Downtown Office Space

[dsjeffries]

quote:
A tale of two office markets
by Kirby Lee Davis
The Journal Record March 7, 2008

TULSA – Utica Place broke a psychological barrier when its 100,000 square feet of luxury office space opened 100-percent pre-leased in January, proving in Mary Martin's eye that Tulsa can absorb high lease rates that justify new construction.
Utica Place recently opened 100,000 square feet of office space, all of it pre-leased, in midtown Tulsa. (Photo by Rip Stell)

What troubles the CB Richard Ellis of Oklahoma broker is that some Tulsa office property owners chose a different strategy. In her 2007 office market survey, Martin said 20 or more Tulsa properties were downgraded from Class B or C because owners have refused to maintain or refurbish their holdings.

She called 2007 a "defining year in segmenting the market."
"Year-end research concluded that both suburban and central business district class A office space is the only class that has successfully increased lease rates over the past 24 months," said the first vice president and principal. "Class B and C suburban office buildings lease rates have been stagnant over the last 60 months."

Down the turnpike, CBRE Senior Associate Tom Lange reported some of the same factors in Oklahoma City that Martin saw in Tulsa: largely empty class C and D buildings spurring huge downtown vacancy rates, countering stronger suburban trends.
But where Tulsa posted a rising overall vacancy rate of 23.7 percent for classes A though C, and generally rising lease rates only in class A space, the 2007 Oklahoma City report recorded a falling vacancy rate of 15.46 percent in those three classes, and overall rising lease rates averaging $14.21 per square foot.

Suburban class A properties in Oklahoma's largest market saw their asking rates climb to an average of $20.17 per rentable square foot, the highest mark since CBRE began tracking Oklahoma City leasing rates in 1982.
"The Oklahoma City office market was robust for 2007," said Lange. "As in the past, there is a positive correlation between a strong oil and gas industry and a healthy office market."
Tulsa shares a strong energy sector, which could help explain the success of Utica Place. Other observers pointed to the office/residential project's extraordinary positioning in Tulsa's wealthy Midtown district, beside one of Oklahoma's premiere shopping and living environments in Utica Square.
While she also credited those location advantages, Martin pointed out One and Two Warren Place chart lease rates competitive to Utica Place levels – and both boast near 100-percent occupancy.
"There are people waiting to sign up for them, too," she said. "I think that tenants are willing to pay more for square foot for quality building that are well-maintained."
The general problem evolves from the aging inventory. Martin said many projects came online in the 1980s, as Oklahoma's economy plunged under depressed oil prices that rang through nearly every sector.
"Those projects are now showing age and are not as desirable to tenants," she said.
Lange pointed to similar problems in defending the capital city's downtown vacancy rate of 27.66 percent.
"The high overall vacancy is largely due to space in the older functionally obsolete buildings," he said. But he noted both class A and B properties in downtown Oklahoma City scored higher average lease rates last year.
Outside of downtown, CBRE's Oklahoma City staff saw few trends like Martin reported in Tulsa.
"Buildings that are actively marketing and leasing, those owners are very much committed to doing what needs to be done to attract new tenants," said Sales Associate Brent Conway.
He pointed out that while Oklahoma City's downtown vacancy rate topped 23 percent, that was down considerably from 2006.
"Everything else across the board, we're in single digits," he said of the city's different submarkets. "That kind of answers the question."
Martin attributed some owner decisions not to reinvest in their aging properties on rising tenant improvement costs, utility costs and other inflationary factors driven by the high cost of energy.
"They don't want to spend the money on maintaining the common areas and maintaining the overall building because everything else has gone up," she said.
"Tenant improvement costs have gone up so much," she continued. "You used to be able to go spend $10 per square foot on someone and get them whatever they want, and now $10 will not get you anything that people need."
Other decisions she pinned on failed efforts to sell the buildings.
"I don't think it slowed down," she said of 2007 sales trends. "A lot of owners think their buildings are worth more than they can get. That's because a lot of investors recognize how much they're going to have to reinvest in the properties."

quote:Martin said 20 or more Tulsa properties were downgraded from Class B or C because owners have refused to maintain or refurbish their holdings.

Not surprising. [V]

Did I read it correctly?  Downtown OKC's vacancy rate is 27.66% and downtown Tulsa's is 23.7%?
Is Bricktown considered to be within DTOKC?  And would those kinds of businesses in Bricktown have any effect on these vacancy rates since they're not offices?

[YoungTulsan]

Tulsa's OVERALL vacancy rate is 23.7% - Our downtown vacancy rate is not listed in this article.

