“Sometimes change comes at you hard and fast, and other times it’s a gradual shift.” Oklahoma City’s local economy continues to effectively resist the fallout of the unofficial recession the nation has been enduring as of late. Relatively speaking, there have been consistent parallels between growth in the job market and unemployment rates; Oklahoma City sales tax revenues experienced a strong increase above from 2022 at 10% year-over-year; and 85% of the proposed school bond elections have passed, indicating the taxpayer’s willingness to allocate dollars towards an elective mission. The previously mentioned metrics, and a few additional others, lead us to believe that the local Oklahoma City economy will continue to remain strong in the short and near term.
The Q1 2023 Oklahoma City office market paints a fairly optimistic picture, going into the summer months, which historically, typically experience an uptick in overall activity. Although net absorption remains negative, Q1 2023 has seen 30,000 square feet positive net absorption as compared to Q4 2022. Vacancy rates continue to trend below the national average at 9.7%, months-on-market continues to remain steadily on the decline, and lease rates continue to see positive growth. We see a rise in product competition with several Class A office projects recently announced and expect to bring more than 200,000 sf online over the next 3-5 years. While this might appear excessive, existing product is still trading cap rates above the national average at 9.37%, leaving significant levels of opportunity for both institutional and local groups seeking to uncover solid investment opportunities.
Yes, the challenges that come with the continued rise in interest rates, tenants continuing to navigate through their transition back to the office, and landlords not having the same capacity to provide concession packages akin to the 2020 office market exist. However, current leasing activity, a meaningful pool of active buyers, and public dollars continuing to be invested into the city fortifies our belief that the Oklahoma City office market will have another strong year, comparable, if not better than 2022.