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ECONOMY: Expanding in 2023
Tulsa’s economy has been steadily rebounding over the past year and is considered to have entered an expansion mode. The unemployment rate increased 0.2% from Q2 to Q3 to 3.1%, and the current workforce slightly increased from 459k to 461k (down 33k year-over-year (YOY)). 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.
Relatively stable industries like healthcare and education are significant drivers of employment here and help keep the economy in check when the more volatile energy industry experiences substantial fluctuations.
DEMAND: Holding Steady in Q3
Tulsa’s office market is holding steady, but demand remains fragile. CoStar reported 317.9k square feet (sf) of net absorption through the third quarter. While the market’s vacancy rate remains elevated (11.5%, down 0.3% YOY), it remains below the U.S. average, and manageable construction keeps vacancies from rising further. With improving demand, rent growth has returned also. Annual rent growth is positive at 0.8%. Despite moveouts over the past year, investors logged $328 million in sales in 2022, the highest volume reported on record.
Despite ongoing uncertainty surrounding the office market, the area is reporting annual rent growth of 1.2%.
PRICING: Steady Rent Increase For Q3
The Tulsa total market saw a $.06 per square feet (psf) increase in rents, finishing the quarter at $17.07 psf (down $.26 YOY), the entire Central Business District (CBD) remained flat at $17.45/psf and Non-CBD a $.11 ($16.86/psf) increase. Class A space continues to struggle with fluctuations in demand. Total Class A vacancies were down 0.7% (up 1.8% YOY) within the CBD and Non-CBD. Class A vacancies in the CBD were down 0.6% (up 1.3% YOY).
The highest rents are found in the metro area outside of the CBD. The South submarket has the highest asking rent at $23.08/psf, followed by the Northeast submarket at $18.17/psf, with the CBD at $17.45/psf. Due to continued consolidations and closing in the downtown area, the CBD has struggled to see any significant rent gains.