OKC Office Vacancy

[G.Walker]

Cushman & Wakefield has the Oklahoma City office market looking good for the remainder of 2023, according to their recent market analysis:

https://www.cushmanwakefield.com/en/...ty-marketbeats

[Just the facts]

I'll just leave this here and the masses can decide for themselves how the office buildings fall into the categories.

https://www.squarefoot.com/blog/clas...%20York%20City.

https://www.vts.com/blog/the-3-offic...20to%20impress.

[BoulderSooner]

Yes. It's almost exactly the same and is part of the entire project.

also has the same ownership and BOK is basically just sublet to BOK and others ..

[Pete]

OKC downtown office vacancy now up to 27.1%.

And that's after taking a bunch of office space off the market, like First National Center and the two buildings being converted to residential as The Harlow development. Also, the completely vacant Dowell Center isn't included for some reason.

It also doesn't take into account the big chunks of empty space in Devon Tower, as owner-occupied buildings aren't factored in.

The survey by Price Edwards mentions that they expect DT vacancy to continue to increase, as several big leases are set to expire in the next few years, and most companies are still downsizing their space requirements with at least a hybrid work-from-home model.

[jbkrems]

Not to mention there are also significant vacancies in NW OKC as well. I know of several buildings with open office space for lease.

[Ginkasa]

Any thoughts on what this means for downtown? I'm just a pleb ignorantly spitballing on the internet (and completely undercutting my own input to boot!), but the first assumption is this is very negative as empty office space means a dead downtown which means stagnation, right? But could it also portend (by necessity?) a greater effort by property owners to do more of what First National has done (perhaps at various scales)? Transform these office spaces into hotels, apartments, retail, etc.? If people aren't working downtown get them living downtown?

[Pete]

^

For anything other than the newest buildings, I think you'll see more and more residential and hotel conversions.

Downtown OKC has already seen plenty of both but you can see that will be a future trend.

[G.Walker]

I think we will see more office buildings, but smaller footprint with mixed use. The Citizen is a good example with having a main tenant as office, but having a hotel component as well.

[PhiAlpha]

^

For anything other than the newest buildings, I think you'll see more and more residential and hotel conversions.

Downtown OKC has already seen plenty of both but you can see that will be a future trend.

This has been going on in tulsa for several years (as it has been in OKC to a lesser extent as far as large historic residential conversions go) but last year seemed to be the tipping point. A ton of historic class B & C office space was just taken off the market for residential conversions. In one case an entire city block is set to become 100% residential above the first floor with block across the street already sitting at about 60%.. It's been a very good transition for downtown Tulsa with all the apartments filling up fairly quickly. Have no doubt it will be better in the long run to take that office space off the market and get more residents in downtown OKC as well (I think the Harlow is going to do great). It's shocking Dowel hasn't been converted yet.

[PhiAlpha]

OKC downtown office vacancy now up to 27.1%.

And that's after taking a bunch of office space off the market, like First National Center and the two buildings being converted to residential as The Harlow development. Also, the completely vacant Dowell Center isn't included for some reason.

It also doesn't take into account the big chunks of empty space in Devon Tower, as owner-occupied buildings aren't factored in.

The survey by Price Edwards mentions that they expect DT vacancy to continue to increase, as several big leases are set to expire in the next few years, and most companies are still downsizing their space requirements with at least a hybrid work-from-home model.

Do you think this will start to drive commercial rents down at all for the buildings that remain office space?

[Pete]

Former office buildings in OKC converted to residential and/or hotels -- I'm sure I am forgetting some:

First National Center
The Montgomery
Park Harvey
The Carnegie (was a library)
The Harlow
The Colcord
City Place (upper floors now condos)
The Ambassador
1212 N Walker
The Sieber
The Presley

[Urbanized]

^

For anything other than the newest buildings, I think you'll see more and more residential and hotel conversions.

Downtown OKC has already seen plenty of both but you can see that will be a future trend.

This has been going on in tulsa for several years (as it has been in OKC to a lesser extent as far as large historic residential conversions go) but last year seemed to be the tipping point. A ton of historic class B & C office space was just taken off the market for residential conversions. In one case an entire city block is set to become 100% residential above the first floor with block across the street already sitting at about 60%.. It's been a very good transition for downtown Tulsa with all the apartments filling up fairly quickly. Have no doubt it will be better in the long run to take that office space off the market and get more residents in downtown OKC as well (I think the Harlow is going to do great). It's shocking Dowel hasn't been converted yet.

It's going on in every major city in America (and likely worldwide), with varying degrees of success. Last October I attended the International Downtown Association's national conference in Chicago, and our own downtown is a microcosm of what is going on there. Just the tour we did of the projects on LaSalle were mind-boggling; imagine a half-dozen or more buildings very similar to FNC that have been decimated by the white collar shift to WFM or hybrid work, all being converted to housing. Also broad swaths of retail and restaurant spaces newly-vacant.

The pandemic-driven office reset is real, and Oklahoma City is faring no worse than any other major city. In fact there are indications that we are doing better in many areas than a lot of cities (for instance state offices absorbing Strata Tower vacancies, some new tenant-driven class A space under construction, underway conversions at places like The Harlow.

