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OFFERING MEMORANDUM
27 E SHERIDAN AVEOKLAHOMA CITY, OKLAHOMA
INVESTMENT PROPERTY
PREPARED BY
CLAYTON HARRIS
ASSOCIATE+1 405 607 [email protected]
AMY DUNN, CCIM
VICE PRESIDENT+1 405 607 [email protected]
BRENT CONWAY
VICE PRESIDENT+1 405 607 [email protected]
MEGHAN PERRY
ASSOCIATE+1 405 607 [email protected]
DISCLAIMER
CBRE © 2015 All Rights Reserved. All information included in this letter/proposal pertaining to CBRE—including but not limited to its operations, employees, technology and clients—are proprietary and confidential, and are supplied with the understanding that they will be held in confidence and not disclosed to third parties without the prior written consent of CBRE. This letter/proposal is intended solely as a preliminary expression of general intentions and is to be used for discussion purposes only. The parties intend that neither shall have any contractual obligations to the other with respect to the matters referred herein unless and until a definitive agreement has been fully executed and delivered by the parties. The parties agree that this letter/proposal is not intended to create any agreement or obligation by either party to negotiate a definitive lease/purchase and sale agreement and imposes no duty whatsoever on either party to continue negotiations, including without limitation any obligation to negotiate in good faith or in any way other than at arm’s length. Prior to delivery of a definitive executed agreement, and without any liability to the other party, either party may (1) propose different terms from those summarized herein, (2) enter into negotiations with other parties and/or (3) unilaterally terminate all negotiations with the other party hereto.
This valuation analysis or broker opinion of value is not an appraisal and has not been performed in accordance with the Uniform Standards of Professional Appraisal Practice. Neither you, nor any third parties, may rely on this analysis for any tax purposes, estate work, litigation, lending or any other matter other than your direct use in connection with a contemplated transaction.
01EXECUTIVE SUMMARY
02TEAM OVERVIEW
03ASSET OVERVIEW
AFFILIATED BUSINESS DISCLOSURE
CBRE, Inc. operates within a global family of companies with many subsidiaries and/or related entities (each an “Affiliate”) engaging in a broad range of commercial real estate businesses including, but not limited to, brokerage services, property and facilities management, valuation, investment fund management and development. At times different Affiliates may represent various clients with competing interests in the same transaction. For example, this Memorandum may be received by our Affiliates, including CBRE Investors, Inc. or Trammell Crow Company. Those, or other, Affiliates may express an interest in the property described in this Memorandum (the “Property”) may submit an offer to purchase the Property and may be the successful bidder for the Property. You hereby acknowledge that possibility and agree that neither CBRE, Inc. nor any involved Affiliate will have any obligation to disclose to you the involvement of any Affiliate in the sale or purchase of the Property. In all instances, however, CBRE, Inc. will act in the best interest of the client(s) it represents in the transaction described in this Memorandum and will not act in concert with or otherwise conduct its business in a way that benefits any Affiliate to the detriment of any other offeror or prospective offeror, but rather will conduct its business in a manner consistent with the law and any fiduciary duties owed to the client(s) it represents in the transaction described in this Memorandum.
