Vacancy climbed to more than 30 percent and some older buildings, including those recently razed by SandRidge, shut down for good. Beffort witnessed that rise and fall, and he insists this time around is very different.
“The difference this time is there were a lot of local small independents that absorbed the marketplace,” Beffort said. “We have some around today, but they were all leasing 3,000 to 5,000-square-foot blocks of space. Today we have larger companies with more staying power that can withstand the ups and downs of the marketplace. So as oil goes to $110 and then if it goes down to $65, and I'm not sure that it will, they can survive that. I think we're much more stable with the four or five big companies we have today.”
Estimating actual office vacancy when everything settles is still a challenge for downtown observers. Downtown Oklahoma City Inc. President Jane Jenkins is cautiously optimistic the rate could go down to eight percent.
Beffort, who brokered the Enogex lease, estimates the current vacancy rate of 14 percent soon will drop to 12 percent. He doesn't expect the rate to go above 15 percent when Devon completes its move next year.
“There are several things working, though I'm not saying they'll all happen,” Beffort said. “We have a way to go.”
Beffort said the Class C office space is disappearing quickly with SandRidge's removal of older buildings on its campus and conversions the past several years of buildings like Park Harvey and the Montgomery into housing.
He predicts that more Class C building conversions will be announced within the next few months, and that a snapshot comparison of office space now to 1980 will reveal the total square feet is about equal, though very different.
“We cleansed ourselves of nonfunctional space and got us to office space that is good for the 21st century,” Beffort said. “We haven't overbuilt. We adapted, we repositioned buildings for other uses, and we have a pretty good market.”
But will downtown offer enough available space to accommodate future growth? Beffort acknowledges only two large chunks of Class A space will remain after the Continental and Enogex moves; 225,000 square feet in Chase Tower and 100,000 square feet in Corporate Tower.
Beffort believes Leadership Square, the last large speculative office space built downtown (1982) will remain such for a long time to come.
“We may see more a larger office building built, but it will be for an owner occupant,” Beffort said. “But speculative office construction? It's not going to happen. The cost to build in the downtown core is $250 to $300 a foot. Rents are $18. You'll need $25 to make that work. Unless you have someone to bridge that gap, you're not going to see it.”