It's certainly worrisome in the short term, but where I think OKC has a distinct advantage over some other mid-sized and even larger major cities is the fact that we have publicly and aggressively been reinvesting in our downtown for a quarter century. Don't get me wrong, so have many other places. But the investment in quality of life and downtown-centered amenities will make it much easier to weather this storm and to transition to the future of downtowns.

[Pete]

It's very troubling that the newer, bigger buildings downtown all have significant vacancy.

BOK Park Plaza is 58% and I don't think that counts some empty space that is being offered for sublease.
Leadership Square is 38%.
Oklahoma Tower is 21%.
Corporate Tower is 19% but that number will shoot way up when Philips Murrah relocates later this year.
City Place is 29%.
55 N Robinson (the IRS Building) is 55%.

I think what we'll see is that these Class A buildings start to offer deals for tenants to relocate from older buildings because their rent rolls are going to continue to head downward as leases expire and companies contract.

[G.Walker]

However, arguably most buildings being converted to housing are older Class C office spaces, that can no longer keep up with current energy savings, technology, and amenities employers are wanting/needing to accommodate employees. Your not going to see a Class A office building converted to housing any time soon.

[PhiAlpha]

Former office buildings in OKC converted to residential and/or hotels -- I'm sure I am forgetting some:

First National Center
The Montgomery
Park Harvey
The Carnegie (was a library)
The Harlow
The Colcord
City Place (upper floors now condos)
The Ambassador
1212 N Walker
The Sieber
The Presley

I was really comparing CBDs since that's what I was primarily thinking of in regard to vacant office space. I think if you spread it to the entire urban core, OKC and Tulsa are pretty even on conversions with OKC having the edge (by a decent margin) in new residential construction.

This is what I could think of off the top of my head for the Tulsa CBD:

Residential Conversions:

• YMCA Lofts
• Philtower (top half)
• Mayo 420 Building Apts
• 111 Lofts
• Vandever Lofts (Rose Rock)
• Reunion Apts (Rose Rock)
• Palace Apts (Rose Rock)
• Adams Apts (Rose Rock)
• The Meridia
• Art Deco Lofts
• Oil Capital Building
• Harrington Lofts
• Sinclair Building (Under Construction)
• ARCO Building (Under Construction)
• Amoco Building (Starting this spring)
• Philcade (Starting this spring)
• Beacon (Starting this spring)

Hotel Conversions:

• Tulsa Club
• Hyatt Place
• Atlas Life (Courtyard Marriott)
• Aloft Tulsa

[PhiAlpha]

It's very troubling that the newer, bigger buildings downtown all have significant vacancy.

BOK Park Plaza is 58% and I don't think that counts some empty space that is being offered for sublease.
Leadership Square is 38%.
Oklahoma Tower is 21%.
Corporate Tower is 19% but that number will shoot way up when Philips Murrah relocates later this year.
City Place is 29%.
55 N Robinson (the IRS Building) is 55%.

I think what we'll see is that these Class A buildings start to offer deals for tenants to relocate from older buildings because their rent rolls are going to continue to head downward as leases expire and companies contract.

Have you heard of any deals being offered out there? My business partner and I have toyed with the idea of getting space downtown but with vacancies increasing, figured we'd wait for awhile to see what rent rates do.

[Zuplar]

Have you heard of any deals being offered out there? My business partner and I have toyed with the idea of getting space downtown but with vacancies increasing, figured we'd wait for awhile to see what rent rates do.

I just had a conversation at lunch with someone and they said the very same thing.

[Dr Beard Face]

double post Delete me!

[Dr Beard Face]

Have you heard of any deals being offered out there? My business partner and I have toyed with the idea of getting space downtown but with vacancies increasing, figured we'd wait for awhile to see what rent rates do.

Come see Arvest Tower! They built out the Executive Suites on the second floor last year for super flexible leases and it is proving very successful, 19 of the 28 offices are leased up! I am one of them. Arvest Tower Executive Suites has offices for as low as $540, and it includes wifi, coffee, bottled water, use of the Executive Suite conference Rooms, and a kitchen. Add $100 a month and you get a sit stand desk and chair so you can move in with just a laptop. MTM available with discounts for longer terms. I think this is going to be the best path for a lot of office buildings. You spend less with the common area, and still have a NEW office while being able to grow or shrink as needed.

I wonder how other Class B and C buildings are doing. At Arvest Tower we were only 66% full in 2022, now were are at 80%. Our traditional space $ per sq footage is WAY less than the Class A's around, only $17.50 compared to $27.50 at Oklahoma Tower and LSQ.

[Midtowner]

I was discussing this with someone in my building just recently. It seems the landlords downtown are a bit disconnected from reality. They think they can automatically raise rates every year despite folks renting office space being able to see their buildings are full of empty spaces. Eventually the laws of supply and demand will kick in and landlords are going to have to start negotiating at lower rates.

