Downtown Development Overview

[shavethewhales]

That sucks. We need to put as much effort into bringing in new office jobs as we did bringing in people for Tulsa Remote.

I imagine some of this will bounce back as people go back to the office, jobs pick up, the economy bounces back, etc, but still... We've needed more corporate jobs here for awhile, and the drain away from Tulsa hasn't been fixed yet.

[swake]

Are people going back to the office?

This isn't a Tulsa problem, and it's likely to get worse.

[SXSW]

I would be interested in seeing similar stats for our peer cities.  Office leasing will be difficult anywhere for the next few years maybe forever.

[LandArchPoke]

I would be interested in seeing similar stats for our peer cities.  Office leasing will be difficult anywhere for the next few years maybe forever.

It seems scary to see a number that big but Tulsa for about the last decade had very little room for growth in the office market in Class A downtown. Part of the shuffle downtown too recently is Consumer Affairs moving into their new space which left a hole in the old Petroleum Club Tower building of 3 floors at least I think. Tulsa has really lacked in true Class A new product coming online in the market, like the Vast Bank building. Even with some increasing weakness in the market it has preformed really well and has rents over $30.00 sq. ft. when most of the other 'Class A' in downtown is more in the $15.00 to $20.00 range. Office always tends to operate with much higher vacancy than other CRE product. 10-15% is usually still a profitable range for many owners/operators in office, while in multifamily you'd have mass bankruptcies of operators if that became common place.

I'd take that number with a grain of salt - the health of the CBD is completely dependent on Class A vacancy only anymore and some of that vacancy is going to include buildings like Philcade and Class B/C that really will never be office again and will eventually be converted to other uses. It's likely that Class A vacancy will be high the next few years with all the new construction finally plus the WPX exit. Tulsa's CBD market is still pretty healthy compared to peer cities. Downtown Dallas (which is not a peer city) for example has had a 20% plus vacancy for example and has been that way for decades. So blanket numbers that people like Oil Capital like to report as doom and gloom sometimes doesn't always tell the entire story. Overall in the last decade downtown Class A office in Tulsa is trending well and I think after the Covid and energy blips it will gain steam again and hopefully having some more options downtown will bring new tenants in or hopefully even some from outside the market to open regional offices here.

I have hope that as companies shift more to the hub and spoke models with more regional offices, Tulsa will be a big beneficiary to that given it's location in between OKC, NWA and SWMO. The way companies recruit and build out their office footprints nationally will never be the same. You're going to see much less focus on gateway markets like NY, San Fran, LA where rents are astronomical and much more focus on regional offices and secondary offices in cheaper markets.

Seeing the city use some of the Covid relief funds to convert a floor of One Tech into a 'WeWork' type space for companies was one of the smarter moves the city has done in a while. Hopefully they can leverage that to help companies get over the nerves of not having to make a huge investment in signing leases for space and be able to see if they can actually recruit to the city. I do think we'll see some big benefits out of that in a few years, especially with the momentum behind TulsaRemote. There's a lot in the background moving (thanks to GKFF) that seems to be helping the city to make a better case to people that they can get employees to move here and that when people do relocate they don't regret it and want put down roots here. That's been one of our biggest barriers to entry to new companies opening offices here is the unknown of recruiting talent.

[SXSW]

I would think residential projects will be more viable in the next couple years vs. office and/or hotel projects.  Very interested to see if Santa Fe Square keeps its office building component or if it all becomes residential. 

[Oil Capital]

I would be interested in seeing similar stats for our peer cities.  Office leasing will be difficult anywhere for the next few years maybe forever.

Oklahoma City: per CBRE, as of year-end 2020, downtown OKC had about 1.3 million square feet of vacant office space, vacancy rate 21.7%.  Postive absorption of 85,974 square feet in the second half of 2020, negative absorption of about 10,000 square feet for the full year.

Omaha:  per CBRE, as of year-end 2020, downtown Omaha had about 542,000 square feet of vacant office space, vacancy rate 9.7%.  Negative absorption of 32,000 square feet in the 4th Q of 2020, negative absorption of about 91,000 square feet for the full year.

Salt Lake City:  per CBRE, as of year-end 2020, downtown SLC had about 2.2 million square feet of available office space, "availability" rate 18.4% (1.8 million vacant, vacancy rate 15.6%).  Negative absorption of 136,317 square feet in 4th Q, negative absorption 388,681 square feet CY2020.