I'm willing to throw out a wild guess that Downtown holds a vacancy rate higher than the overall average, like 35% vs 20% in the rest of the city, averaging out to 23%.

OKC's overall vacancy rate is stated to be considerably lower than ours, at 15.46%.

I know I'd rather work at Utica Place than Downtown right now.  DT lacks critical mass activity-wise, and the population center has moved so far away from DT that I imagine that is now a major factor in vacancies.

[swake]

quote:Originally posted by DScott28604

quote:
A tale of two office markets
by Kirby Lee Davis
The Journal Record March 7, 2008

TULSA – Utica Place broke a psychological barrier when its 100,000 square feet of luxury office space opened 100-percent pre-leased in January, proving in Mary Martin's eye that Tulsa can absorb high lease rates that justify new construction.
Utica Place recently opened 100,000 square feet of office space, all of it pre-leased, in midtown Tulsa. (Photo by Rip Stell)

What troubles the CB Richard Ellis of Oklahoma broker is that some Tulsa office property owners chose a different strategy. In her 2007 office market survey, Martin said 20 or more Tulsa properties were downgraded from Class B or C because owners have refused to maintain or refurbish their holdings.

She called 2007 a "defining year in segmenting the market."
"Year-end research concluded that both suburban and central business district class A office space is the only class that has successfully increased lease rates over the past 24 months," said the first vice president and principal. "Class B and C suburban office buildings lease rates have been stagnant over the last 60 months."

Down the turnpike, CBRE Senior Associate Tom Lange reported some of the same factors in Oklahoma City that Martin saw in Tulsa: largely empty class C and D buildings spurring huge downtown vacancy rates, countering stronger suburban trends.
But where Tulsa posted a rising overall vacancy rate of 23.7 percent for classes A though C, and generally rising lease rates only in class A space, the 2007 Oklahoma City report recorded a falling vacancy rate of 15.46 percent in those three classes, and overall rising lease rates averaging $14.21 per square foot.

Suburban class A properties in Oklahoma's largest market saw their asking rates climb to an average of $20.17 per rentable square foot, the highest mark since CBRE began tracking Oklahoma City leasing rates in 1982.
"The Oklahoma City office market was robust for 2007," said Lange. "As in the past, there is a positive correlation between a strong oil and gas industry and a healthy office market."
Tulsa shares a strong energy sector, which could help explain the success of Utica Place. Other observers pointed to the office/residential project's extraordinary positioning in Tulsa's wealthy Midtown district, beside one of Oklahoma's premiere shopping and living environments in Utica Square.
While she also credited those location advantages, Martin pointed out One and Two Warren Place chart lease rates competitive to Utica Place levels – and both boast near 100-percent occupancy.
"There are people waiting to sign up for them, too," she said. "I think that tenants are willing to pay more for square foot for quality building that are well-maintained."
The general problem evolves from the aging inventory. Martin said many projects came online in the 1980s, as Oklahoma's economy plunged under depressed oil prices that rang through nearly every sector.
"Those projects are now showing age and are not as desirable to tenants," she said.
Lange pointed to similar problems in defending the capital city's downtown vacancy rate of 27.66 percent.
"The high overall vacancy is largely due to space in the older functionally obsolete buildings," he said. But he noted both class A and B properties in downtown Oklahoma City scored higher average lease rates last year.
Outside of downtown, CBRE's Oklahoma City staff saw few trends like Martin reported in Tulsa.
"Buildings that are actively marketing and leasing, those owners are very much committed to doing what needs to be done to attract new tenants," said Sales Associate Brent Conway.
He pointed out that while Oklahoma City's downtown vacancy rate topped 23 percent, that was down considerably from 2006.
"Everything else across the board, we're in single digits," he said of the city's different submarkets. "That kind of answers the question."
Martin attributed some owner decisions not to reinvest in their aging properties on rising tenant improvement costs, utility costs and other inflationary factors driven by the high cost of energy.
"They don't want to spend the money on maintaining the common areas and maintaining the overall building because everything else has gone up," she said.
"Tenant improvement costs have gone up so much," she continued. "You used to be able to go spend $10 per square foot on someone and get them whatever they want, and now $10 will not get you anything that people need."
Other decisions she pinned on failed efforts to sell the buildings.
"I don't think it slowed down," she said of 2007 sales trends. "A lot of owners think their buildings are worth more than they can get. That's because a lot of investors recognize how much they're going to have to reinvest in the properties."

quote:Martin said 20 or more Tulsa properties were downgraded from Class B or C because owners have refused to maintain or refurbish their holdings.