CONFIDENTIALITY AGREEMENT
This is a confidential Memorandum intended solely for your limited use and benefit in determining whether you desire to express further interest in the acquisition of the Property. This Memorandum contains selected information pertaining to the Property and does not purport to be a representation of the state of affairs of the Property or the owner of the Property (the “Owner”), to be all-inclusive or to contain all or part of the information which prospective investors may require to evaluate a purchase of real property. All financial projections and information are provided for general reference purposes only and are based on assumptions relating to the general economy, market conditions, competition and other factors beyond the control of the Owner and CBRE, Inc. Therefore, all projections, assumptions and other information provided and made herein are subject to material variation. All references to acreages, square footages, and other measurements are approximations. Additional information and an opportunity to inspect the Property will be made available to interested and qualified prospective purchasers. In this Memorandum, certain documents, including leases and other materials, are described in summary form. These summaries do not purport to be complete nor necessarily accurate descriptions of the full agreements referenced. Interested parties are expected to review all such summaries and other documents of whatever nature independently and not rely on the contents of this Memorandum in any manner. Neither the Owner or CBRE, Inc, nor any of their respective directors, officers, Affiliates or representatives make any representation or warranty, expressed or implied, as to the accuracy or completeness of this Memorandum or any of its contents, and no legal commitment or obligation shall arise by reason of your receipt of this Memorandum or use of its contents; and you are to rely solely on your investigations and inspections of the Property in evaluating a possible purchase of the real property. The Owner expressly reserved the right, at its sole discretion, to reject any or all expressions of interest or offers to purchase the Property, and/or to terminate discussions with any entity at any time with or without notice which may arise as a result of review of this Memorandum. The Owner shall have no legal commitment or obligation to any entity reviewing this Memorandum or making an offer to purchase the Property unless and until written agreement(s) for the purchase of the Property have been fully executed, delivered and approved by the Owner and any conditions to the Owner’s obligations therein have been satisfied or waived. By receipt of this Memorandum, you agree that this Memorandum and its contents are of a confidential nature, that you will hold and treat it in the strictest confidence and that you will not disclose this Memorandum or any of its contents to any other entity without the prior written authorization of the Owner or CBRE, Inc. You also agree that you will not use this Memorandum or any of its contents in any manner detrimental to the interest of the Owner or CBRE, Inc. If after reviewing this Memorandum, you have no further interest in purchasing the Property, kindly return this Memorandum to CBRE, Inc.
DISCLAIMER
© 2017 CBRE, Inc. The information contained in this document has been obtained from sources believed reliable. While CBRE, Inc. does not doubt its accuracy, CBRE, Inc. has not verified it and makes no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the property. The value of this transaction to you depends on tax and other factors which should be evaluated by your tax, financial and legal advisors. You and your advisors should conduct a careful, independent investigation of the property to determine to your satisfaction the suitability of the property for your needs.
ASSET OVERVIEW
4 | 27 E SHERIDAN
INVESTMENT SUMMARY
As exclusive agents for the owner, CBRE is pleased to offer for sale this multi-tenant triple net lease investment property located at 27 E Sheridan Avenue, in the Bricktown District of Oklahoma City. The offering consists of a four-story office/retail building totaling 27,860 rentable square feet situated on 0.2021 acres. The first floor tenant, Hudson’s Public House, currently has seven years remaining on the existing lease, expiring December 31, 2023. Hudsons Public House is a popular eatery and bar and has two locations throughout the Oklahoma City area. This asset is located near the intersection of I-235 and I-40, a major crossroad in the US Interstate System with over 123,000 VPD passing through. The Bricktown area is becoming increasing popular with many neighboring buildings recently renovated and a new parking structures recently added to the district. Bricktown has considerable amount of foot traffic with Eleven hotels within walking distance and two currently under construction. The Chesapeake Energy Arena, Chickasaw Bricktown Ballpark and the Cox Convention Center are also within walking distance providing a boost to foot traffic during Thunder games and other events.
INVESTMENT HIGHLIGHTS
• IN-PLACE CASH FLOW: 27 E Sheridan Avenue provides investors with a predictable cash flow, as the first floor retail is leased until December 2023 and the second floor office has a flexible lease intending to stay for three years. This allows for the owner to have reliable income while renovating the top two floors.
• EXCELLENT LOCATION: The building is located in the tourist area with multiple sporting and civic events throughout the year. This drives considerable foot traffic throughout the day and during events. The Bricktown area is located at the intersection of I-235 and I-40 which sees more than 123,000 VPD pass through.
• FUTURE INCOME GROWTH: In addition to a secure, initial cash flow, 27 E Sheridan Ave also provides investors and owner-users with multiple avenues for value creation:
LIST PRICE
$4,250,000$/SF
$152.55
• EXTEND LEASE WITH HUDSONS PUBLIC HOUSE: Investors will have the opportunity to extend the lease with Hudsons Public House and push the rents for increased income.
• MARKET TO OWNER-USERS OR TENANTS: Investors have the opportunity to turn the historic building’s upper three floors into loft apartments or offices. Both residential and office space are in high demand in Bricktown.
