Industrial Property Market Trends
2017 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.
A cursory glance at the vacancy numbers for this year’s Industrial Market Survey would give the impression of a market with surging vacancies. With a multi-tenant industrial base of only 10.8 million square feet out of a total industrial market of 68 million square feet, a few large empty spaces in the multi-tenant arena will skew the numbers. Bulk warehouse space is a crucial indicator of the economic health of a market. The spaces are large, tend to be occupied by national credit tenants, and exist to support the retail, manufacturing, and construction sectors. Multi-tenant bulk warehouse in Oklahoma City has the lowest vacancy of any of the categories we track, as well as over 1.3 million square feet of new space is currently in the planning, construction, or leasing phase in the metro. Some of these newly-constructed buildings, like the new 300,000 square foot Amazon facility, are single-tenant buildings and will not appear on this report. But the majority are multi-tenant and were built to fill the need for modern space for image-conscious tenants, in addition to required amenities such as 30’-32’ clear height, large truck courts, and ESFR sprinkler systems.
The current oil crisis has had an impact, but the general warehousing and distribution sector has been little affected by the slow-down.
The bulk warehouse market rose from 8.7% vacant in 2016 to 12.2% in 2017. Much of this vacancy was due to new construction, and a significant amount of space reported as available is still under lease and marketed as sub-lease space.
Flex space vacancy rose from 11.7% in 2016 to 14.5% currently. The effect of the oil crisis on small business is more noticeable in this sector.
Service Warehouse, usually volatile, rose from 14.1% vacant in 2016 to 27.6% vacant in 2017. We define this sector as 18-24 feet in clear height including some shorter but functionally obsolete properties. Compounding this increase is the occurrence of a large true vacancy in a facility which for years has been fully occupied catering to the seasonal needs of retailers.
Vacancy Bulk warehouse vacancies will remain steady or decrease, other sector vacancies will decrease if the current recovery in the price of crude oil is maintained.
Rental Rates While rental rates will probably not inflate under vacancy pressure, Landlords will use concessions to compete for good credit tenants.
New Construction Bulk warehouse is the only significant multi-tenant construction anticipated in the next 12 months.