Why retail rents slipped despite increased demand in Oklahoma City

Assumed but often forgotten constants in the law of supply and demand help explain the oddities that brokers with CB Richard Ellis-Oklahoma found in Oklahoma City retail property markets the first half of the year: Demand for retail space went up, but rent prices went down.
by Richard Mize Published: August 18, 2012

People tend to remember just the fun parts of the law of supply and demand.

What we remember is: When demand goes up, price goes up. Or: When demand goes down, price goes down.

Or, we remember: When supply goes up, price goes down. Or: When supply goes down, price goes up.

We tend to forget a few mundane but critical things.

One, “price” in the law of supply and demand refers to the equilibrium price, the point where the amount of supply exactly meets the amount of demand. It's a moving point in an active market.

Two, the law assumes a competitive market, but inefficiencies abound to muck up economic mechanisms.

Three, we forget the assumed constants in the law of supply and demand.

•  When demand goes up and supply stays the same, then price goes up.

•  When demand goes down and supply stays the same, then price goes down.

•  When supply goes up and demand stays the same, then price goes down.

•  When supply goes down and demand stays the same, then price goes up.

It's that third thing, the assumed constants, that help explain the oddities that brokers with CB Richard Ellis-Oklahoma found in Oklahoma City retail property markets the first half of the year:

Demand for retail space went up, but rent prices went down.

Why? Because supply did not stay the same. A lot of it was used up.

The most sought-after space, in fact — higher-priced space — was absorbed, leaving relatively more space that was less desirable, therefore priced lower. With higher-priced space taken out of the pool, trusty statistics kicked in and the average asking rents fell for the remaining space.

by Richard Mize
Real Estate Editor
Real estate editor Richard Mize has edited The Oklahoman's weekly residential real estate section and covered housing, commercial real estate, construction, development, finance and related business since 1999. From 1989 to 1999, he worked...
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