• SUPERIOR LOCATION AND ACCESSIBILITY: The Property’s superior location in the heart of Bricktown and access to the interstate network provides excellent opportunities for investors.
• ABOVE-AVERAGE RENT GROWTH PROJECTED: With limited new construction and sustained tenant demand, CBRE-Econometric Advisors projects that the Oklahoma City office market will experience approximately 26% cumulative office market rent growth over the next five years.
27 E SHERIDAN | 5
PROPERTY OVERVIEW
LOCATION 27 E SHERIDAN AVENUE, OKLAHOMA CITY, OK
YEAR BUILT 1920
LOT SIZE 0.2021 ACRES
GROSS AREA 27,860 SF
TYPICAL FLOOR SIZE 6,965 SF
NUMBER OF STORIES FOUR
PARKING 35 SPACES “SECURED” (1.26:1,000 RATIO)
ZONING BC BUSINESS COMMERCIAL
PARCEL R020027025
REAL ESTATE TAXES $27,701.65
6 | 27 E SHERIDAN
BUILDING DETAILS
FOUNDATION
The foundation system is presumed to consist of grade beams and spread footings supporting the building columns and exterior walls, constructed with poured-in-place, reinforced concrete.
STRUCTURAL FRAMING
The structural framing is all wood timbers, 12”x12” columns with a 12”x12”x36” column cap on top to support the 12”x16” timber beams that sit on top and support the floor joist. The 2nd floor has a 1”x2” oak floor on top of a wood sub-floor. The 1st floor has a complete store front glass system with insulated glass. The 2nd floor has 4 inch aluminum frames with insulated glass, there are no windows at this time on the 3rd & 4th floor (they have old wooden frame windows that are boarded up).
EXTERIOR WALLS
The exterior walls of the building consist of brick and glass windows.
ROOF TYPE / COVER
The roof is a 30 pound roofing material, torch down.
WINDOWS
The windows are double pain insulated.
PRIMARY EXTERIOR DOORS
The main entrance for the 2nd, 3rd, & 4th floor is on the back of the building, a single 36 inch glass door in an aluminum frame.
HVAC
The HVAC units for the 1st floor are on the roof . They are four and five ton units.
PLUMBING
There is a 100 gallon water heater on the 1st floor (Henry Hudson Restaurant). There are no restrooms on the 2nd floor, the tenant (ABACUS) shares the restroom on the 2nd floor with Bricktown Brewery. There is no water/sewer for the 2nd, 3rd, or 4th floor.
ELECTRICAL SERVICE
There is a 600 amp 208/240 volt system on the 1st floor. A 200 amp 120/240 volt on the 2nd floor. There is no power on the 3rd or 4th floor (lighting for those floors is on BTB).
EXTERIOR LIGHTING
There are street lights in the front of the building along Sheridan Ave. They are goose neck lights on the front of the bu90ilding but none on the back. The parking lot behind the building (which is not part of the property) has parking lot lights.
ELEVATOR SERVICE
One hydraulic 3,500-pound elevator. The elevator goes from the basement to the 4th floor and the equipment is located on the roof.
STAIRS
Both stairwells only go to the 2nd floor. The elevator is the only access to the 3rd and 4th floor. The 3rd and 4th floor have not been occupied recently.
FIRE PROTECTION
Fire extinguishers are located throughout the 1st and 2nd floors of the building. However the building is fully sprinkled (basement to the 4th floor).
