The Oklahoma City industrial market so far has had relatively few foreclosures, usually related to owner-occupant company bankruptcies. There have to date been no foreclosures of investor owned multi-tenant buildings. Vacancy has risen across both the entire industrial market and the multi-tenant market. The multi-tenant market tends to be populated by national and regional tenants, who have been affected more by the recession than the local market as a whole. As a result of this there are some large blocks of empty warehouse space (over 100,000 square feet) that were not available 18 months ago.
Market wide vacancy currently stands at 11%. Multi-tenant vacancy is at 15.3%, up from 12% one year earlier. These are significant but not catastrophic increases. The multi-tenant sector has grown over the past decade but is still a minority segment of the market. Oklahoma City is a 70% owner-occupied market, and the availability of lender financing is a critical part of the market. The “credit crunch” is loosening, but lenders are under more scrutiny from regulators than ever before, which can make it challenging for industrial companies to purchase real estate.
We appear to be in the early stages of a recovery. Activity is slowly increasing but shaped by the realities of today’s financial world. Many tenants are choosing short term leases to maintain flexibility and limit liabilities. There is downward pressure on lease rates and deal terms requiring landlord concessions to maintain occupancy. The downturn in the energy sector is responsible for a large part of the decreased activity in free-standing industrial buildings, and will continue to affect us in the foreseeable future. Sale prices for owner occupied buildings have not crashed but the number of sales is a fraction of the last five year average. It is a challenging time to be a building owner or broker.