An open house at a warehouse: an uncommon site in Oklahoma City, as industrial boom eases
Richard Mize, The Oklahoman
7 min read
A man stands inside a new warehouse at 9500 W Reno Ave. on Tuesday during a broker's open house hosted by Chris Roberts, with Price Edwards & Co. in Oklahoma City.
An open house at a new warehouse? Not common, and it's a sign that Oklahoma City's industrial building boom is expiring, not popping, but like a balloon losing air.
Plenty of new space has been leased, but after several years of rapid expansion — due to the COVID-19 pandemic, lockdowns, the temporary explosion in e-commerce, global shipping constraints, tangled supply chains and logistics, and the rush to build — the industrial property market is a little overbuilt.
Bulk warehouse space for lease, especially, with high ceilings, docks for trucks, and minimal office space, the kind often sought by national or regional companies, is especially plentiful after several speculative industrial parks started since 2021. Speculative means built with no tenants lined up.
Average rents slipped in the third quarter to $8.22 per square foot per year from $8.44 at midyear, even though more space was occupied than vacated and delivered to the market, according to NAI Sullivan Group, an OKC commercial property brokerage.
Vacancy still increased to 4.6% from 3.8% in the second quarter "as we see more and more medical cannabis companies go dark and more large-scale speculative Class A development hit the market," NAI Sullivan's Zac McQueen said.
That's what Agee and Roberts were showing at 9500 W Reno: a 228,000-square-foot, brand-new Class A warehouse, with an identical one next door, none of the space leased.
High interest rates throw water on future development, and warehouses already up face some decline in demand
Chris Roberts, with Price Edwards & Co., hosts a a broker's open house Tuesday inside a new warehouse at 9500 W Reno Ave.
"We felt it was important to kind of showcase this product, this pair of buildings, to the local brokerage community, and we actually have a couple of prospective tenants who are stopping by today," Agee said during the open house Wednesday. It was a "broker's open," meaning meant for fellow specialists.
Agee said that interest rates, much higher than two years ago when the warehouses were started, change TriStar's approach to future development, but 9500 W Reno was financed at "an interest rate that continues to make sense in today's environment."
And, Agee said, despite "extreme volatility" in construction costs the past two years, "we were able to successfully navigate those rough waters to deliver these buildings and offer rental rates that are very competitive in the market."
A decline in demand is not a crash, he said, and TriStar is still bullish on OKC.
Industrial developers are still looking at OKC to start new warehouse developments
R.J. Agee, vice president of development for TriStar Properties, St. Louis., is pictured Tuesday during a Price Edwards & Co. broker's open house inside a new warehouse at 9500 W Reno Ave. in Oklahoma City.
"The fundamentals are still strong," Agee said. Vacancy rates are "still near historic lows. They're not at historic lows, but they're still near historic lows. I think Oklahoma City as an industrial market is still very healthy.
"All that is to say we feel really good about this space leasing up. ... I feel really good about what's going to happen here, these two buildings, filling them up with quality tenants, creating quality jobs, and continuing an economic investment in the market."
However, he added, "Like most other people, we are taking a wait-and-see approach on the next round of developments."
In the meantime, McQueen said, "Developers are still looking at OKC. I am working with a couple right now. OKC industrial is still doing well, vacancies have edged up a bit but are still historically low. Overall transaction volume is down due to increased rates and general economic instability, but leasing is doing well."
Interstate corridor, proximity to Dallas make OKC attractive to companies looking to relocate or expand
Two new warehouses at 9500 and 9400 W Reno Ave. in Oklahoma City are pictured Tuesday.
Companies looking to relocate or expand see OKC as a "suburb" of the Dallas-Fort Worth market, McQueen said, "being just a three-hour drive north on I-35. With that distance many of the prospects are still able to hit their target markets given the I-35, I-40, I-44 corridor through OKC."
TriStar is looking to local warehouse users as likely tenants at 9500 W Reno, "that tried-and-true industrial-type user, someone that has a need to service here locally," Agee said. "Could you get a regional-type tenant here? Certainly. We get our fair share of RFPs that are multimarket people looking here, and Memphis, and Kansas City."
He said TriStar isn't too concerned with the contraction in e-commerce and is ready for all comers.
"I think it's the same tenants, potentially," he said. "E-commerce has cooled a bit. We're not seeing quite the flurry of activity from e-commerce fulfillment-type users. These are spec buildings. We build them to be flexible, and to accommodate as many different types of users as we can."
Oklahoma City 'holding steady' in industrial property availability
Two new warehouses at 9500 and 9400 W Reno Ave. are pictured Tuesday.
"While you may hear doom and gloom on the big stage — meaning the United States commercial real estate market — Oklahoma City is still holding steady," Hunt said "There are many pluses about industrial properties in Oklahoma City.
"Some of the national reports are saying now that even Industrial is starting to show a decline with everything going on in the world, but so far, Oklahoma City seems to be continuing the growth mode."
Following is a list of industrial parks started or expanded since 2020, and, for local brokers, recently signed tenants.
OKC Logistics Park, industrial park in Oklahoma City
People look at inside a new warehouse at 9500 W Reno Ave. on Tuesday during a broker's open house.
Senior Business Writer Richard Mize has covered housing, construction, commercial real estate and related topics for the newspaper and Oklahoman.com since 1999. Contact him at rmize@oklahoman.com. Sign up for his weekly newsletter, Real Estate with Richard Mize.You can support Richard's work, and that of his colleagues, by purchasing a digital subscription to The Oklahoman. Right now, you can get 6 months of subscriber-only access for $1.
