COVID-19 hit commercial real estate hard – like everything else – in 2020, and every real estate sector rebounded, with some surge, in 2021.
Here’s what happened in Oklahoma City and what to expect for the rest of 2022, according to local commercial real estate agencies.
The shape of the Oklahoma City economy’s shopping and retail sector was “steady but unremarkable,” as top broker Price Edwards & Co. put it, at the end of 2019.
Then came COVID-19 and a “sharp” drop in store and restaurant sales – especially restaurant sales, as shutdowns and social distancing made it impossible to eat out.
But there were winners, Price Edwards said: grocery stores, dollar stores, Walmart, Target, other discount stores, take-out restaurants, “and of course, Amazon.”
The losers were fashion, entertainment venues, personal services, restaurants, gyms, fitness centers and theaters, the company said.
In the summer of 2020, just three months into the pandemic, “Oklahoma reopened, most retailers are open and generally reported better-than-expected sales, but not at pre-pandemic levels. pandemic,” Price Edwards reported at the time.
Today, companies have adapted.
Ghost kitchens have emerged – those that prepare and sell food for delivery only. Regular restaurants have changed over time, offering outdoor seating and more spacious indoor seating. Walkability, street viability and the outdoors in general have become more important.
Price Edwards expects retail activity to increase through 2022.
Outlook for Warehousing and Industrial Property in Oklahoma City in 2022
At the end of 2019, the “supply chain” was still a term mainly used by logisticians. Its relationship to warehousing and industrial property, and its ties to retail and consumer goods, were not daily news stories.
Then came COVID and the stay-at-home shopping movement exploded, linking retail activity to industrial property in new ways. But the outlook for the industry, with the exception of large bulk warehouses, did not look bright in the first pandemic summer.
“As of this writing…multi-tenant industrial properties have continued the downward trend in vacancy seen over the past two years,” Price Edwards reported at the time. “The bulk warehouse sector is an exception this year.
“The bulk warehouse is seen as an important indicator for the economy given its central role in the supply chain, support for retail, and its tendency to be occupied by domestic and international tenants. Most warehouse operations are considered essential activities and have remained in operation during the lockdown, although there have been upstream supply chain disruptions.”
Here, some rental operations have been postponed.
“It is reasonable to expect some increase in vacancy over the next 12 months due to business bankruptcies, particularly in the retail sector,” Price Edwards said.
A year later, in the summer of 2021, the reverse had happened: industrial vacancy had fallen from 14.93% to 8.38%, the company said, mainly thanks to pandemic-fueled e-commerce.
“Locally, there was a hiatus in speculative warehouse construction which is now being reversed with several active projects in the metro area,” Price Edwards reported. “This is definitely an ‘owners market’ and, with the exception of major events in the national economy, the market shows no signs of changing for the foreseeable future.”
Today, industrial vacancy is at an all time high and rents are at an all time high nationally and the lack of space here has led to an industrial building boom.
“Oklahoma City has seen much of this national success locally,” wrote industry expert Zac McQueen in a report by the NAI Sullivan Group. “Vacancy rates continue to be extremely low, and construction is finally starting to respond with the largest purely speculative Class A industrial development ever built in the city. Many are hoping and expecting this to bring even more of jobs and growth to the city’s national distribution footprint.”
Apartment Rentals, Multi-Family Real Estate Market Outlook for OKC in 2022
Multifamily development and investment were hot at the end of 2019, especially investment. Out-of-state capital had been pouring into Oklahoma and scooping up apartment complexes for years.
Then COVID hit, and soon the sector was collectively gasping at the prospect of millions of suddenly unemployed tenants breaking leases or being evicted. However, the apartments emerged mostly unscathed.
Tenants struggled in 2020, but here they mostly kept their rent paid, and that was reflected in apartment sales for the year. Investors continued to invest in it.
“The roller coaster ride may have been more emotional than financial,” Mike Buhl, broker-owner of multifamily property brokerage Commercial Realty Resources Co., told Norman. “The effects of COVID‐19 on the multifamily sector have so far proven to be more of a disruption than a trend. …Tenants have prioritized rent payments.”
The occupation remained firm. Rents have gone up.
Now, with local unemployment low, tenants are continuing to pay their rent and investors are investing more than ever — nearly $1 billion for apartments here in 2021, Buhl reported.
Renters continue to rise, and people living in complexes that have recently changed hands, and are undergoing renovations and improvements, in particular, should be prepared for rent increases.
The median monthly rent for a one-bedroom apartment in Oklahoma City was $840 in February, up 9.1% from the same period last year; and the median for a two-bedroom unit was $980, up 8.9% year-over-year, according to Zumper, a San Francisco-based online rental marketplace.
However, apartment rents in Oklahoma City remain affordable compared to much of the country, ranking as the 89th most expensive rental market in the country, Zumper reported.
Office market outlook for OKC in 2022
The Oklahoma City office market was still struggling with the 2014-2015 crude oil price crash more than two years ago.
Then COVID hit, and it didn’t help. The overall vacancy rate rose from around 20% to nearly 25% at the end of 2020, according to Price Edwards & Co., the city’s north and northwest areas, which are “particularly heavy on energy businesses were the hardest hit.
“What begs the question of which has had a greater impact on the market: the pandemic or the energy crisis? The initial response would be the energy crisis due to pronounced staff reductions and a few bankruptcies, but the true impact of the pandemic will likely not be known for another year or two, as most non-energy users continue to operate with full staff, even if that staff is working from home,” the company reported.
After another year of the pandemic, the market saw reversals from the immediate shock of COVID-19, even in the northern and northwest areas of the city, the firm said. But at the end of 2021, other challenges were looming.
“There is no doubt that office market data in 2021 exceeded our expectations, but there are still areas of concern,” the company reported. “Inflation rose 7% in the past year, the highest since 1982.”
And with excess space on the market despite some recovery, tenants have the edge over landlords in new lease negotiations.
“We believe we are still in a ‘renter’s market’. There is still over 4 million square feet of office supply in our market, and while landlords have been able to keep rental rates steady, the cost of acquiring a new lease is high,” Price Edwards said.
Then there’s a problem that affects all of construction: tight labor and rising, sometimes skyrocketing, costs for building materials, made more complicated by supply chain disruptions.
Excess space is clouding the market for rented office space somewhat, hampering landlords’ ability to increase rental rates.
“Combine that condition with rising construction costs and tenants still wanting turnkey construction for new office space, and landlords could see their margins slashed to the point that a deal no longer makes sense on the plan. economic,” Price Edwards said. “As a result, looking ahead to 2022, we expect rental rates to remain relatively stable across all submarkets as landlords continue to incentivize tenants through various rental concessions.”
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 [email protected].