Apartment Market Holding In OKC

OKLAHOMA CITY, OK - Constraints in the capital markets and a major slowdown in real estate across the board is reflected in two 2008 year end multifamily reports for Oklahoma City. Norman based Commercial Realty Resources Co. and the Oklahoma City office of Sperry Van Ness each recently published 2008 multifamily reports. The CRRC report showed total sales volume in Oklahoma City was down 10 percent from the previous year, while total units sold and the number of transactions was down but the average price per unit was up 52 percent by the end of 2008 compared to mid 2008.

With gloom and doom in many areas of the country, Mike Buhl, with CRRC, said 2008 was not altogether glum despite the 10-percent decline in sales volume from 2007. "Remarkably 2008 finished up really strong in transactions and values," Buhl said. "A lot of that was driven by the properties that traded at the end of the year." Perhaps the most noteworthy sale of the year was Mike Henderson's four property Legacy portfolio, which sold to Illinois-based Inland Real Estate Acquisitions Inc. in November for $132 million. Andy Burnett, with Sperry Van Ness, co-brokered the Legacy deal, and published the multifamily report for his office. Burnett called 2008 an interesting ride for the Oklahoma City multifamily market.

The Sperry Van Ness report showed 29 properties, totaling 5,323 units, sold in the Oklahoma City area in 2008. Sales totaled just under $262.4 million, a 5 percent decrease from 2007, but the average unit price for 2008 was up 55 percent from the 2007 average. Coming into 2008 Burnett said there was a feeling of invincibility in the market coming off two strong years, but brokers quickly found nationwide credit problems were beginning to be felt locally. Burnett found that occupancy rates also held strong in 2008 and vacancy was at 7.9 percent, down from 8.3 percent in 2007.

Both Buhl and Burnett said money is still out there for higher-end properties, and there is still money available for those projects. Already in 2009 the Sycamore Farms apartments in northwest Oklahoma City sold to a group of investors for $20.7 million.

But doing business in 2009 may be a bit different, Buhl said. Especially with properties from the 1970s and earlier, Buhl said the market could see some movement toward deals where a lender is foreclosing and the owner may have to sell properties for less than their mortgage and show up with some money on the table at closing. Burnett said in 2009 lenders are going to have to stay in the game and focus on stabilized cash-flowing properties in good locations with little to no deferred maintenance.

But Buhl said not to look for significant multifamily development and construction in 2009. He said while the market has added 1,000 to 1,200 units per year for nearly the past decade, he expects only about 500 units to be added this year. Burnett said downtown is still primed for more rental units, based on the success of properties like Legacy at Arts Quarter and the Park Harvey building. "Everything downtown has done really well," he said.

For the next 11 months Buhl said he expects multifamily occupancy rates to remain stable in the 90 percent to 92 percent range. He added that 2009 should generate a more equilibrium between supply and demand.

In what looks to be a less-active market, Buhl said sellers with high quality assets and attractive assumable financing should see an active sales market in 2009. And Buhl is remaining optimistic that 2009 unit sales will be close to 2008 numbers. "In 2008, 5,907 units sold," Buhl said. "We should see 4,000 to 5,000 units trade in 2009."