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Oklahoma City Multifamily Market Survey Year End 2019


2019 was a fun year for the multifamily investment market. While we’re excited about 2020, it’s hard not to wonder if 2019 reached the cyclical peak after crushing 2018’s total sales volume by 23% and surpassing a half billion in sales for the first time ever. A combination of a robust economy with over a decade of solid economic growth along with multifamily investing now becoming mainstream, one must wonder, is this just the new normal? Ten years ago a newly syndicated buyer would have had a difficult time trying to convince a seller that it truly had the ability to close; whereas today, one cannot discount the buying power made by these newly created companies putting family, friends and miscellaneous private capital to work. With the advancement of technology, someone with little experience in this industry can use their personal relationships and create a professional appearing investment company and start to acquire millions in real estate. The bigger concern is no longer their ability to close, but their ability to perform under the current pricing. Properties that have traded three or even four times over the last 6-8 years have nearly had all the value-add pulled from them, with the next buyer having to be even more creative than the one before. 

Despite a slightly slower economy, demand remains solid with 2.11 million jobs added in 2019. Although positive, this was the lowest addition of jobs to the US economy since 2011 at 1.4%. Low unemployment fueled income growth, and although solid it was still below expectations, ending a decade of slow but steady economic growth. The average hourly earnings grew by 2.9 percent over the past year to $28.32, and while the weakest annual pace since July 2018 it’s still positive and therefore boosting the average workers buying and leasing power. While it’s interesting that people are talking about the economy slowing, it’s still worth noting that it is still growing, not contracting. If every year was better than the previous year, with record year after record year, then the economy would likely grow too fast and be headed towards a large correction. So the ebb and flow of growth is normal, and as long as it’s moving in a positive direction, then it’s good for the multifamily market. 

Many expected interest rates to rise in 2019, therefore causing a reduction in overall multifamily volume; however, as interest rates continued to drop, demand increased. While there are many factors that can affect the multifamily market, there are none as direct as the cost of money. Further, Oklahoma City’s popularity as one of the most affordable cities to live has increased the population by 143,458 between 2010-2018, an increase of 11.64%. Putting this into perspective, during that same time period Los Angeles and New York grew by only 3.61% and 2.11% respectively. With continued population growth, solid wage gains and low cost of capital, the outlook for multifamily in the next 12 to 24 months appears bright. 

Today’s apartment residents are not only renting for longer, but they’re staying in their specific units longer. This adds up to the expectation that demand for apartments will only continue to increase, further driving rates higher while pushing vacancy and concessions lower. Between the end of 2018 and 2019 rental rates in Oklahoma City grew 3.33% year over year to a market average of $0.93 overall. Occupancy remained unchanged at 90% and rental concessions lowered slightly to an average of 0.9% overall. Across the metro sub-markets, all experienced positive rent growth with the only outlier in the Urban Core which had isolated drivers such as employment and competition that created downward pressure on specific assets. Even with this negative pressure, overall rents only decreased by 1.01%, or one cent per square foot to an average price per foot of $1.47. With stress in the energy markets, locations with a higher concentration in that workforce may experience continued negative pressure preventing desired increase in rents and the likelihood of more concessions. 

Breaking the market down, the largest gain year over year came from Class C assets, with an overall rent growth of a staggering 7.59% to $0.81 per square foot. Likewise, studios and efficiency units had the largest gains in unit types, with an annual increase of 3.48% and 5.26% respectively. Alternatively, Class A properties experienced a slight decrease in their annual rent growth, decreasing 1.65% to an average of $1.30 per square foot. Studying these numbers shows there is significant demand in the workforce housing sector, which was also reflected in the breakdown of average sales price by class. 


In 2019 there were a total of 45 properties with 25 units or more that transacted in the Oklahoma City metro area, with a total sales volume of $570 million. Although this marks the first time in the city’s history to achieve the half billion-dollar mark, what makes this record even more interesting isn’t the sheer volume, rather the fact that this record was a relatively average year in terms of total units sold. In 2019, there was 7,851 units that transacted, a mere 3.76% over the five-year average, but at $72,668 per unit, that accounts for a staggering 45% increase in average price per unit compared to the previous year. Although this is a significant increase, it should be pointed out that 2019 had higher than average volume of Class A and B units transact, which will drive the overall average price per unit up compared to most years. 

While the overall price per unit increased substantially, it’s important to break down the transactions into classes to get a better understanding of the overall market health. 2019 was an active year for quality assets in Oklahoma City, with a total of eleven transactions with Classes A and B combined. Of those, six transactions were Class A for a total sales volume of $231.8 million. Broken down, this represents 1,968 units for an average price per unit of $117,775, a slight decrease of 3.34% in overall price per unit from the previous year. Class A transactions had an average non-ad-valorem tax adjusted cap rate of 5.51%. Interestingly, Class A transactions made up just over 25% of the overall units transacted, which is 70% more than the five-year average, showing a strong flight to quality for well-located and performing assets. Class B transactions were also active, with a total of 1,090 units transacting with a total sales volume of $106.1 million. These five transactions had an average price per unit of $97,372, a 10.7% increase in value from the previous year. Investors paid an average of 6% cap rates on a non-ad-valorem tax adjusted basis for Class B assets in 2019. 