Not surprising. [V]

Did I read it correctly?  Downtown OKC's vacancy rate is 27.66% and downtown Tulsa's is 23.7%?
Is Bricktown considered to be within DTOKC?  And would those kinds of businesses in Bricktown have any effect on these vacancy rates since they're not offices?

Downtown Tulsa's rate is around 25%, the 23% is Tulsa metro. So downtown Tulsa is not in that much better shape than Oklahoma City.

But, it also should be taken into account that downtown Tulsa has nearly twice the square footage that downtown Oklahoma City does. I think the numbers are around 9.5 million square feet in Tulsa compared to 5.5 million square feet in Oklahoma City.

Tulsa's numbers should improve this year, we will remove about a quarter of million square feet off of the market in the new city hall's space for the city, that space will no longer be counted as "leasable". And in the half of the building that will remain leasable space the city has done a good job filling the building so much of that space goes from vacant to occupied. That building was mostly empty with 600,000 square feet of space in the current numbers. The market is losing almost another 100,000 square feet of leasable space in the Atlas building as it becomes a hotel, hopefully all the current tenants of the Atlas will elect to remain in other Kanbar buildings downtown.

So This year Tulsa has about 9.5 million square feet of leasable space with something like 7.1 million of that space leased. Next year Tulsa might have closer to 9.1 million square feet of leasable space with 7.3 million of that space leased with no other improvements in the market other than what has already been reported and we would be down to something like a vacancy rate of 20%.

[Friendly Bear]

quote:Originally posted by swake

quote:Originally posted by DScott28604

quote:
A tale of two office markets
by Kirby Lee Davis
The Journal Record March 7, 2008

TULSA – Utica Place broke a psychological barrier when its 100,000 square feet of luxury office space opened 100-percent pre-leased in January, proving in Mary Martin's eye that Tulsa can absorb high lease rates that justify new construction.
Utica Place recently opened 100,000 square feet of office space, all of it pre-leased, in midtown Tulsa. (Photo by Rip Stell)

What troubles the CB Richard Ellis of Oklahoma broker is that some Tulsa office property owners chose a different strategy. In her 2007 office market survey, Martin said 20 or more Tulsa properties were downgraded from Class B or C because owners have refused to maintain or refurbish their holdings.

She called 2007 a "defining year in segmenting the market."
"Year-end research concluded that both suburban and central business district class A office space is the only class that has successfully increased lease rates over the past 24 months," said the first vice president and principal. "Class B and C suburban office buildings lease rates have been stagnant over the last 60 months."

Down the turnpike, CBRE Senior Associate Tom Lange reported some of the same factors in Oklahoma City that Martin saw in Tulsa: largely empty class C and D buildings spurring huge downtown vacancy rates, countering stronger suburban trends.
But where Tulsa posted a rising overall vacancy rate of 23.7 percent for classes A though C, and generally rising lease rates only in class A space, the 2007 Oklahoma City report recorded a falling vacancy rate of 15.46 percent in those three classes, and overall rising lease rates averaging $14.21 per square foot.

Suburban class A properties in Oklahoma's largest market saw their asking rates climb to an average of $20.17 per rentable square foot, the highest mark since CBRE began tracking Oklahoma City leasing rates in 1982.
"The Oklahoma City office market was robust for 2007," said Lange. "As in the past, there is a positive correlation between a strong oil and gas industry and a healthy office market."
Tulsa shares a strong energy sector, which could help explain the success of Utica Place. Other observers pointed to the office/residential project's extraordinary positioning in Tulsa's wealthy Midtown district, beside one of Oklahoma's premiere shopping and living environments in Utica Square.
While she also credited those location advantages, Martin pointed out One and Two Warren Place chart lease rates competitive to Utica Place levels – and both boast near 100-percent occupancy.
"There are people waiting to sign up for them, too," she said. "I think that tenants are willing to pay more for square foot for quality building that are well-maintained."
The general problem evolves from the aging inventory. Martin said many projects came online in the 1980s, as Oklahoma's economy plunged under depressed oil prices that rang through nearly every sector.
"Those projects are now showing age and are not as desirable to tenants," she said.
Lange pointed to similar problems in defending the capital city's downtown vacancy rate of 27.66 percent.
"The high overall vacancy is largely due to space in the older functionally obsolete buildings," he said. But he noted both class A and B properties in downtown Oklahoma City scored higher average lease rates last year.
Outside of downtown, CBRE's Oklahoma City staff saw few trends like Martin reported in Tulsa.
"Buildings that are actively marketing and leasing, those owners are very much committed to doing what needs to be done to attract new tenants," said Sales Associate Brent Conway.
He pointed out that while Oklahoma City's downtown vacancy rate topped 23 percent, that was down considerably from 2006.
"Everything else across the board, we're in single digits," he said of the city's different submarkets. "That kind of answers the question."
Martin attributed some owner decisions not to reinvest in their aging properties on rising tenant improvement costs, utility costs and other inflationary factors driven by the high cost of energy.
"They don't want to spend the money on maintaining the common areas and maintaining the overall building because everything else has gone up," she said.
"Tenant improvement costs have gone up so much," she continued. "You used to be able to go spend $10 per square foot on someone and get them whatever they want, and now $10 will not get you anything that people need."
Other decisions she pinned on failed efforts to sell the buildings.
"I don't think it slowed down," she said of 2007 sales trends. "A lot of owners think their buildings are worth more than they can get. That's because a lot of investors recognize how much they're going to have to reinvest in the properties."

