ECONOMY: Turning The Corner
Tulsa’s economy has been steadily rebounding over the past year and is considered to have entered an expansion mode. The Q4 unemployment rate rose 0.1% from Q3 to 3.4% (up 0.7% year over year (YOY)) and the current workforce has dropped 33k from Q3 to 461k (up 21k YOY). The population of the Tulsa area has topped 1.0 million for the first time, adding over 7,000 new residents last year alone. The Tulsa job market also grew throughout the year. Low rents, energy costs, and taxes help to make the cost of doing business in Tulsa 11% lower than the national average. Tulsa’s low cost of doing business continues to drive companies to the metro. With aviation, aerospace, and to some extent, oil and gas industries providing demand, the industrial market has remained stable.
DEMAND: : Consistent Pace Into 2023
The Tulsa industrial market has enjoyed consistent occupancy and rent growth over the past year. Overall, the industrial market is proving to be better insulated and is a point of strength in the commercial real estate market compared to other assets. Demand has continued to be focused on logistics properties, and development has reflected this growth. The passing of medical marijuana in Oklahoma has contributed to the budding demand for industrial space also. Consistent leasing has kept vacancy rates tight at 4.1 In turn, annual rent growth measured 6.6% at year-end 2022, the best performance on record. There has been a lack of speculative construction in the metro, resulting in increased competition among tenants, and rent growth has averaged around 3% annually over the past five years.
PRICING: Industrial Rents Softened In Q4
Overall Industrial Rents dropped $.10/per square foot (psf ) since third quarter. While Flex properties continue showing the highest overall rents in Q4 2022 ($6.55 psf ) this category took a $0.45 psf loss from Q3. Among the large area submarkets, the highest rents are found in Southwest ($10.25 psf ), South Central ($9.70 psf ), and East ($7.00 psf ) Tulsa. In contrast, rents are typically lower in North Central ($4.00/ psf ) and the CBD ($4.00 psf ). Tulsa’s asking rents remain affordable relative to the national average and are on par with regional metros like Oklahoma City and Northwest Arkansas.