First Quarter Retail Market Report 2017
03 04 04 04 05 05 06 07 08 10 Executive Summary National Economy Local Economy Oklahoma City Retail Market Leasing Net Absorption and Inventory Rental and Vacancy Rates Construction, Delivery, Net Absorption and Vacancy Rate Oklahoma City Retail Market Sales Transactions during Q1 2017 About NAI Sullivan Group
EXECUTIVE SUMMARY Q1 retail absorption continued to slow down as our report shows a net absorption for all retail space at 277,000 square feet. That is an 11% decrease from Q4 so the trend is continuing for decreased demand for retail users in the area. This slowing trend is also shown in decreased leasing rates averaging $11.69 in Q1 2017 down from $12.52 overall in Q4 2016. We continue to see Edmond and Norman as the strongest demand markets, with vacancies in both markets and 3.7% in Edmond and 2.6% in Norman. Vacancy rate in the Oklahoma City market is a very respectable 5.7% New Construction at Chisolm Creek and the construction of the retail center at NW 150th and Pennsylvania and Memorial and May will add new opportunities to the rapidly at the higher end of retail rates approaching $26.00 to $32.00 per square foot. The appetite to purchase retail centers also remains strong with Q1 2017 having 34 sales of retail properties averaging $132.57 per square foot. One of the most notable transactions is the 240 Penn Park Phase I property with 214,773 square feet selling for $29,050,000.00 which is $119.88 per square foot. We see 2017 as a year that retail rates will move sideways to slightly lower as the demand and supply may favor the tenant as new projects come on line. Bob Sullivan CEO Leasing Activities Total Inventory 91,150,018 SF Overall Rental Rate $11.67/SF/YR NNN Total Vacancy Rate 5.59% Under Construction 277,000 SF Sales Activities Number of Transactions 34 Total Sales Volume $52,433,500 Average Price per Bldg. SF $132.57 3
NATIONAL ECONOMY The Fed crisis to a range between 0.75 percent and 1 percent. The Fed will increase the interest rate gradually, probabaly two additional hikes, since the economy is not notably strengthened despite the national unemployment rate President Trump has signed executive orders and granted permits for Keystone XL and Dakota Access. We have yet to see more concrete economic policies to be carried out by the new administration. Trump s probusiness policy will lower hurdles for businesses but it takes time to eliminate regulations. Oil prices have been increasing for several months and recently we saw the number of drilling rigs in the United States soar and, which in turn increased inventories, which sent oil prices lower in March. LOCAL ECONOMY Oklahoma s drilling rig count has been increasing despite the decrease in oil prices. Energy companies are Resources, Deveon Energy, and SandRidge are among those companies planning to increase drilling activity. According to Baker Hughes report, Oklahoma s rig count increased to 118 by the end of Q1 2017, the highest level since April 2015 and up 55 from one year ago. As everything is picking up from the downturn, we have seen a more active quarter than the Q4 2016. Wilshire Point is scheduled to start its construction soon, the 10-story, 182-room Renaissance Hotel construction will begin in May, and Wheeler district along the Oklahoma River is set to start its construction in June; Oklahoma City Council has approved the zoning change which allows an additional retail building to be added to Penn Square Mall; Midwest City has given approval to build a 14-screen Warren Theater; and the Bank of Oklahoma Park Plaza is well under construction. According to the Greater Oklahoma City Chamber s 2017 economic forecast report, the Oklahoma City market is expected to see 0.7 percent job growth by the end of 2017, which is due to the recovery of the energy downturn, and it is going to be a year of recovery and improvements. OKLAHOMA CITY RETAIL MARKET LEASING The largest retail lease signing occurring in Q1 2017 included the 54,071 SF lease signed at 5857 NW Expressway in Oklahoma City, the 50,835 SF lease signed at 3700-3806 W Reno Avenue in Oklahoma City, and the 25,000 SF lease signed by Vintage Stock in Chisholm Shopping Center at 2836-2850 NW 63rd St. in Oklahoma City. 4
NET ABSORPTION AND INVENTORY The total retail net absorption was 277,000 SF at the end of Q1 2017. The total retail net absorption decreased from 499,812 SF at the end of Q4 2016. The total retail inventory was 91,150,018 SF at the end of Q1 2017. The total retail inventory increased from 90,090,661 SF at the end of Q4 2016. RENTAL AND VACANCY RATES The retail market rental rate averaged $11.67/SF/ YR NNN at the end of Q1 2017. The retail market rental rate decreased from the $12.52/SF/YR NNN rate at the end of Q4 2016. The retail vacancy rate was 5.59% at the end of Q1 2017. The retail vacancy rate increased from the 5.50% at the end of Q4 2016. 5
CONSTRUCTION, DELIVERY, NET ABSORPTION AND VACANCY RATE By the end of Q1 2017, there were 377,747 SF of retail space under construction in the Oklahoma City market. The largest two properties under construction was the 174,121 SF University Town Center at 2010-2040 24th Avenue in Norman, and the 91,000 SF Shoppes at Quail Springs at 13601 N May Avenue in Oklahoma City. Top Under Construction Retail Properties Building Name Building Address City Building Size University Town Center Area 2A 2010-2040 24th Ave Norman 174,121 SF Shoppes at Quail Springs 13601 N May Ave OKC 44,688 SF Shoppes at Fox Lake 1081-1099 W I-35 Frontage Rd Edmond 26,250 SF Bradbury Sta on 3601-3733 E 2nd St Edmond 19,800 SF - 14170 N Santa Fe Dr Edmond 19,398 SF 6