quote:Martin said 20 or more Tulsa properties were downgraded from Class B or C because owners have refused to maintain or refurbish their holdings.

Not surprising. [V]

Did I read it correctly?  Downtown OKC's vacancy rate is 27.66% and downtown Tulsa's is 23.7%?
Is Bricktown considered to be within DTOKC?  And would those kinds of businesses in Bricktown have any effect on these vacancy rates since they're not offices?

Downtown Tulsa's rate is around 25%, the 23% is Tulsa metro. So downtown Tulsa is not in that much better shape than Oklahoma City.

But, it also should be taken into account that downtown Tulsa has nearly twice the square footage that downtown Oklahoma City does. I think the numbers are around 9.5 million square feet in Tulsa compared to 5.5 million square feet in Oklahoma City.

Tulsa's numbers should improve this year, we will remove about a quarter of million square feet off of the market in the new city hall's space for the city, that space will no longer be counted as "leasable". And in the half of the building that will remain leasable space the city has done a good job filling the building so much of that space goes from vacant to occupied. That building was mostly empty with 600,000 square feet of space in the current numbers. The market is losing almost another 100,000 square feet of leasable space in the Atlas building as it becomes a hotel, hopefully all the current tenants of the Atlas will elect to remain in other Kanbar buildings downtown.

So This year Tulsa has about 9.5 million square feet of leasable space with something like 7.1 million of that space leased. Next year Tulsa might have closer to 9.1 million square feet of leasable space with 7.3 million of that space leased with no other improvements in the market other than what has already been reported and we would be down to something like a vacancy rate of 20%.

How SWEET of Mayor Chatty Kathy to expend $76 million in tax dollars to reduce DOWNTOWN vacancy rates!

She stated that in fact was ONE of the reasons for the purchase of the Borg Cube.

And, I might just offer, that is NOT a core mission of any governmental body.

That is a PRIVATE Sector matter exclusively, given  proper INFRASTRUCTURE investment by a government body in streets, fire, police, water, sewer, etc.  

And, that is ALL.  

Not absorbing excess downtown office vacancy.

and, also

NOT that wonderfully nebulous Tax Vampire mantra:

Economic Development.

[:O]

[sgrizzle]

Friendly Bear has a problem with ED.

[bacjz00]

quote:Originally posted by YoungTulsan

the population center has moved so far away from DT that I imagine that is now a major factor in vacancies.

While many other points are argued year in and year out, this continues to be the biggest single reason for downtown's slow deterioration.  Geographically, it is at the end of the road.  Development and population growth has not happened AROUND downtown, but more pointedly, EAST of downtown.  Our downtown is no longer anywhere near the population center of the city.  And location (as any novice marketer will tell you) is THE MOST IMPORTANT THING.

[inteller]

quote:Originally posted by bacjz00

quote:Originally posted by YoungTulsan

the population center has moved so far away from DT that I imagine that is now a major factor in vacancies.

While many other points are argued year in and year out, this continues to be the biggest single reason for downtown's slow deterioration.  Geographically, it is at the end of the road.  Development and population growth has not happened AROUND downtown, but more pointedly, EAST of downtown.  Our downtown is no longer anywhere near the population center of the city.  And location (as any novice marketer will tell you) is THE MOST IMPORTANT THING.

ding ding ding!  we have a winner!

downtown tulsa could be its own suburb.

[FOTD]

FB.... you nailed it!

[TheArtist]

Thats a mischaracterization. She did not move the city hall in order to reduce vacancy rates. It was a secondary result, something that added to the benefit of the move. Not the main reason for the move. And you know that FB, so why would you say something like that?

[guido911]

quote:Originally posted by sgrizzle

Friendly Bear has a problem with ED.

