“Class C” office buildings in downtown Oklahoma could reach an all-time high vacancy of 65 percent by the end of the year, according to Price Edwards & Co. — not a surprise, necessarily, but a milestone, nonetheless.
It's not as clearly a negative marker as it might seem, except for the property owners. A “flight to quality” has tenants at all levels moving up, said Craig Tucker, Price Edwards managing broker and office specialist.
“The best space is getting leased up. Everybody seems to be stepping up,” said Tucker, who compiled the firm's midyear office market summary.
The most recent big move was announced just this week. Blue Cross and Blue Shield of Oklahoma reported its pending relocation from a building it has long owned at 3401 NW 63 to leased space in the IBC Bank Center, 3817 Northwest Expressway. Blue Cross said its building needs work and at 80,000 square feet is too big for its needs.
It is leasing 49,000 square feet at IBC.
Downtown will take the biggest hit at the end of the year when Devon Energy Corp.'s lease of some 225,000 square feet at First National Center expires, Price Edwards said.
“As we have stated before, many of these buildings are faced with functional obsolescence and it remains to be seen what becomes of them. Given the increase in demand for downtown housing, we expect a few may be converted to that or alternative uses,” the firm reported.
Setting the oldest buildings aside, downtown vacancy is closer to a “reasonably healthy” vacancy of 13.5 percent, Price Edwards said.
But it's the top of quality where the market keeps humming downtown: Class A space keeps getting taken.
Class A vacancy had shrunk to 2.3 percent by midyear, which probably is an all-time low, the firm said, and rents had risen to $19.55 per square foot per year, an all-time high.
Downtown eyes are on land now occupied by Stage Center, where a new skyscraper is reportedly in the works.