Is new DT office construction on the horizon??

[JOHNINSOKC]

Does anyone know what the office vacancy rates were during the height of the oil boom in the 1980's? I'm curious because OKC was much smaller back then and we had a 31-story Oklahoma Tower built, a 22-story and 16 story twin tower Leadership Square built and a couple of other ones that I'm not sure what the names of those are, but the point is that this city had massive office construction going on. Presently, the office market downtown is full of vacant class C space that is slowly being bought up for conversion to housing. If the overall vacancy is skewed by those properties, then I feel optimistic that in a fairly short amount of time, the vacancy rate will tumble. Last I heard, the class A space was at 16% and I'm sure that there is some absorption of space each quarter. Does anyone know at what rate of vacancy downtown class A needs to get down to in order to fully justify new speculative construction?

[Pete]

I was in the commercial real estate business in the 80's and I specifically remember that when Leadership Square was built, everyone knew it would just cannibalize other buildings. Which it did.

Then, when the economy went south, vacancies really went up and have stayed very high downtown.

Until some of the older buildings (like First National Center) are absorded through adaptive use or otherwise, I don't think anyone could make the economics work for a new office building.


And it's not just OKC... Very few large cities have many office buildings under construction in their respective CBD's since things were so incredibly overbuilt in the '80's.

Also, most the growth in jobs is in smaller and medium-sized companies and there is a strong trend towards expandable office parks, such as what Dell has done and what's happening out on Memorial Road.

[The Old Downtown Guy]

Here is a link to Price Edwards, primary keeper of commercial office real estate data in OKC. http://www.priceedwards.com/okc_market.htm They have archived reports going back to 1998 which contain data going back to 1994. But that was the oldest info I could come up with.

The idea that the removal of a few mostly vacant buildings from the downtown office market might spur the construction of a new office tower in downtown OKC might be premature, but an interesting topic for discusssion none the less.

The process that is underway in downtown OKC, that being building ownership and uses changin, may be the beginning of a long term improvment in CBD office rental rates. And, vacancy rates are a driving factor in rental rates which drive construction of new buildings. Class A space is still available downtown and with an infussion of cash considerably less than the cost of new construction, First National Center could join the ranks of Class A space.

Of course, in an era of continuing consolidation in the energy business, there is always the dark possibility that Kerr McGee could vacate it's headquarters building which would be a major blow to the CBD office market. Not a rumor or a near term possibility, but always out there and a factor that investors would consider before putting 100 million dollars on the line.