Mize: Commercial real estate is hitting on all sectors in Oklahoma City

Apartment rents went up, retail stores were in a "scramble," office rents slipped, and industrial property was still on fire in Oklahoma City in the third quarter, NAI Sullivan Group said this week.

Here are highlights from the firm's detailed reports, available at www.naisullivangroup.com.

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Apartment owners push rents higher

Rents have gone up 8.5% on average in the past year, reported multifamily specialist Micalyn Wetwiska. It could have been worse. She said some Sunbelt cities saw hikes of more than 20%.

With construction slowed during the worst of the coronavirus pandemic, supply couldn't keep up with demand and overall apartment vacancy fell from 7.9% in the second quarter to 6.6% in the third, the lowest since 2014, Wetwiska said.

"The drop in supply has allowed for apartment owners to push for higher rents," she said, but paying rising rent is still easier than buying a house.

"Low interest rates have created a hyper competitive residential market benefiting apartment owners," she said. "Tenants are forced to rent because buying a home has become so competitive, leaving most with no option but to rent."

Wetwiska tracked 46 apartment sales for a combined $233 million, the biggest one 850-unit Isola Bella Apartments, 6303 NW 63, which sold to New York Investors for $56 million, or $65,882 per unit, on Aug. 23.

Isola Bella Apartments, 6303 NW 63, sold to New York Investors for $56 million, or $65,882 per unit, on Aug. 23, NAI Sullivan Group reports.
Isola Bella Apartments, 6303 NW 63, sold to New York Investors for $56 million, or $65,882 per unit, on Aug. 23, NAI Sullivan Group reports.

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Restaurants lead retail rush for space

Retail was a "scramble" in the third quarter, reported David Hartnack, vice president of retail.

"The post pandemic surge of retail users continues to push vacancy rates lower and rental rates higher. This has been particularly true of any space built out as a restaurant or with drive thru," Hartnack said. "Additionally, users have felt an urge to lock in rental rates for longer terms to combat the expected inflation over the coming years."

Investment sales surged as many retail property owners opted to sell in the face of uncertainty over long-term capital gains tax changes, he said.

Uncertainty colors the outlook, as well.

"While the market is currently busy, we are uncertain of what 2023 has to offer. Continued supply chain concerns, and change to capital gains tax laws could have dramatic effects on the retail market," Hartnack reported.

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The biggest office sale was downtown

There were 63 office transactions recorded in the third quarter for a combined $86,244,612, office specialist Matthew Pierce reported, and the biggest sale hit close to home:

The office building where The Oklahoman now leases space, at 100 W Main St., sold to Griffin Media Center OKC for $16,025,000, or $145.68 per square foot, on Aug. 2. The sale was announced July 12.

The 110,000-square-foot property is being remodeled, which is why I am writing this at home. We will get back downtown sometime after the first of the year.

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Incredible industrial still sizzling

Metro-area warehouse-industrial vacancy skid to 3.2%, but in Edmond it's ridiculous: 0.6%, reported Zac McQueen, industrial specialist.

But then Edmond isn't really known for industrial property.

Nonetheless, its absorption of more than 100,000 square feet of space in the third quarter made it "the hottest in the metro," McQueen said.

"The overall national industrial market has had a record quarter across various key metrics such as rent, vacancy, and net absorption," he wrote. "National industrial vacancy fell to an all-time low of 4.1%, and average rents hit an all-time high of $7.18 per square foot.

"Oklahoma City has seen much of this national success locally. Vacancy rates continue to be extremely low, and construction is finally starting to respond with the largest purely speculative Class A industrial development ever to be constructed in the city. Many hope and expect this will bring even more jobs and growth to the city’s national distribution footprint."

Senior Business Writer Richard Mize has covered housing, construction, commercial real estate, and related topics for the newspaper and Oklahoman.com since 1999. Contact him at rmize@oklahoman.com.

This article originally appeared on Oklahoman: OKC commercial real estate office industrial retail apartments update