Top Proposed Retail Properties Building Name Building Address City Building Size Czech Hall Village SW of Czech Hall Rd and I-40 Yukon 450,000 SF Shoppes at Chilsholm Trail SE of S Grand Ave and Highway 81 Chickasha 300,000 SF Covell & Kelly Shopping Center SW of W Covell Rd and N Kelly Ave Edmond 250,000 SF The shoppes at Memorial Crossing NE of W Memorial Rd and N Western Ave OKC 136,000 SF Edmond Retail Center-op on 2 NE of W Memorial Rd and N Western Ave Edmond 102,700 SF Edmond Retail Center-Op on 1A NE of E Danforth Rd and N Coltrane Rd Edmond 101,075 SF OKLAHOMA CITY RETAIL MARKET SALES The $52,433,500. The largest sale based on dollar volume was the sale of Penn Park at 1409-1449 I-240 Service W in Oklahoma City. G & I VIII RCG Penn Park LLC acquired the 242,325 SF Penn Park Phase I from IA Oklahoma City Penn LLC for $29,050,000, or $119.88 per SF on January 31st, 2017. Summary Number of Transactions 34 Total Sales Volume $52,433,500 Average Price $1,588,893.94 Average Size SF 12,017 SF Average Price per Bldg. SF $132.57 Oklahoma City retail market stays very active despite the energy downturn. Oklahoma City Council has given the approval of zoning change and will allow a 23,000 SF retail building to be added to Penn Square Mall; the 10-story, 182-room Renaissance Hotel will begin construction this May; A 14-screen Warren Theater is planned in Midwest City and a 12-screen Showbiz Cinemas is planned in Edmond, etc. The retail market will continue to stay strong as we recover from the energy downturn. 7
OKC MARKET SIGNIFICANT RETAIL SALE TRANSACTIONS DURING Q1 2017 Property Name: 240 Penn Park Phase I Property Address: 1409-1449 I-240 Service W, OKC Sale Price: $29,050,000 Building SF: 214,773 SF Price per SF: $119.88 Sale Date: 01/31/2017 Property Name: 108 E California Ave. Property Address: 108 E California Ave., OKC Sale Price: $2,150,000 Building SF: 13,694 SF Price per SF: $157 Sale Date: 01/06/2017 Property Name: 2610 W Memorial Rd. Property Address: 2610 W Memorial Rd., OKC Sale Price: $1,555,000 Building SF: 5,442 SF Price per SF: $285.74 Sale Date: 01/25/2017 8
Property Name: 6620 S I-35 Service Rd. Property Address: 6620 S I-35 Service Rd., OKC Sale Price: $925,000 Building SF: 14,132 SF Price per SF: $64.45 Sale Date: 02/27/2017 Property Name: 5418 N Western Ave. Property Address: 5418 N Western Ave., OKC Sale Price: $855,000 Building SF: 6,358 SF Price per SF: $134.47 Sale Date: 01/27/2017 Property Name: 4408 S Pennsylvania Ave. Property Address: 4408 S Pennsylvania Ave., OKC Sale Price: $800,000 Building SF: 4,840 SF Price per SF: $165.28 Sale Date: 01/20/2017 9
NAI SULLIVAN GROUP NAI Sullivan Group is a leading global service provider offering and exceed your expectations. Our talented and experienced business owners alike. We are your single point of contact for customized real estate services. NAI Sullivan Group strives for excellence in all facets of real estate services in order to maintain our position as an industry leader. Our team transforms forward-thinking ideas into cuttingedge applications, to achieve maximum results for our clients, company and community. Whether around the corner or around the world, NAI Sullivan Group is a dynamic member of NAI Global, the world s leading square feet of properties managed, we bring together people and resources to deliver results for our clients wherever needed. Our clients come to us for our extensive knowledge. They build their businesses on the power of our global managed network. industrial and retail properties, including those that are fully occupied. It contains thousands of details on every facet of every building tracked. Also, NAI Sullivan Group provides detailed information on all contacts and companies in various markets. NAI Sullivan Group is a leader in the adoption of new technologies to improve business operations as a means of speeding communications, optimizing performance, delivering the highest quality services to clients and facilitating the sharing of best practices among our brokers. NAI Sullivan Group has launched a new application for the ipad and iphone. This app is free of charge and is available for download in the Apple App Store under NAI Sullivan Group. agent contact information, perform calculations, review our current market reports and much more. This app allows a client to simply take a photo of the property they are interested in and their request will instantly be submitted to the sales associate of the client s choice. The associate will then contact the client with details of the property in question. CoStar Group is the primary provider for commercial real estate information, analytics and marketing services. CoStar conducts extensive local market research to produce and maintain the largest and most comprehensive database of Commercial Real Estate information. Their online services enable the sales associate to analyze, interpret and gain unmatched insight on commercial property values, market conditions and current availability. REALTrac Online is NAI Global s web-based transaction management software, which helps to coordinate projects and facilitate the transaction cycle. REALTrac enables the Buyer, the Seller, the Lessee and the Lessor to view online the progress of their transaction. STARS is an acronym which stands for Strategic Transaction Administration and Reporting System. STARS is NAI s proprietary system for providing a timeline of events to clients in transactions. LoopNet Inc. is one of the leading information service providers to the commercial real estate industry; it delivers a comprehensive suite of products and services to meet the national and local professionals. LoopNet members can list, search, market, Internet. For more information, please visit our website: www.naisullivangroup.com Download the NAI Sullivan Mobile App FREE from the App Store! Resources mainly come from CoStar, Xceligent, The Oklahoman, and The POINT. 10
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