I'm lucky enough to be in a very small building and have a 30+ year/multigenerational relationship with the landlord, so despite my great location, my situation has been very stable.

[G.Walker]

I work in a Class C office space right now, on a hybrid schedule. The office is about 50% full on average on any given day. However, the reason we maintain a full office space is because we have regular training classes. We have to utilize our training room because we have the right equipment, technology, IT support, and onboarding for new trainees. So they can get adequate and efficient training before they go hybrid or fully remote. This is something you can't do over Zoom effectively.

Moreover, some agents just don't want to work from home, they like coming to the office. But I would say 75% of our agents work from home. But management positions are required to be in office 3 days out of the week on a rotating schedule. The demand for office space will never go away, maybe not as large space will be needed, but there is always a demand for some type of space.

[BoulderSooner]

Come see Arvest Tower! They built out the Executive Suites on the second floor last year for super flexible leases and it is proving very successful, 19 of the 28 offices are leased up! I am one of them. Arvest Tower Executive Suites has offices for as low as $540, and it includes wifi, coffee, bottled water, use of the Executive Suite conference Rooms, and a kitchen. Add $100 a month and you get a sit stand desk and chair so you can move in with just a laptop. MTM available with discounts for longer terms. I think this is going to be the best path for a lot of office buildings. You spend less with the common area, and still have a NEW office while being able to grow or shrink as needed.

I wonder how other Class B and C buildings are doing. At Arvest Tower we were only 66% full in 2022, now were are at 80%. Our traditional space $ per sq footage is WAY less than the Class A's around, only $17.50 compared to $27.50 at Oklahoma Tower and LSQ.

i think this model and the one that city place has (they sell floors as office "condo's") are ones that will grow and grow

[Rover]

I work in a Class C office space right now, on a hybrid schedule. The office is about 50% full on average on any given day. However, the reason we maintain a full office space is because we have regular training classes. We have to utilize our training room because we have the right equipment, technology, IT support, and onboarding for new trainees. So they can get adequate and efficient training before they go hybrid or fully remote. This is something you can't do over Zoom effectively.

Moreover, some agents just don't want to work from home, they like coming to the office. But I would say 75% of our agents work from home. But management positions are required to be in office 3 days out of the week on a rotating schedule. The demand for office space will never go away, maybe not as large space will be needed, but there is always a demand for some type of space.

Yes, there are a number of these around town. The concept has been around and has been only moderately successful here.

[UrbanistPoke]

I was discussing this with someone in my building just recently. It seems the landlords downtown are a bit disconnected from reality. They think they can automatically raise rates every year despite folks renting office space being able to see their buildings are full of empty spaces. Eventually the laws of supply and demand will kick in and landlords are going to have to start negotiating at lower rates.

I'm lucky enough to be in a very small building and have a 30+ year/multigenerational relationship with the landlord, so despite my great location, my situation has been very stable.

Some of this is because most office leases have escalation clauses so it makes it easy on landlords to raise rents even on vacant space every year. There are a lot of buildings where owners have had the properties for a long time and have minimal debt, cheap debt, or no debt and for them it doesn't matter as much if the building is 20-30% vacant versus 5% vacant or full. They would rather maximize any new leases rent level wise especially since lease terms are typically 5, 7, or 10 years in length.

[UrbanistPoke]

I was really comparing CBDs since that's what I was primarily thinking of in regard to vacant office space. I think if you spread it to the entire urban core, OKC and Tulsa are pretty even on conversions with OKC having the edge (by a decent margin) in new residential construction.

This is what I could think of off the top of my head for the Tulsa CBD:

Residential Conversions:

• YMCA Lofts
• Philtower (top half)
• Mayo 420 Building Apts
• 111 Lofts
• Vandever Lofts (Rose Rock)
• Reunion Apts (Rose Rock)
• Palace Apts (Rose Rock)
• Adams Apts (Rose Rock)
• The Meridia
• Art Deco Lofts
• Oil Capital Building
• Harrington Lofts
• Sinclair Building (Under Construction)
• ARCO Building (Under Construction)
• Amoco Building (Starting this spring)
• Philcade (Starting this spring)
• Beacon (Starting this spring)

Hotel Conversions:

• Tulsa Club
• Hyatt Place
• Atlas Life (Courtyard Marriott)
• Aloft Tulsa

This has been one trend that we don't give ourselves here in Oklahoma enough credit for, we have been leading nationally in conversions of obsolete offices to other uses. Normally in CRE you see trends from the coasts that slowly filter in this direction. The historic tax credit structure here has been huge and I've been pushing legislatures to enact a similar tax credit program for just obsolete buildings such something from the 80s or 90s build can qualify even though it's not a 'historic' building. That would be huge to move it forward even more.

The smaller floor plates of many building here make it a lot easier to covert too. When they've looked at a lot of conversions in places like Chicago, NY, etc. the building depths are too big to make residential work usually because of code (hard to get windows that are required). There's been some cities looking into revising code for issues like requiring windows in every bedroom, etc.

OKC & Tulsa are well ahead of the majority of major cities and are national models for conversions of older building and how well they have been received over the years.