Another huge speculative industrial park has broken ground in Oklahoma, this one in Tulsa, and property brokers say neither war, pestilence, nor the usual bane of economic growth — rising interest rates — is likely to tamp down the building boom.
The boom is largely fueled by continued changes in the way people shop. Online retail, and demand for faster delivery times, keep growing.
Add to that the return of U.S. manufacturers back home, or at least back to North America, after a generation of offshoring. The challenges of COVID-19 and now the Russian war with Urkraine, have onshoring accelerating.
It's not a brand-new phenomenon. "Industrial is the next retail," CBRE Group broker Randy Lacey said here at a conference five years ago. The pandemic, and now war, threw fuel to the fire.
Developers are convinced that speculative construction — which means no tenants are lined up to lease the space beforehand — is worth the risk.
The most recent project is a big industrial park by VanTrust Real Estate LLC, a developer based in Kansas City, Missouri. The group just started Tulasi Commerce Park, with 684,616 square feet of space planned for two warehouses. It's being marketed by Newmark Robinson Park, a brokerage in Oklahoma City.
VanTrust joins developers in Kansas and Dallas in coming to Oklahoma to meet the booming demand for new industrial space.
It comes to a total of 2,784,616 square feet of new warehouses, in three developments, started in the past six months — equal to 58 football fields (not counting sidelines and end zones).
And that's not all.
In all, across the Oklahoma City area, about 3.8 million square feet of industrial space is in the pipeline, planned or under way, set to be delivered within the next 12 to 18 months, said Cody Beat, industrial broker with Price Edwards & Co.
About two-thirds of it is already pre-leased, he said. It's the speculative risk going into the rest that is so startling compared with the past.
Warehouse space keeps getting gobbled up. The first quarter saw these big leases in Oklahoma City:
• Cox Automotive signed a 387,000-square-foot lease at 6801 S Sunnylane Road.
• Nortek Air Solutions signed a 242,000-square-foot lease at the former in a Baker Hughes facility at 12701 N Santa Fe Ave.
• Real Value signed a 182,835-square-foot lease at the former General Electric Oil & Gas warehouse at 4600 SE 59.
• Locke Supply signed a 118,946-square-foot lease at 4249 SW 29.
"The list goes on and on," Beat said.
All the new warehouse space is turning Oklahoma City into a different kind of "Big League City" — an industrial one
The new space is the stuff of e-commerce and last-mile logistics, helping make sure the book, socks, office supplies, cat food or whatever you order today gets to you tomorrow.
It also means more places for business operations such as data centers, and that means jobs "first and foremost," which generate population growth, and grow the tax base "and ultimately our infrastructure and amenities," said Chris Zach, with CBRE.
"This attracts new companies who want to be here, and around and around we go," Zach said. "This is what we’ve seen with OKC more and more lately, which is why it has become such an attractive place to live and our KPIs (key performance indicators) have trended so well."
But in the big picture, for Oklahoma City, it means something else, Beat said. Oklahoma City is becoming a different kind of "Big League City" — an industrial big league city.
"With all the development occurring around the metro area, this is signaling a change in the way businesses look at our market," Beat said. "Given Oklahoma City’s geographical location and low cost of living/operating businesses, we are seeing investment from national and regional retailers and manufacturers.
"There are also a number of large, well-respected national developers planning significant projects here. The expectation is that Oklahoma City is poised to become a regional warehouse/industrial hub, which will serve to further diversify Oklahoma’s economy and stimulate job growth."
As the world turns, and turns upside down, industrial property needs churn
A lot has changed since the first big spec industrial park was announced last fall: fickle COVID-19 rising and falling, and now on the rise again, the war in Ukraine, and interest rates on the rise.
What has all of that meant for industrial property demand in Oklahoma?
"We still have a lot of distribution tenants looking for space, but the most notable change has been from manufacturing requirements," said Brett Price, senior managing director for industrial at Newmark Robinson Park. "There seems to be more manufacturing and data center companies looking for space over the past six months.
"Manufacturing buildings across the country are typically older and don’t have modern amenities. We are already seeing several new data centers announced around the country, and I think we will also see an increasing number of manufacture facilities in the near future."
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