Albuquerque:  per CBRE, year-end 2020, downtown Albuquerque had about 733,000 square feet of available office space (in a very small downtown).  Availability rate is 26.1%.  Second half 2020 negative absorption 17,331 SF, CY2020 negative absorption 9,845 SF.
 
Grand Rapids:  3rd Q 2020.  701,000 square feet vacant. 7.2% vacancy rate.  3rd Q negative absorption: 123,496 SF.  CY2020 negative absorption: 79,784 SF.

Louisville:  4th Q 20200:  about 1.6 million vacant.  Vacancy rate: 17.1%.  4th Q positive absorption: 30,731SF.

Memphis:  4th Q 2020:  about 700,000 SF vacant.  Vacancy rate:  20%.  4th Q negative absorption:  40,178.  CY 2020 negative absorption:  37,818.

Raleigh NC:  4th Q 2020:  about 285,000 SF vacant.  Vacancy rate: 5.3%.  4th Q negative absorption:  4,876 SF.

Average Gross Annual Asking Rate for Tulsa CBD was $15.54.  For OKC:  $19.77  Omaha: $20.83 SLC: $25.80  ABQ: $17.63.  Grand Rapids: $17.89.  Louisville:  $18.05.  Memphis: $16.53.  Raleigh: They only give the Class A asking rate of $33.36.

[Vision 2025]

Are people going back to the office?

This isn't a Tulsa problem, and it's likely to get worse.

By observed inbound traffic on the BA,  I would say yes they are definitely going back to the office.

[ComeOnBenjals]

One of the major downtown employers will be returning to the office here in a couple months.

[LandArchPoke]

I've been told that the Sinclair building is being purchased (Morony is finally letting that building go thankfully) and will be converted to apartments - this is one of my favorite buildings downtown. This and the Arco building will be about 150 new units in the Deco District. Not sure when construction will start offically, but I'm told it will be this year with late 2022 planned on the opening dates.

Not many buildings left for conversion downtown. The Reunion building I'm told was leasing about 20 units per month which is a pretty fast absorption rate for all the new building downtown. Still plenty of demand for reasonably prices units.

It's nice to see how many buildings we've seen come online downtown with almost no on site parking and they have all leased very well. I wish people at the city would pay more attention to this and get more serious about reforming parking minimums outside of downtown.

The Village in the Pearl is planning on breaking ground on Phase II and III which will be another 25-50 units and after that I think pretty much all of the land in that development will be gone. They struggled a bit on lease up (I think they were just charging too much for the build out and location) on Phase I but are moving forward quickly with II and III this year. 

[SXSW]

The Village in the Pearl is planning on breaking ground on Phase II and III which will be another 25-50 units and after that I think pretty much all of the land in that development will be gone. They struggled a bit on lease up (I think they were just charging too much for the build out and location) on Phase I but are moving forward quickly with II and III this year.  

Is Phase II on Peoria?  It looks like it from this rendering and has a good amount of ground floor retail.  Where is Phase III located?

[LandArchPoke]

Is Phase II on Peoria?  It looks like it from this rendering and has a good amount of ground floor retail.  Where is Phase III located?

Yes, that is Phase II. Phase III is for the remaining lots along 8th Street. From what I was told I believe they will be townhome rentals versus apartments for those lots - there will be around a dozen of those.

[SXSW]

Yes, that is Phase II. Phase III is for the remaining lots along 8th Street. From what I was told I believe they will be townhome rentals versus apartments for those lots - there will be around a dozen of those.

Nice, I really like that whole neighborhood they’ve developed over the years and glad to see it nearly built-out.  This is the kind of development I hope we eventually see on the UCAT/TDA lots north of downtown by OSU

[ComeOnBenjals]

The Brook restaurant next to City Hall is hiring... seems like they're close to opening up here soon.  Excited for this project, I always thought it was a bad visual to have a dilapidated warehouse next to our main city building.

[SXSW]

The Brook restaurant next to City Hall is hiring... seems like they're close to opening up here soon.  Excited for this project, I always thought it was a bad visual to have a dilapidated warehouse next to our main city building.

HUGE improvement on this block.  The roof deck will have a great view too at least until something gets built on the PAC lot.  Hopefully it's a successful project and they are able to do something similar with the adjacent parking lot at 2nd & Detroit.  

[Jacobei]

The Brook's loaded cheddar fries will be listed as a contributing factor of death on my autopsy.

That said, I'm really interested to see what other concepts go in this building.