In our previous report, we highlighted that the office market might not immediately feel the full impact that the COVID-19 pandemic would have on Oklahoma City. The data for early 2022 could suggest that the shadow space that was not repositioned before its expiration is returning to the market. The overall office market experienced negative absorption of 246,749 SF for the first half of 2022. The market vacancy rate rose from 23.4% to 24.9%, with overall rental rates following the trend declining from $19.66 per SF to $19.31.
The Central Business District posted negative absorption of -103,352 SF resulting in an increase in the vacancy rate from 20.7% to 22.5%. The state of the Central Business District is an example of space coming back on the market due to leases reaching expiration where a tenant had either shut down or consolidated post-pandemic. Looking ahead, the Central Business District will be impacted by the recent announcement of the Phillips Murrah law firm moving to midtown. Not only will this add approximately 50k SF of vacancy to the downtown submarket, but the resulting absorption in midtown would be neutral because it is taking up an added supply of office space rather than moving into existing vacant inventory. It is likely that we will continue to see a slow rise in direct vacancy as the lease terms for spaces underutilized or offered for sublease expire.