Chesapeake Energy Corp.'s slowdown is hitting the office market just as its buildup and buy-up did.
Two local commercial property firms noted the positive impact that Chesapeake's fortunes have had on the supply of office space the past several years — and the drag that a shrinking Chesapeake could have.
“Could” because both Price Edwards & Co. and Grubb & Ellis-Levy Beffort said that any space Chesapeake turns back to the market will be absorbed by other companies looking to expand or move into higher-quality digs.
Grubb & Ellis-Levy Beffort noted that Chesapeake vacated some of the 83,000 square feet in the Harvey Parkway building, 301 NW 63, and 30,000 square feet at Atrium Towers (south), 3501 NW 63.
Chesapeake also sold the former Caliber Center, a 280,000-square-foot Class A building, to IBC Bank-Oklahoma late last year.
Meanwhile, office developers are quiet, with no space under construction, even with low vacancies and rising lease rates because of uncertainty over Chesapeake's space needs, Price Edwards said.
“Chesapeake has been the suburban markets' best friend over the past several years by acquiring several hundred thousand square feet of space either by purchase of entire buildings or the leasing of significant blocks of space. With its disposition of several billion dollars in assets, Chesapeake's employee count is shrinking and with it it's appetite for space,” the firm said.
Chesapeake employs several hundred fewer people locally than its peak of nearly 5,000 — and around 12,000 nationally, down from 13,200 — according to government filings. At the same time, several buildings remain under construction on the corporate campus at NW 63 and Western Avenue, which means the company will require less space elsewhere.
“How well the market absorbs that off-campus space will be the true test of the suburban market's strength in the next few years,” according to the Price Edwards report, prepared by Craig Tucker, managing broker and office specialist.
Grubb & Ellis-Levy Beffort said any space Chesapeake offers for sale or lease will be filled “in short order” because the city lacks large blocks of contiguous Class A office space.
However, despite strong demand, office vacancy across all classes increased slightly in the fourth quarter of last year, to 17.9 percent, “largely as a result of Chesapeake Energy's consolidation,” according to that report, prepared by research analyst Julie Anewalt and office broker Vicki Wells.
Price Edwards recorded a slight drop in vacancy, to 16.2 percent.
The difference has to do with different properties surveyed by each firm, but also is an indication of how stable the market has been despite changes at Chesapeake as well as at Devon Energy Corp., which now fully occupies its new 1.8-million-square-foot skyscraper at 333 W Sheridan.
“Despite 500,000 square feet of space hitting the market in 2012 from Devon's phased relocation to its new downtown corporate headquarters, the market seemed to just shrug that off with solid absorption of that vacancy and another strong performance by the northwest submarket where the overall vacancy rate is now under 10 percent,” Price Edwards said.
Class A buildings in the northwest are even tighter, with a vacancy of just 4.2 percent. Downtown, Class A vacancy fell from 8 percent to 4 percent at the end of 2012, even as space across classes opened up to 24.6 percent, the firm said.
Price Edwards cautioned of volatility in 2013 “due to the financial strength of local companies relocating to more modern facilities, but there is also the possibility of some companies reducing their space needs ... however, we see more positive than negative.”
Grubb & Ellis-Levy Beffort pointed to Oklahoma City's main economic engines, as well as the nature of the supply of office space, in its forecast for the year.
“Growth in the oil and gas industry will continue to be an economic driver through 2013 and the years ahead,” the firm said. “The combination of Oklahoma City's economic strength and large blocks of available office space will allow new companies to enter the market.”