Tulsa office vacancies fall 2.5 percent in 2012
BY ROBERT EVATT World Staff Writer
Saturday, January 19, 2013
1/19/13 at 7:12 AM
Last year brought significant improvement for Tulsa's office market, as vacancies dropped 2.5 percent to about 22.6 percent now.
Bob Pielsticker, author of the latest study on the area's office buildings for CB Richard Ellis/Oklahoma, noted that the current rate lies between a five-year high of 25.2 percent at the end of 2011 and a low of 20.4 in June 2009.
"Right now the office market vacancy rate is average," he said.
The improvement was driven by 355,000 square feet of positive absorption and continued expansion by energy companies. Pielsticker estimated that the energy sector was responsible for about half of all new office space acquisition.
Although office buildings in the metro area's east and north central sections saw significant new leases, the greatest improvement was experienced downtown, where vacancies dropped from 24.5 percent.
Pielsticker said that's a side effect of increased development of all kinds, including apartments, restaurants and entertainment venues.
"The excitement of more amenities downtown is driving things," he said. "The younger employees want to be there."
Most of the new office leases are within Class A properties - the newest or most recently renovated buildings, Pielsticker said. Vacancies for that segment have fallen to 4.61 percent.
Many of the vacancies showing up in the report are for Class C and D properties, which require significant capital and renovation to become rentable.
The divide between the building classes is responsible for the counterintuitive drop in lease rates, which fell last year from $13.87 per square foot to $13.10.
That drop is due to rates in the study being for vacant rather than filled property, and the fact that most Class A properties that could command higher rates are now off the market, Pielsticker said.
"If we surveyed what people are actually paying, that number would be a lot higher," he said.
The office market is expected to continue to improve over the next year, and Pielsticker said some companies are actively seeking land for construction.
Last year's most notable office building transactions included Rosemont Realty's acquisition of the ground lease for the 960,000-square-foot Warren Place complex for an estimated $120 million; WZ Properties' purchase of the 521,000-square-foot 110 West 7th Building downtown for $29.8 million; and NBI Services' purchase of the 44,611-square-foot building at 1516 S. Boston Ave.
Robert Evatt 918-581-8447