27 E SHERIDAN | 7
TENANT INFORMATIONTENANT HUDSON’S PUBLIC HOUSE
WEBSITE www.hhpublichouse.com
PARENT COMPANY
PUBLIC/PRIVATE Private
Financial information available upon execution of a
confidentiality agreement
NET RENTABLE AREA 6,000 RSF
% OF PROPERTY 25%
LEASE EXPIRATION December 2023
TENANT INFORMATIONTENANT ABACUS
WEBSITE www.abacusok.com
PARENT COMPANY Good Egg Dining Group
PUBLIC/PRIVATE Private
Financial information available upon execution of a
confidentiality agreement
NET RENTABLE AREA 6,000 RSF
% OF PROPERTY 25%
LEASE EXPIRATION Negotiable
8 | 27 E SHERIDAN
1ST FLOORHUDSONS PUBLIC HOUSE
4TH FLOOR2ND FLOORABACUS
27 E SHERIDAN | 9
27E SHERIDAN
AVENUEO K L A H O M A C I T Y,
O K L A H O M A
10 | 27 E SHERIDAN
3RD FLOOR
2ND FLOOR OFFICE 2ND FLOOR OFFICE
27 E SHERIDAN | 11
REAR ENTRANCE
12 | 27 E SHERIDAN
AERIAL
27 E SHERIDAN | 13
AERIAL
CENTRAL BUSINESS DISTRICT
BRICKTOWN
CHICKASAW BRICKTOWN
BALLPARK
DEEP DEUCE
CHESAPEAKE ARENA
COX CONVENTION CENTER
27 E SHERIDANO K L A H O M A C I T Y,
O K L A H O M A
14 | 27 E SHERIDAN
SALE COMPARABLES
NO. ADDRESS PRICE SF $/SF SOLD DATE
1228 NE 2nd STREETOklahoma City, OK
$1,250,000 9,770 $128.07 August 12, 2015
2322 NE 2nd STREETOklahoma City, OK
$875,000 5,420 $161.44 February 11, 2015
3409 E CALIFORNIA AVEOklahoma City, OK
$7,200,000 38,854 $185.31 August 21, 2014
4222 E MAIN STREETOklahoma City, OK
$1,150,000 8,750 $131.43 August 29, 2014
5224 E MAIN STREETOklahoma City, OK
$1,300,000 8,774 $148.17 June 21, 2016
6400 N WALNUT AVEOklahoma City, OK
$1,620,000 17,632 $91.88 August 11, 2014
AVERAGE $2,232,500 14,865 $141.05
RENT PER SQUARE FOOT AVERAGES LOW HIGH
GROSS ASKING RENT $19.99 $15.00 $21.60
GROSS STARTING RENT $21.72 $16.00 $22.69
GROSS EFFECTIVE RENT $21.86 $16.00 $23.18
RENT COMPARABLES
27 E SHERIDAN | 15
21
3
SALE COMPARABLES MAP
4 5
6
27E SHERIDAN
AVENUEO K L A H O M A C I T Y,
O K L A H O M A
MARKET OVERVIEW
PLATT COLLEGE | 17
$16.96 PSFAVERAGE ASKING RATES
16,018,894 SF TOTAL OFFICE MARKET
1,343,9962015 POPULATION
CITY OF OKLAHOMA CITY | MARKET OVERVIEW
Source: CBRE RESEARCH
49.4%MALE
50.6%FEMALE
35.7AVERAGE
AGE
18.9%BACHELORS
$50,256MEDIAN HH
INCOME
17.8%AVERAGE VACANCY
18 | 27 E SHERIDAN
OKLAHOMA CITY OVERVIEW
Oklahoma City is the most populous city in the state of Oklahoma. From 2010 to 2015, Oklahoma City’s metro population grew by nearly 9%, and has experienced a 1.75% average annual growth rate. In 2015, the Oklahoma City MSA population was estimated to be 1,343,996 while the city of Oklahoma City’s population was 630,749. Since 2010, the Oklahoma City MSA is the 18th-fastest-growing large metro in the country and has grown twice as fast as the nation.
ECONOMIC OVERVIEW
The economy of the Greater Oklahoma City region is diverse. While federal, state and local government are the largest employers, and the oil and natural gas sector generates the largest revenues, the area’s major private sector economic contributors include:
AVIATION & AEROSPACE: With the largest concentration of aviation and aerospace firms in the state, the Greater Oklahoma City region’s 265 firms employ 38,000 workers—and growing. Nearly 65% of the workforce at Tinker Air Force Base—the largest single site employer in the state—consists of civilian contractors and service providers.
BIOSCIENCE: Oklahoma City’s bioscience presence is generating national and international attention. The sector employs more than 51,000 statewide. Companies within this industry are dedicated to providing bioscience goods and services, as well as education and research testing.
ENERGY: Oklahoma City is the energy capital of the state. Energy accounts for approximately 3% of metro employment but more than 9% of total compensation. The sector draws its strength from several energy companies with headquarters in the city.
