The last 12 months have been marked by dramatic changes. As of this writing, these events have not seriously affected the Oklahoma City multi-tenant industrial market. Overall, multi-tenant industrial properties have continued the declining vacancy trend seen over the past two years. The bulk-warehouse sector is the exception this year. Bulk-warehouse is seen as an important indicator for the economy given its central role in the supply chain, support of retail business, and tendency to be occupied by national and international tenants. Most warehouse operations are considered essential businesses and remained in operation during the lockdown, although there have been upstream supply-chain disruptions. Locally, we know of a few lease transactions that were postponed. It is reasonable to expect some vacancy increase in the next 12 months as a result of corporate bankruptcies, especially in the retail sector.
Locally, bulk warehouse vacancy grew from 11.9% in 2019 to the current level of 15.9%. Part of the vacancy rise is due to speculative construction and part is related to growth as local tenants vacated leased spaces to purchase or construct their own buildings. In the foreseeable future, a slow recovery could put added, though modest pressure on these numbers.
Flex space, generally consisting of tenants with less that 12,000 square feet, recorded a solid vacancy decline from 11.8% in 2019 to 9.6% in 2020. This builds on a 4% decline from 2018 to 2019. The majority of space designated “Flex” by this report is 1980’s vintage, but there has been limited development of new space, although mostly limited to metal construction for cost and rental rate efficiency. This space type is heavily tenanted by service industry companies who are typically rate-sensitive.
The service warehouse sector includes older warehouse space, no longer efficient for large-scale distribution operations, as well as modern dock-high buildings with intermediate clear heights. Because of the inclusion of older, larger facilities, this sector is always the most volatile since a few larger vacancies can skew the vacancy numbers. This sector does however offer very affordable rents and vacancy has declined from 33.7% in 2018 to 17.7% in 2020.
Sales of multi-tenant facilities in the last 12 months included a large portfolio sale. Sealy Strategic Equity Partners sold a twenty-building portfolio to DRA Advisors including bulk warehouse, flex space, and modern service warehouse space. These properties were part of a large multi-state portfolio. Locally this sale transacted just over 2 million square feet for $92.4 million. The largest component of the sale was approximately 1.2 million square feet of bulk warehouse facilities.
