Downtown office vacancy tumbled the first half of the year, with tenants almost falling over themselves to lease space.
Price Edwards & Co.'s Mid-Year Office Market Summary was glowing: New lessees and expanding tenants occupied 240,000 square feet of space downtown since last summer.
That's more than in any other 12-month period since the firm started tracking office space in 1986, according to the report, prepared by Craig Tucker, managing broker and office specialist with Price Edwards.
It was as if Bank of Oklahoma Plaza, 16 stories at 201 Robert S. Kerr, went from empty to full — plus a whole floor of the One North Hudson building at 401 W Sheridan Ave.
“For downtown to have the absorption of 240,000 square feet the past 12 months is pretty staggering,” said Ford Price, managing partner of Price Edwards.
He said it's generated a new “dynamic” downtown, where the office market faces upheaval as Devon Energy Corp. occupies more and more of its 1.8-million-square-foot tower, vacating leased space in several buildings.
“People are feeling a lot better about being able to deal with Devon,” Price said.
The report does note in its forecast for the remainder of the year: “Vacancy rates will increase dramatically as Devon relocates to its new headquarters.”
Nonetheless, Price said, Continental Resources' absorption of the 307,000-square-foot former Devon headquarters building at 20 N Broadway, effective in early 2011, was a “game changer.”
The return of Enogex LLC's to downtown, leasing 130,000 square foot at Leadership Square, 211 N Robinson, also signified a turning point: Enogex, a natural gas pipeline subsidiary of OGE Energy Corp., had fled downtown as it was going down in the 1980s oil bust.
But the downtown office market is also thriving on “a whole lot of medium-sized transactions,” Price said.
Leasing activity remained strong at midyear, shaking off volatility in the industry sector fueling it: energy.
“Despite the change in crude oil and natural gas prices, the strong energy industry has enabled the local economy to flourish while most of the country has struggled,” brokers with CB Richard Ellis-Oklahoma noted in their midyear Oklahoma City Marketview.
The firms' midyear assessments of downtown were comparable.
Price Edwards found a vacancy rate of 20.7 percent, down from 22.8 percent at the end of 2011, and an average rent rate of $15.34 per square foot per year, up from $15.28. CB Richard Ellis calculated a vacancy rate of 19.9 percent, down from 23.5 percent at year-end, and an average asking rate of $14.87 per square foot.
Price Edwards mentioned two clouds over downtown: the fate of First National Center, 120 N Robinson, and the shortage of parking.
First National owners have until Friday to come up with $12 million to settle with lender Capmark on a $21 million note or see the 1-million-square-foot office complex go into receivership.
The center includes a 32-story tower of 451,086 square feet built in 1931, a 14-story building of 201,915 square feet built in 1956, and a 14-story building of 346,650 square feet built in 1974.
Price wondered whether the answer to the parking problem might be found on some of the First National Center property.
The tallest tower, on the National Register of Historic Places and an icon for 80 years since the “skyscraper race” with what is now City Place next door to the south, is probably untouchable, he said.
But Price said some of the rest of the complex is ripe for “adaptive reuse” — re-purposing as something other than office space, maybe housing, maybe a hotel, maybe parking.
Whatever becomes of First National Center, “I think the city of Oklahoma City has to be involved in some way, just like with the Skirvin,” he said of the public-private effort that took the historic downtown hotel out of mothballs and put it back in service five years ago.