Industrial Property Market Trends
2016 Mid-Year Industrial Survey Summary
This report covers only multi-tenant, investment grade industrial buildings. We classify buildings according to design, intended use, and clear height into three categories:
• Flex Space is generally considered to be less than 18 feet, but also includes modern high clearance flex space developments
• Service Warehouse is from 18 to 23 feet
• Bulk Warehouse is 24 feet or greater.
Generally the minimum size building tracked in any of the property types is 35,000 square feet.
Despite layoffs and bankruptcies in the oil and gas sector driven by drastically lower crude oil prices, The Oklahoma City multi-tenant industrial market is reporting lower overall vacancy than at this time in 2015. The industrial market as a whole, including single-tenant and owner-occupied properties, continues to enjoy low vacancies at 6.5% vacant with an unemployment rate of just 3.9%. The total vacancy rate for OKC multi-tenant industrial space is 10.56%, down from 11.8% last year. Despite lower vacancies, several speculative industrial building developments have been suspended due to slower leasing velocity. While not creating large vacancies, the withdrawal of the oil and gas service companies from space acquisition has created much less competition for available space.
While the current oil price environment has certainly affected the multi-tenant industrial market, the effect is moderate. The rapid rent inflation of the past several years has slowed significantly and presents a more flexible environment for new-lease concessions. With world-markets uncertainty becoming the new normal, tenant demands of flexibility in lease term and escape options are more common. We project a “more-of-the-same” multi-tenant market with level rents and new construction mostly limited to pre-leased developments.
The bulk warehouse market fell from 9.8% vacant in 2015 to 8.7% in 2016. This translates to about 500,000 square feet of available space against a total inventory of 5.7 million square feet. Much of this gain was due to strong positive absorption in the North submarket.
Flex space vacancy fell dramatically from 14.2% in 2015 to 11.7% currently. Once again, strong positive absorption in the North submarket fueled this decrease.
Service Warehouse, usually volatile and often independent of overall market trends, remained virtually flat reporting 14.0% vacant in 2015 and 14.1% vacant in 2015.
There was only one sale of tracked multi-tenant properties in the last twelve months. 1301 Cornell Parkway, a 33,280 square foot flex space center sold for $1,487,500 ($44.69 per square foot) in January, 2016.
Vacancies will remain around current levels, with the possibility of increased flex space vacancy as more oil and gas related businesses contract.
Rental rates will remain steady but rent concessions will play a larger part in new leases and renewals.
New construction will be limited and speculative development not currently building will slow significantly.