Oklahoma City Multifamily Market Report Year End 2020
The good news about 2020 is that the pandemic’s effect on the multifamily market doesn’t appear to be sustained, rather, more of a temporary pause. The year saw both the second highest quarterly sales volume and the lowest quarterly sales volume in the history of our survey (28 years). While multifamily property operations have suffered from some of the COVID fallout, the investment market isn’t really listening as investment demand is surging. Buyers are driving capitalization rates lower, taking advantage of still historically low interest rates.
Despite the pandemic, Oklahoma City experienced the third consecutive year of positive job growth and ended the year at a 4.8 percent unemployment rate. This put Oklahoma City among the 25 lowest large metros for unemployment. This is especially impressive given the fallout in the energy sector over the past three years. Somehow, Oklahoma City continues to have a stronger than expected economy. One out of every three dollars earned in the state is earned in the Oklahoma City metro. Oklahoma City also accounted for 40 percent of the state’s GDP. In the apartment market, Oklahoma City saw another year of positive rent growth. Year-over-year, market average rents increased by 3.9 percent to $1.00 per square foot (per month). That is an impressive annual increase when you take into consideration that the first half of the year had virtually no rental growth. Oklahoma City is now in its 27th year of positive annual rent growth, averaging 3.02 percent over that period, which speaks to the stability of our market. Rents in smaller units felt the most upward pressure with efficiency units increasing 5.04 percent to $1.25 per square foot and one-bedroom units also breaking the dollar mark at $1.01 per square foot, or a 3.06 percent increase. Two and three bedroom units had the least growth, albeit still impressive at 2.35 percent and 2.41 percent growth respectively, to $0.87 and $0.85 per square foot.
Despite the CDC’s federal eviction moratorium, vacancy remained unchanged at 10 percent. The larger issue is economic occupancy. While physical occupancy is generally what is reported, economic occupancy refers to the number of units that are actually paying rent. At the end of 2020, a National Multifamily Housing Council Report showed that only 93.8 percent of the occupied units were paying rent, compared to 95.8 percent in December of 2019. While there has been a lot of discussion of flight to the suburbs, Oklahoma City didn’t experience the same trend. Occupancy increased from 89 percent in 2019 to 92 percent at the end of 2020. Also interesting, the strongest rent growth was in mature assets located in northwest Oklahoma City, south Oklahoma City and the Midwest City/Del City sub-markets. These each had 5.5, 4.1 and 5.0 percent annual rent growth, respectively. The lowest performer of all sub-markets was Edmond at .93 percent, which is generally one of the stronger submarkets. When broken down by class, the top performer of 2020 were Class C assets with an annual increase of 6.0 percent over the previous year, reaching an overall average rent of $0.89 per square foot.