Over the past 18 months, Tulsa’s retail market has experienced a marked slowdown in leasing and sales activity due to the volatility in the national economy that has forced several national retailers to close their doors. As a result, the past year has been tough for local retail commercial real estate professionals who have seen few tenants leasing new spaces; however, some Tulsa industry professionals say the trend may be turning around.
According to Bob Parker, vice president of retail leasing and marketing with GBR Properties, he and other local retail brokers have experienced an uptick in retail tenants seeking to lease space.
“We started seeing the slowdown to some degree last summer and more so as we went into fall, but for whatever reason it seems the faucets have opened a little,” he explained. “I am as busy as I can ever remember being.”
Parker pointed out that he has yet to complete any leasing deals, but said this new wave of interest should result in some completed deals over the next 30 to 60 days, which is typically about the amount of time it takes to complete a standard retail lease transaction.
Mendy Parish, senior associate with CB Richard Ellis-Oklahoma’s Tulsa office, echoed Parker’s comments, adding that most of the activity she is currently experiencing is from local retailers and not national retailers who are still feeling the pain from the downturn in the national economy.
“National retailers right now are still holding back a little bit as they have been suffering for about 18 months now,” Parish said. “The activity we are seeing by local tenants is cautious activity, but it is the first major activity we have seen in quite some time, so it is very exciting to see.”
Even with the increase in activity, Parish said it is still far from enough to help backfill the increased amount of vacant “big box” spaces now in the market due to the exits of national retailers such as Circuit City.
Most of these local tenants are searching for smaller spaces as a lack of large retailers seeking space in the Tulsa market continues at the current time, she added. As a result, Parish said Tulsa will most likely begin to see significant recovery in its retail market in 2010, especially since a few more national retailers may be forced to close in Tulsa this year.
“I think the worst is over, but I do feel it will be a fairly slow recovery in terms of improving retail vacancy,” added Parish.
Parker said most of the leasing interest he is fielding from retailers is in neighborhood shopping centers that tend to house more local tenants than national tenants. The tenants consist of a mixture of existing local tenants looking to take advantage of the favorable lease rates and some new startup retailers.
“We have had some small local clothing retailers seeking space and some medical-related tenants such as chiropractors,” Parker said. “Something is happening and it is good for the market.”
Even better news for the market, according to both Parker and Parish, is the signs of activity increasing in some of Tulsa’s newer retail developments such as Tulsa Hills.
Some of the strongest retail sectors in the Tulsa metropolitan area are in suburban areas such as Claremore, Owasso, Broken Arrow, Glenpool and Coweta, according to Rickey Hayes, CEO of Retail Attractions LLC. Hayes said retail activity remains strong in these growing suburbs, thanks largely to the public-private partnerships that created a number of new successful retail developments.
“Communities that understand the value of public-private partnerships are seeing their retail activity heat up,” explained Hayes. “These partnerships have been the driving force behind much of the retail development that has gone on in recent years.”
With the changes being seen in both the national and local economies, Hayes said the value of partnerships between private developers and municipalities has become even more important as these partnerships are proving one of the most effective ways to develop new retail centers.
The continued increase in the construction of new single-family homes, coupled with increasing traffic counts in these suburban areas, has resulted in a perfect recipe for successful retail developments that have been able to withstand the changing conditions in the retail market, explained Hayes.
“A great example of this is the Southwest Crossroads development in Glenpool,” he said. “It has proven to be one of the hottest developments in the entire state.”
Not only is the strength in these suburban cities helping bolster the entire Tulsa retail market, but it is also financially benefiting the communities. These small communities have been able to offset any losses created by the changes in the economy by the increased sales tax revenue generated by these developments, Hayes said.
“Cities that are talking about furloughs for their employees to cut budget costs are cities that didn’t capitalize on retail development,” he added. “Glenpool, Owasso and Coweta are actually adding municipal employees to their work force.”
Even with the uptick in leasing activity, challenges still remain for the Tulsa market. Investment sales activity remains slow as the frozen credit markets have made it difficult for buyers to secure financing. Parker said he expects the tight lending environment to continue the remainder of the year, making it difficult for sales and new construction to occur.
Other challenges, according to Parish, include the significant amount of new construction that has come online in the market over the past year. That new space, coupled with the increased amount of existing spaces that have been vacated over the past year, will prove challenging to improving occupancy, Parish said.
“With so much space available, it will create competition and owners will be forced to negotiate more favorable rates for tenants,” she added.
Despite these challenges, Parker hoped the current upswing in activity will continue in the Tulsa market, and believed the stable local economy will help facilitate continued activity. Thus far, he said the stability of the local economy has proven a key factor in keeping Tulsa’s retail market from sinking to the depths that a majority of larger markets have across the nation.
“We have not felt the downturn to the degree the coastal markets have,” added Parker. “Not just Oklahoma, but the entire central corridor of the United States appears to be doing well.”