
Our year-end survey results reflect this back and forth between the positive and this uncertainty. The market as a whole was relatively flat for the year, vacancy ended the year at 10.2 percent, up moderately from year-end 2011 at 9.8 percent. The South submarket reflected improved occupancy as some long-vacant spaces were filled. The remaining markets saw vacancy tick up slightly, but overall absorpsion was positive at just over 178,000 square feet. With the exception of the West-Central submarket, the increase was generally spread throughout the centers in each submarket. In the West-Central
submarket, older centers experienced a few sizable tenant move-outs that contributed to the rise in vacancy. This divergence between vacancy in old and new product is taking place throughout the country. A number of older centers will need to be re-positioned in the upcoming years to compete; a few may need to be torn down. The vibrancy in the top half of our market is winning the day though which bodes well for the upcoming year.
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Much of the improvement in our market has come from big boxes being filled. Both former Ultimate Electronics, on I-240 and Quail Springs Marketplace, have been leased, by US Foods Chef's Store and Golfsmith, respectively. The former Belle Isle Linen's space is expected to be leased in the first quarter. Gold's Gym took the NW Highway and Portland former Circuit City off the market as well as the former Sportmen's building at Quail Springs. Several boxes have been converted to non-retail use, including both former Borders, the Norman location will be a library and the NW Highway location a medical clinic. The former Crossroad's Best Buy will be expansion space for Heritage College. As a result, we've seen a nearly 1 percent drop in vacancy for the free-standing retail buildings we track, to 4.7 percent.