Now that's an avatar

[Friendly Bear]

quote:Originally posted by TheArtist

Thats a mischaracterization. She did not move the city hall in order to reduce vacancy rates. It was a secondary result, something that added to the benefit of the move. Not the main reason for the move. And you know that FB, so why would you say something like that?

In her public press conference announcing the move, Mayor Taylor specifically stated that ONE of the reasons for the move of City Hall to the Borg Cube was to improve the downtown office market by reducing office vacancy.

Not the only reason.

But, ONE of the reasons.

And, that is a BOGUS reason.  It is NOT the responsibility of city government to "MANAGE" downtown office vacancy rates.

That is entirely the purview of private enterprise.

I heard her "Reduce Downtown Office Vacancy Rates mantra" come through those cute little lips from her unusually expansive mouth opening when she talks.

Anyone ever notice?

Must have had a Speech Coach at one time....

[TheArtist]

quote:Originally posted by Friendly Bear

quote:Originally posted by TheArtist

Thats a mischaracterization. She did not move the city hall in order to reduce vacancy rates. It was a secondary result, something that added to the benefit of the move. Not the main reason for the move. And you know that FB, so why would you say something like that?

In her public press conference announcing the move, Mayor Taylor specifically stated that ONE of the reasons for the move of City Hall to the Borg Cube was to improve the downtown office market by reducing office vacancy.

Not the only reason.

But, ONE of the reasons.

And, that is a BOGUS reason.  It is NOT the responsibility of city government to "MANAGE" downtown office vacancy rates.

That is entirely the purview of private enterprise.

I heard her "Reduce Downtown Office Vacancy Rates mantra" come through those cute little lips from her unusually expansive mouth opening when she talks.

Anyone ever notice?

Must have had a Speech Coach at one time....

I would like to see that press conference, because I dont believe she ever said "One of the reasons FOR the move...was to improve the downtown office market..." The reduction of downtown office vacancy rates was an additional positive, which would be another good reason to be for the move, but it was not the reason, or a reason, for the move. Again, it seems to me your twisting the wording and the meaning around so you can gripe. But, I am sure there is a written copy of what she said somewhere.

[Friendly Bear]

quote:Originally posted by TheArtist

quote:Originally posted by Friendly Bear

quote:Originally posted by TheArtist

Thats a mischaracterization. She did not move the city hall in order to reduce vacancy rates. It was a secondary result, something that added to the benefit of the move. Not the main reason for the move. And you know that FB, so why would you say something like that?

In her public press conference announcing the move, Mayor Taylor specifically stated that ONE of the reasons for the move of City Hall to the Borg Cube was to improve the downtown office market by reducing office vacancy.

Not the only reason.

But, ONE of the reasons.

And, that is a BOGUS reason.  It is NOT the responsibility of city government to "MANAGE" downtown office vacancy rates.

That is entirely the purview of private enterprise.

I heard her "Reduce Downtown Office Vacancy Rates mantra" come through those cute little lips from her unusually expansive mouth opening when she talks.

Anyone ever notice?

Must have had a Speech Coach at one time....

I would like to see that press conference, because I dont believe she ever said "One of the reasons FOR the move...was to improve the downtown office market..." The reduction of downtown office vacancy rates was an additional positive, which would be another good reason to be for the move, but it was not the reason, or a reason, for the move. Again, it seems to me your twisting the wording and the meaning around so you can gripe. But, I am sure there is a written copy of what she said somewhere.

In fact, during her televised press conference, she even RECITED the expected percentage increase in the office rental absorption rate for downtown due to the move of City Hall, which a few short months before in January 2007, the Lorton's World had stated downtown office vacancies were at an 11-YEAR high.

A Sept. 23, 2007 Lorton's World "news" article mentions this in respect to the Borg Cube:

"In addition to the efficiencies created by the consolidation, officials have said that freeing up prime redevelopment sites by vacating some city facilities and removing the nearly vacant One Tech Center from the office space market will play a tremendous role in revitalizing downtown."

http://www.tulsaworld.com/news/article.aspx?articleID=070923_1_A8_hKath47057

Absolutely true.  No baloney.

Maybe the actual press conference is out on YouTube.

[RecycleMichael]

Your own source proves she didn't say it. "officials" are not the Mayor. If she said it, the Tulsa World would have quoted her.

Not that the truth matters to the bear...

[TheArtist]

I know they mentioned that "in addition to consolidation" it would help do several positive things.  But they didnt set out to move simply, or even mostly, in order to decrease downtown vacancy rates. It was pointed out as an additional plus that would happen if the move went ahead. There were other "side" benefits that would also likely occur as well.