The 20-million-square-foot metro Tulsa general purpose, multi-tenant office market continues to alternate between good and bad quarters for occupancy. The second quarter’s 41,000 square feet of positive net absorption pushed the vacancy rate down 20 basis points to 18.6%, but the first quarter total had been minus 32,000 square feet. The rate fell to 18.5% in August. Trends are more consistent by segment, with 2012 net absorption through mid-year at plus 100,000 square feet for Class A properties and minus 91,000 for Class B/C. The respective second quarter vacancy rates were 12.5% and 23.3%.
As in many markets, Tulsa’s occupied square-footage is far below the level of the year 2000, in this case by nearly 1.3 million square feet, with limited construction and net absorption in the red most years since. Reis, however, predicts that after ending 2012 at 18.6%, the vacancy rate will fall to 18.3% at year-end 2013 despite new supply as demand picks up. Further decreases are forecast to follow.
Rents continue to rise slowly. In the second quarter both the average asking rent and the average effective rent increased 0.3%, to $14.62 psf and $11.82 psf, respectively. The year-over-year increase was 1.2% asking and 1.3% effective. There was no further change through August, and gains of 1.1% and 1.3%, respectively, are forecast for all of 2012. As vacancy falls, Reis predicts rent gains will accelerate, with the effective average forecast to increase by more than 5.0% in 2015 and 2016. The second quarter 2012 Class A and B/C asking averages, meanwhile, were $16.68 psf and $13.01 psf.
“While the Tulsa economy shows signs that a recovery is in progress, this has yet to transition into positive real estate fundamentals for the office sector,” according to Cushman & Wakefield, which puts the vacancy rate at 25.4%, up 550 basis points from a year earlier, and the direct asking rent at just $13.98 psf.