New warehouses will fill up as fast as they go up, keeping Oklahoma City in view for new industrial tenants, according to commercial realty firms.
Big bulk warehouse spaces are in especially short supply, but speculative construction is arising to meet the demand, Price Edwards & Co. said in its midyear industrial market summary.
Without the new space, “modern bulk warehouse spaces over 75,000 square feet are simply unavailable in Oklahoma City,” the firm reported. “This creates some real obstacles to larger tenants migrating to this market, and the economic development efforts to attract them.”
As goes multi-tenant bulk warehouse space — determined by a ceiling height of 24 feet or more, dock-high bays to accommodate trucks, with minimal office space — so goes the industrial property market in general, said broker Bob Puckett, who compiled the Price Edwards report.
“Bulk warehouse is always the bellwether measure because it is generally populated by national tenants,” Puckett said just off Oak Hollow Industrial Park, where a 60,000-square-foot spec warehouse is under way at 1300 SE 89, just east of Interstate 35.
Vanguard Development, the owner-developer of Oak Hollow, is offering the space at an aggressive $6.25 per square foot per year on a triple-net lease, meaning tenants pay property taxes, insurance and maintenance. Most new bulk space rents for $5 to $5.50, according to Price Edwards.
However, the supply is tight.
“There’s very little bulk warehouse on this side of town, and that’s one of the driving features in this project,” Puckett said.
More than 300,000 square feet of speculative industrial space, in three projects, is underway or planned to start this fall, according to CB Richard Ellis-Oklahoma’s midyear report.
They include that firm’s listing of 135,000 square feet of space at 6900 N Bryant Ave.; the Vanguard warehouse on SE 89; and Gardner Tanenbaum Holdings’ 125,000-square-foot warehouse at Northgate Industrial Park at I-35 and Hefner Road, broker Caitlin Dempsey said.
“Also following the speculative construction trend are developments ... that cater towards the oilfield services industry. With the increase in construction, demand for industrial land is also on the rise,” she said.
As space fills up, rents go up, and the gap between rates for existing space and new construction is narrowing, Price Edwards reported.
Price Edwards sketched the market by product type (buildings 35,000 square feet and larger):
Bulk warehouse, 55.4 percent of the total: 8.2 percent vacant at midyear, compared with 4.5 percent a year ago, some of the increase “due to the chaotic market created by the May 2013 tornadoes,” the firm said. “Many tenants were displaced temporarily into previously vacant space and uncertainty about the future of the damaged buildings made true vacancy difficult to measure.”
Flex space, usually with ceiling height less than 18 feet, but some higher, 24.7 percent of the total: 9.3 percent vacant, the lowest since 2000.
Service warehouse, ceilings 18 to 23 feet, 19.9 percent of the total: 9.4 percent.
Price Edwards reported vacancy and lease rates by submarket:
North (north of Reno Avenue): Bulk, 6.17 percent vacant, rent $2.50 to $5; Flex, 10.5 percent vacant, rent $6 to $8.82; service, 12.3 percent vacant, rent $2.50 to $6.50.
Southwest (south of Reno Avenue, west of Santa Fe Avenue): Bulk, 6.43 percent vacant, rent $2.95 to $5.50; flex, 8.1 percent vacant, rent $3.50 to $8; service, 7.51 percent vacant, rent $2.50 to $10.50.
Southeast (south of Reno Avenue, east of Santa Fe Avenue): Bulk, 22.26 percent vacant, rent $3 to $4.25; flex, 11.66 percent vacant, rent $5.50 to $10.50; service, NA.
CB Richard Ellis-Oklahoma divided the metro area into five submarkets and tracked buildings of all industrial types 20,000 square feet and larger. The firm reported:
Central business district: 8.6 percent vacant; average lease rate $2.99.
Northwest (north of NW 10 and west of Interstate 235): 5 percent vacant; average lease $5.
Northeast (north of NE 10 and east of I-235): 16 percent vacant; average lease $3.72.
Southeast (south of NE 10 and east of I-235): 3.4 percent vacant; average lease $6.91.
Southwest (south of NW 10 and west of I-35: 9 percent vacant; average lease $4.61.