HEALTHCARE: As one of the nation’s major centers of healthcare delivery, the Oklahoma City metro employs more than 74,000 health care sector workers. Our 30 general medical and surgical hospitals and 16 specialized hospitals combine to offer outstanding healthcare.
OKLAHOMA CITY’S LARGEST EMPLOYERS
COMPANY NAME # OF EMPLOYEES
STATE OF OKLAHOMA 46,900
TINKER AIR FORCE BASE 26,000
OU - NORMAN CAMPUS 11,900
FAA MIKE MONRONEY AERONAUTICAL CENTER 7,000
INTEGRIS HEALTH* 6,000
HOBBY LOBBY STORES, INC.* 5,100
OU HEATLH SCIENCES CENTER 5,000
CITY OF OKLAHOMA CITY 4,600
MERCY HEALTH SYSTEM OKLAHOMA* 4,300
OGE ENERGY CORPORATION* 3,400
* Company HQ’s located in Oklahoma City
Source: Greater Oklahoma City Chamber “Oklahoma City at a Glance” Updated January 2016
MANUFACTURING: This broad category includes metals and machinery; building materials; food products; and medical devices and equipment. With more than 36,000 employed, the manufacturing sector represents approximately 6.1% of the Oklahoma City MSA’s total nonagricultural labor force.
PROFESSIONAL, BUSINESS & FINANCIAL SERVICES: Similar to the healthcare sector, the Oklahoma City region provides business and financial services to a market that extends beyond the state boundaries. This sector makes up 19% of the metro’s total workforce with more than 109,800 employees in this sector.
WHOLESALE AND RETAIL TRADE: Oklahoma City’s central location and accessibility have made it a vital crossroads for commerce. The convergence of I-35, a major north-south interstate, and I-40 and I-44, major east-west interstates, and numerous U.S. and state highways position Oklahoma City as a major wholesale and retail trade center. For the year 2015, the Oklahoma City MSA had estimated total taxable retail sales of $20.9 billion.
27 E SHERIDAN | 19
OKLAHOMA CITY OVERVIEW
OKLAHOMA CITY ACCOLADES
• Oklahoma City ranked among top ten largest cities for recession recovery(WalletHub January 2017)
• Oklahoma City is one of the top metros for wage growth(Forbes December 2016)
• No. 1 for oil and gas investment(Fraser Institute December 2016)
• No. 4 for top tourist cities(USA Today October 2016)
• No. 5 for top cities rebounding from the recession(CNBC August 2016)
• No. 1 for cities with the best quality of life(Business Facilities August 2016)
• No. 7 for best cost of living(Business Facilities August 2016)
• No. 3 for best largest cities to start a business(WalletHub May 2016)
• Oklahoma City’s Myriad Botanical Gardens ranked among top 10 best city parks(USA Today April 2016)
• No. 1 for women entrepreneurs(SmartAsset March 2016)
• Oklahoma City ranked among the top 14 places to visit in 2016(USA Today December 2015)
• No. 10 in construction value(NAIOP September 2015)
• No. 2 in installed wind power and No. 4 for cumulative installed capacity(U.S. Department of Energy August 2015)
• No. 8 best city to find a job(Fortune June 2015)
• No. 5 friendliest city in the U.S.(Travel and Leisure May 2015)
• No. 3 best U.S. city for millennial college students(USA Today April 2015)
• No. 17 among the top 20 most affordable major markets(International Housing Affordability Survey January 2014)
• Oklahoma City near the top of the list for budget-friendly metros(Apartment Guide January 2014)
• Ranked No. 1 in home value increases since the pre-recession highs of 2007(Wall Street Journal December 2013)
• Ranked No. 9 for affordable luxury apartments(Apartment Guide August 2013)
20 | 27 E SHERIDAN
ONE-MILE RADIUS THREE-MILE RADIUS FIVE-MILE RADIUSP
OP
ULA
TIO
N
2016 POPULATION 6,252 77,599 224,042
2021 POPULATION 6,636 83,394 249,275
2010 POPULATION 5,783 72,355 209,275
2000 POPULATION 4,901 72,120 205,361
PERCENT POP CHANGE: 2010 TO 2016 1.26% 1.13% 1.07%
PERCENT POP CHANGE: 2016 TO 2021 1.20% 1.45% 1.41%
2016 MEDIAN AGE 33.3 32.2 33.0
HO
US
EH
OLD
S
2016 HOUSEHOLDS 1,921 29,075 85,150
2021 HOUSEHOLDS 2,163 31,316 91,014
2010 HOUSEHOLDS 1,606 27,163 80,628
PERCENT HH CHANGE: 2010 TO 2016 2.91% 1.09% 0.88%
