The retail market is better than it seems like it should be. Given the continued layoffs & bankruptcies in the energy market, declining sales tax revenues, and general economic uncertainties, the expectation would be that the Oklahoma economy and the retail market would be in a recession. But, leasing activity, development, and interest in our market remain strong. The unemployment rate has ticked up, but only slightly. Sales taxes in the suburbs have, with limited exceptions, continued to rise. Tinker and the aerospace industry are expanding. We are seeing some weakness in the office market, primarily energy-related, and we are beginning to see some pockets of inconsistent retail performance, primarily in local tenants. But, overall, the mid-year snapshot of our industry is pretty good.
Let’s look at the numbers. Mid-year retail vacancy comes in at 10.4 percent which is a full percentage point higher than year-end. On the face it of it, this would be cause for concern. And, no doubt, some of the increase is due to an easing of the market; however, a deeper look into the number reveals that market growth is driving the increase. For a number of years, Oklahoma City has had a shortage of new, well-located retail space; the market is addressing this through expansions of existing centers, new development, and re-positioning of centers. This past year, the market added 600,000 square feet of space in the 25,000 square foot plus category that we track. The market vacancy is just over 8 percent if you add the stand-alone buildings. Several of the new developments are in lease-up stage and are temporarily contributing to the additional vacancy – Quail Springs Shops, the 240 Penn Park addition, Stone Mill in Yukon, Tract 30 at Chisholm Creek, Northeast Town Center, etc. Existing properties that are being renovated and repositioned have also contributed – Bryant Square, Edmond Marketplace, Oak Brook among others. The vacated Macy’s at Quail Springs Mall alone makes up half the increase (more on it later). You can see how market dynamics are at play here; expect to see vacancy fluctuate over the next few years given the development activity in the market.
The question as to whether or not activity stalls in the next couple of years rests with two economic drivers over which we have little control: does the energy market recovery continue? And, is there a broader national recession?
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