Diving into the retail vacancy rates across Oklahoma and illustrating what they mean.
Edmond vacancy increased slightly during the first half of the year, ending June at 9.0 percent compared to 8.4 percent at the end of the year. There were no major shifts in occupancy and the inventory of product stayed roughly the same. There have been some smaller strip centers and stand-alone buildings built, but no significant new construction. The pandemic and general economic conditions will no doubt constrain new development for some time. As with all the Oklahoma City metro, expect additional vacancy over the second half of the year as we see tenant bankruptcies and closures. Yet, Edmond will continue to be one of the most desired retail submarkets; virtually all multi-store retailers want to be in the market given Edmond’s demographics, particularly incomes and disposable spending.
Eastern Oklahoma County
Eastern Oklahoma County vacancy was virtually unchanged at mid-year at 12.4 percent, up slightly from 12.1 percent on December. A new retro design center totaling 14,000 sf was announced in June anchored by Pearle Vision and Nashbird across from Sooner Rose. This is the only significant new construction anticipated in the near term. The JCP at Midwest City Town Center is on the closure list but remains open in the short-term. And, the Warren Theater at Sooner Rose remains closed and there is significant concern about the overall theater industry. Several other national tenant vacancies could create some holes in this submarket; however, given the concentration of the market on local tenants, the question becomes the health of small shop tenants. There remains a significant amount of product that is older, several of which have significant deferred maintenance or difficult configurations. The larger spaces in these older centers have proven more difficult to lease.
The Moore-Norman submarket vacancy came in at 7.4 percent at mid-year versus 7.1 percent at year-end. Again, very limited new construction in this submarket and very little anticipated in the year ahead as the market works through the current environment. Sooner Mall continues to have significant vacancy primarily due to the empty Sears. Should the JCP store close here, it could create real issues for the mall. Malls have been the hardest hit of all landlords during the shutdown. Costco’s entry into this market in south Moore is still anticipated but has not been officially announced. The Moore-Norman submarket has been a highly desirable location for retailers – incomes are good and housing density is high – making it one of the highest retail growth areas of the metro over the last 10 years.
South Oklahoma City
South Oklahoma City saw the most significant rise in vacancy over the first half of the year, from 13.0 percent to 15.5 percent. The increase appears to be spread across the market as opposed to issues with one center or a few tenants. Zerby Interests is moving forward with plans to re-configure and expand Shields Plaza although timing is unknown. Until that re-development is started, no significant new development in this submarket is anticipated. The northern half of this submarket is heavily reliant on the Hispanic shopper and is largely characterized by smaller centers with relatively good occupancy, particularly along 29th street.
West Central Oklahoma City
The West Central vacancy remained low at 6.0 percent as compared to 5.8 percent at the end of 2019. Westgate Marketplace, Yukon Village, The Market at Czech Hall, and West End Pointe and the OKC Shoppes comprise nearly half the total product in the submarket and all maintain high occupancy. The Market at Czech Hall expects to add a new ground-up HomeGoods and a Crest grocery next to the Burlington. The corridor draws not only from the Interstate-40 traffic but from a large swath of homes north of Interstate-40 that have limited access to retail, particularly new retail. The former Cotton Mill parcel is one of the possible locations for the Maps 4 soccer stadium, which could jump-start a larger mixed-use development there, although current conditions are likely to delay or preclude any significant new development for some time.
The Interstate-40 and Portland area, home to 40 stores, containing over 2.5 million square feet that specialize in furniture and accessories, remains the hub of furniture sales for the City.
Northwest Oklahoma City
The Northwest submarket is the only submarket that showed a modest improvement in occupancy, moving from 87.6 percent to 88.2 percent at mid-year. Council Crossing and
Market Place OKC, properties with long-term vacancy issues, have been able to address much of their vacancy and accounted for much of the improvement. It is one of the more mature submarkets in the city and continues to see limited new development. For many retailers, this market is their second or third choice. This is reflective of the area demographics and the distressed condition of some of these properties: the northwest submarket is characterized by established neighborhoods with limited population growth and relatively unchanged demographics. This is another submarket with a significant reliance on small shop and local tenants, many of whom are being hurt by the pandemic and resulting economic strains.
North Oklahoma City
The North Oklahoma City submarket is our largest concentration of retail; of the 7.2 million square feet of space in the submarket, nearly half is along the Memorial Road corridor. Virtually every major national retailer in our market has a presence here and, while activity has slowed, retailers continue to look in this area to expand or possibly upgrade locations due to anticipated closures. This submarket will no doubt remain our primary retail corridor and will have the most activity, both good and bad, over the next year.
The area around Penn Square Mall, Oklahoma’s leading mall, is probably even more highly desired among retailers, but there is limited availability of land for development. Both Quail Springs Mall and Penn Square Mall face significant challenges upon reopening. Quail Springs Mall in particular given that it was showing some signs of weakness prior to the shut-down and its more recent focus on fitness and entertainment tenants which have struggled with current operation restrictions. The current environment also may change the timing of future planned developments, including the next phase of Chisholm Creek and Oak, the planned mixed-use development across from Penn Square. Flix construction is nearly complete at the Half; but an opening date has not been announced.