OKC’s warehouse and distribution sector thriving, e-commerce playing pivotal role

If you have driven along Interstate-44 just south of Will Rogers World Airport recently, you cannot help but notice Amazon’s new fulfillment center expansion going up just north of their current facility that opened in 2019. When it opens later this year, the new facility should nearly double Amazon’s warehouse space here to 1.6 million square feet and add another 500 jobs to the Oklahoma City metro.

The fact that Amazon has chosen to expand in Oklahoma City is no doubt a testament to the overall growth and vitality of the warehouse and distribution sector in the Oklahoma City region.

The health of the Oklahoma City metro’s warehouse and distribution sector is reflected in recent data published by labor market analytics firm Emsi that shows between 2010 and 2020, the number of jobs within the sector grew by 56% or 10,000 jobs. That growth rate even outpaced the state and nation, which saw jobs grow at a rate of 33% and 21%, respectively. If you compare Oklahoma City’s job growth to the state and nation within the last five years (2015-2020), it is even more pronounced.

Jeff Seymour, executive vice president of economic development at the Greater Oklahoma City Chamber, believes some of that growth can be attributed to a rise in on-demand delivery services resulting from COVID-19; however other reasons may not be as obvious. 

“E-commerce continues to drive some growth, but I also think as Oklahoma City continues to grow, it is serving more as a regional hub than it has in the past,” he said, noting that the warehouse and distribution industry accounts for $4.2 billion or 5.5% of total gross domestic product – the economy’s total output of goods and services – for the Oklahoma City metro.

“Large distribution clusters like Kansas City and Dallas-Fort Worth in the center of the country typically have robust rail, air and highway infrastructure options. We have great transportation infrastructure here as well; however, we are not a mega-cluster like a Kansas City, a DFW or a Chicago. Just realizing our potential to be a regional multi-state hub is probably where we are positioned to best leverage our abilities right now,” Seymour said.

Oklahoma City can do even more to maximize its niche to serve as a strong regional multi-state hub in the warehouse and distribution sector, according to Seymour. Ensuring the state has a readily available workforce with the necessary skills and talents is a key factor in the equation, especially for those companies that rely heavily on, or are making the transition to, more automation. Another is having the right location, land and properties available to those companies that can help them grow.

According to figures provided by CoStar, a third-party real estate listing service, there are more than 73 million square feet of warehouse and distribution commercial real estate inventory in the Oklahoma City market. With a vacancy rate of just 4%, it is not hard to see just how healthy the sector really is.

“The warehouse and distribution sector in Oklahoma City is very healthy. In fact, I would even term it as hot,” said Randy Lacey, SIOR, first vice president of CBRE, the world’s largest real estate and investment firm.

For 30 years, Lacey has worked as an industrial real estate broker and has seen firsthand how Oklahoma City’s warehouse and distribution sector has improved over several decades, dating back to the oil bust years when vacancy rates were approaching 18%. He echoed Seymour’s sentiments concerning the impact the pandemic has had on the market.

“E-commerce is one of the biggest driving forces in the market between fulfillment centers, last-mile facilities and sorting centers. That is all about warehouse space and has created a consistently low vacancy rate and kept the prices high. That is probably one of the biggest reasons why the industrial market is a preferred asset class and is so stable and predictable,” Lacey said.

Brett Price, SIOR, senior managing director at Newmark Robinson Park, which specializes in the leasing and sales of industrial properties in Oklahoma, described Oklahoma City’s industrial market as “tight.”

“You typically do not see a great deal of speculative industrial development in Oklahoma City. However, within the next 12 to 18 months, we expect to see quite a few developments kicking off,” Price said.

Even with just a 4% vacancy rate for the Oklahoma City metro, Lacey said companies are still looking to expand or relocate to the region.

“There is a really healthy market of companies that are considering Oklahoma City,” Lacey said. “For example, we are working with a national developer right now that is already looking hard at building some distribution space here.”

“One of the reasons why the industrial market is so stable here is because it’s never over built. Developers just don’t go out and start building a bunch of space like they do in some other markets. The cap rates are also higher in Oklahoma City. In other words, the investors get a higher rate of return here than they do in some of these other markets. That is very attractive to an investor and why they put money into this market,” Lacey said.

Seymour explained that one of the Chamber’s primary goals from an economic development standpoint is for Oklahoma City is to have a well-diversified economy, and having a strong warehouse and distribution sector supports primary job growth. He pointed to recent efforts by the Chamber to lure companies from various industries to the Oklahoma City market. Of the approximately 70 projects the Chamber is currently working, about 10% are warehouse/distribution projects.

“[Warehouse and distribution] is our second highest category. Number one is manufacturing by far; the other is distribution. Manufacturing is huge, but they also usually have a distribution element to their operations. And number two is distribution. We consistently see a strong pipeline of warehouse projects of different categories,” Seymour said.

This article originally appeared in the May 2021 edition of The Point!