PERCENT HH CHANGE: 2016 TO 2020 2.40% 1.50% 1.34%
AVERAGE HOUSEHOLD SIZE 1.56 2.47 2.54
INC
OM
E
2016 AVERAGE HOUSEHOLD INCOME $59,031 $46,144 $47,478
2021 AVERAGE HOUSEHOLD INCOME $63,462 $48,868 $50,019
2016 MEDIAN HOUSEHOLD INCOME $36,084 $30,046 $34,390
2021 MEDIAN HOUSEHOLD INCOME $35,641 $30,245 $34,262
2016 PER CAPITA INCOME $30,782 $18,942 $19,695
HO
US
ING
2016 HOUSING UNITS 2,434 35,830 99,405
OCCUPIED UNITS 1,920 29,074 85,150
VACANT HOUSING UNITS 513 6,755 14,255
2016 OWNER-OCCUPIED HOUSING UNITS 216 10,860 41,095
2016 RENTER-OCCUPIED HOUSING UNITS 1,704 18,214 44,055
2016 MEDIAN HOME VALUE $121,341 $74,329 $79,592
2016 AVERAGE HOME VALUE $175,465 $119,652 $107,271
DEMOGRAPHICS
27 E SHERIDAN | 21
OKLAHOMA CITY OFFICE MARKETVIEW
Oklahoma City tacked up job growth totaling 6,700 new payrolls year-over-year through May. While the region has seen modest expansion in its area employment, mounting cost pressures and bankruptcies in the local oil and gas upstream sector have affected its office market since this time last year. A number of OKC-based companies (or those with major operations here) are now reorganizing their finances via Chapter 11 filings. Furloughs have occurred as three major local firms pared 2,500 employees, shrinking their office space needs in the process. Two of these firms alone occupy 4 million sq. ft. of mostly owned Class A office space. As the energy sector adjusts to this industry-wide contraction, we expect to see the OKC office sector push up its sublease level which, as we reported just last month, was registering a dubious statistical resiliency despite what local market experts knew anecdotally to be the case. That said, even limited yet positive job growth has had modest impact on office leasing. In one such example, Paycom is hiring an additional 1,000 workers as it constructs an 80,000 sq. ft. expansion to its owned headquarters in the Northwest. Still, OKC’s overall economy is holding its own registering 1.9% gross metro product growth according to the most recent report from Moody’s Analytics.
OKC’s investment market saw a number of properties change hands during H1 2016, a signal the office market remains resilient with investors despite slower leasing volume. 7919 Mid America sold for $11.5 million ($136 per sq. ft.) and was the largest office sales transaction of the H1 2016 period, followed by 9520 N. May selling for $6.2 million ($93 per sq. ft.). The majority of office sales were acquisitions by private investors as OKC’s investment opportunities are primarily in smaller properties under 50,000 sq. ft. and under the $5 million sale mark, which comprised 80% of H1 2016’s office investment sales.
OKC’s office market is undergoing a cyclical transition oriented towards occupiers. Tenants seeking to upgrade their space there are now a number of options today compared to the past few years when the market has been tight, particularly in the Class A segment, making it difficult for tenants to expand or move into next generation space. As some energy related tenants continue to downsize and several new construction projects complete, the market will begin to loosen and allow tenants more options. SandRidge and Chesapeake both occupy a significant sq. ft. of office space, yet have laid off a large portion of workforce in Oklahoma City. BOK Park Plaza will bring 700,000 sq. ft. to the market in H1 2018 and is Oklahoma City’s largest multi-tenant office property to be built since the 735,500 sq. ft. Leadership Square, located in the CBD, delivered in 1984. Devon Energy has pre-leased 325,000 sq. ft. at Hines’ new BOK Park Plaza in addition to Bank of Oklahoma (BOK) who will be consolidating its metropolitan operations into the top floors of BOK Park Plaza, withdrawing from office space in the CBD and Northwest. These movements within the market will create tenant opportunity unseen in the office sector for many years as the Class A and B market now loosen.