Often Class C transactions are looked to as the overall barometer for the multifamily market health due to the share of units sold compared to the overall total. In 2019 the total units sold decreased 34% from the previous year, for a total of 4,579 units. Although this decline is significant, the prices paid represented a strong appetite in investor demand jumping 24% since the previous year to $48,267. Of the 31 transactions, investors paid an average of 6.24% cap rate for Class C transactions, on a non-ad-valorem tax adjusted basis. Overall, cap rates were compressed on all asset classes by 10.52%, with an overall market cap rate of 6.04% showing continued demand for multifamily investments in Oklahoma. 


Although demand remains strong, rising cost of construction combined with higher demand in nearby markets, construction has been very limited in the past 12- 18 months, with the majority of development happening in or near the urban core. Select projects in suburban areas continue to lease up within one year and have little impact on the surrounding properties. In 2019 only 959 total units were delivered, which is the lowest annual delivery in five years, and less than half of the historical average. 2020 should see an increase in deliveries with a projected 1,459 units coming online, and another 711 in late planning stages with an additional 2,000 in mid-planning stages. As long as Oklahoma City stays under 2,000 units per year, then there should be little impact from new deliveries and all inventory should be easily absorbed. 

Projects worthy of note that are currently under construction are First National Center with 193 units of ultra-luxury units in a historic high-rise downtown building. Due to the complexity of this project, they are not planned to be online until 2021. Also, in the Urban Core is the 345-unit West Village. Although some of the units are already leased, the northern portion is still under construction with several delays causing the completion to fall into mid-to-late-2020. Popularity has risen for boutique style apartments near the urban core, and local developers have gotten creative with the designs, finishes and curb appeal for the sub 50-unit properties. A couple anticipated projects include the 17-unit Town House Apartments, the 48-unit Classen 16 on the edge of the Plaza District and leasing up now is the 33-unit project by local developer Richard McKown on NW 4th and Lee. Local developer Richard Tanenbaum has been successful in the Interstate 240 area and is looking to replicate that success with the addition of 516 units on Sooner Road called Liberty Creek Village. 

Of the planned properties, one is more anticipated than most, which is the 325-unit property in the highly popular retail area along Classen Curve, The Residence at Classen Curve. Although still early in the planning stages, this property will be a test of what select in-fill suburban properties will be able to achieve compared to the urban core. 



Class A: 13% 

Class B: 17%

Class C: 66%

All Bills Paid: 4%



In recent years, forecasting seemed to be more difficult than historically speaking as we have been in uncharted waters for some time and yet continue to push forward. We’ve had several years of unprecedented growth where someone who performed average could still succeed; however, those opportunities are more and more limited as we get further into this cycle. Although there is concern over the long-term, we should have another twelve months of solid sales activity, strong rent growth and more fun. However, if you look at purchasing today, what’s your exit strategy? Is it twelve months from now? Twenty-four, thirty-six? While the market is strong now, what will it be when it’s time to sell? It is likely those easy layups have been made and the opportunities left are those that require a little more effort. Just purchasing a property and assuming someone will come along and pay a lower cap rate is the average strategy, and average doesn’t provide investors their “pref” in the long run. It may have worked up to now, but operators now are going to have to roll up their sleeves, create value with real work, real fiscal management and more importantly, using real numbers; something of a foreign concept for many investors. 

In the short term, investment sales activity is expected to continue at its current strength with all indicators showing growth through 2020, with many suggesting the likelihood of having another record-breaking year. Interest rates will be a key metric to continue this pace, although they are projected to remain at, or near, current levels. If there is any movement in pricing in either direction, it is likely to be in small increments. Cap rates are continually being compressed, with a likelihood of decreasing another 25-50 basis points over the next twelve months, dipping below 6% overall. Overall the apartment market has been relatively unchanged from the sustained energy downturn other than a few specific pockets; as a whole Oklahoma City continues to benefit from strong job growth and overall fundamentals that will position 2020 into being another strong year for property performance with 2.65-2.85 percent in projected rent growth. Occupancy rates will likely remain relatively unchanged, with slight upward pressure as the population continues to grow. 

Capital is still driving deals to new heights, so as long as interest rates remain low and syndicators continue to be flooded with capital, they will keep pressing values upward. If interest rates start to rise in a meaningful way, values will likely level off and make those investment scenarios a little less successful. Although the proverbial crystal ball doesn’t exist, and anyone who says they can predict the future is obviously not seeing 20/20. We remain optimistic on 2020, but we are cautious beyond 24 months. 


Forecast Bullets

  • Abundance of capital and overall liquidity combined with the popularity of multifamily investing will push average cap rates down below 6% for first time 
  • Sales activity to remain steady through 2020 
  • Strong property performance expected with 2.65-2.85 percent in projected rent growth 
  • Construction activity to remain below historical averages, but increase compared to 2019 
  • Investors from markets with newly implemented rent control, will look for more stable, conservative states to invest their capital. 
  • As yields in primary markets continue to compress, investors will continue to search the secondary and tertiary markets like those in Oklahoma, further pushing demand to new highs. 


Download the full copy of the latest market summary and expense survey here (email required)