Introducing the First Quarter Industrial Market Report for 2023 in Oklahoma City! Oklahoma City's industrial market is experiencing remarkable growth, expanding rapidly with the addition of 3.2 million square feet in the past year. This surge has elevated the total inventory to an impressive 132,786,282 square feet. The city's strategic geographic location, well-connected major interstates, and its rapid urban development contribute significantly to this progress. A noteworthy aspect of this expansion is the considerable increase in Class A warehouse space, predominantly driven by speculative development.
Regarding net absorption and inventory rates in Q1 2023, the cumulative net absorption stood at a negative 3,568 square feet by the end of the quarter. Meanwhile, the overall inventory rose from 131,116,869 square feet at the close of Q4 2022 to 132,756,282 square feet at the conclusion of Q1 2023. Specifically, Class A properties witnessed a negative net absorption of 94,179 square feet, whereas Class B properties experienced a positive net absorption of 75,415 square feet. Class C properties, on the other hand, recorded a negative net absorption of 22,332 square feet.
During this period, notable industrial sales transactions occurred as well. Throughout Q1, a total of 45 transactions took place, generating a combined sales volume of $26,639,552. The average price per square footage of buildings in these transactions was $78.55, with a median price of $78.50. The average capitalization rate (cap rate) for these transactions stood at 7.9%.
As of the end of Q1 2023, the average rental rate for Class A properties was $7.52 per square foot per year, triple-net (NNN), showing a decrease from the Q4 2022 figure of $7.76 per square foot per year, NNN. Conversely, the average rental rate for Class B properties rose to $8.25 per square foot per year, NNN, compared to the Q4 2022 value of $8.20 per square foot per year, NNN. The overall vacancy rate in Oklahoma City during Q1 remained consistent at an average of 4.2%.
The current state of capital markets has had a notable impact on sales activity in the Oklahoma City commercial real estate market, influencing the volume and pace of transactions. Fluctuations in interest rates and investor sentiment have prompted cautious strategies and adjustments in property acquisitions. However, despite these fluctuations in sales, the leasing activity for warehouse and commercial properties in OKC has remained steady. This stability reflects an ongoing demand for leasing such properties, driven by the city's robust economic growth and favorable business environment.
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