Oklahoma City’s office market experienced negative net absorption of ~205,000 sq. ft. in the first half of the year. Slackened absorption rates were primarily caused by the continuation of energy companies consolidating space. Large blocks greater than 10,000 sq. ft. were returned to the market by Range Resources, Williams Partners Computer RX and American Energy Management Services during H1 2016. Leasing activity for spaces more than 10,000 sq. ft. was subdued as Intermedix, Weatherford International, Halliburton, Cox Media, Merrill Lynch and Global Life Insurance all completing leases during H1 2016, yet contributed minimally to net absorption as most of these deals were in fact renewals.
(204,605) SFNET ABSORPTION
17.8%VACANCY RATE
$16.96/SF AVGASKING RATE
929,228 SFCONSTRUCTION
OKLAHOMA CITY OFFICEHIGHLIGHTS
22 | 27 E SHERIDAN
VACANCY
GROSS ACTIVITY AND ABSORPTION
ASKING LEASE RATES
VACANCY
OKC office vacancy rose to 17.8% during H1 2016, up from 16.7% in H2 2015, as Westgate One delivered 200,000 sq. ft. of vacant space and several large blocks of space hit the market. Still, vacancy in the CBD dropped 6.4% temporarily due to First National Center closing, yet the completion of BOK Park Plaza in H1 2018 will potentially cause downtown vacancy to rise up to 5% by our accounting given pre-lease measures. That said, overall office vacancy eclipse the 20% high water mark, not cresting until H1 2018, where the rates will be highest for the CBD and Northwest due to the dense concentration of energy firms and new construction within these preferred OKC office submarkets.
ASKING LEASE RATES
Asking rents remained relatively stable, declining only $0.01 per sq. ft. during H1 2016 but these are likely to begin reacting to the upturn in office vacancy during the remainder of 2016 and into 2017. Landlords with large blocks of vacancy are going to be motivated to offer enhanced concession packages to include rent abatement and tenant allowances, which will become part of the norm for space negotiations.
ABSORPTION
Oklahoma City’s office market experienced negative net absorption of -205,000 sq. ft. in the first half of the year. Slackened absorption rates were primarily caused by the continuation of energy companies consolidating space. Large blocks greater than 10,000 sq. ft. were returned to the market by Range Resources, Williams Partners, Computer RX and American Energy Management Services during H1 2016. Leasing activity for spaces more than 10,000 sq. ft. was subdued as Intermedix, Weatherford International, Halliburton, Cox Media, Merrill Lynch and Global Life Insurance all completing leases during H1 2016, yet contributed minimally to net absorption as most of these deals were in fact renewals.
14.0
14.5
15.0
15.5
16.0
16.5
17.0
17.5
18.0
(350)
(300)
(250)
(200)
(150)
(100)
(50)
0
50
100
150
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016
Vacancy Rate (%)Net Absorption (000s SF)
Net Absorpt ion Vacancy Rate
14.5
15
15.5
16
16.5
17
17.5
H1 20
14
H2 20
14
H1 20
15
H2 20
15
H1 20
16
($) SF
1414.5
1515.5
1616.5
1717.5
18
H1 20
12
H2 20
12
H1 20
13
H2 20
13
H1 20
14
H2 20
14
H1 20
15
H2 20
15
H1 20
16
(%)
INV
ES
TM
EN
T P
RO
PE
RT
IES
© 2017 CBRE, Inc. The information contained in this document has been obtained from sources believed reliable. While CBRE, Inc. does not doubt its accuracy, CBRE, Inc. has not verified it and makes no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the property. The value of this transaction to you depends on tax and other factors which should be evaluated by your tax, financial and legal advisors. You and your advisors should conduct a careful, independent investigation of the property to determine to your satisfaction the suitability of the property for your needs.
