How is Tulsa is facing this new economic reality?
Now that the oil bust has done all the damage it can do, local companies are readjusting and beginning to stabilize.
For the past three years, the oil bust weighed down Tulsa. Thousands lost their jobs, survivors spent their money more carefully and corporations thought twice about opening new locations in the area.
That weight was eased in 2017. Not because oil prices have recovered; at the time of this writing, most oil price forecasts predict an overabundance of supply and continued flat demand from China and other countries will keep oil prices low through 2018. Yet most companies have stopped cutting away their workforces or canceling expansion plans.
Simply put, the oil bust has done all the damage it can. Residents and corporations alike already have tightened their belts and adjusted to this new economic reality, and everyone’s now ready to move forward, says Bob Ball, director of economic research at the Tulsa Regional Chamber.
“We’re no longer losing jobs,” Ball says. “Even with oil prices being what they are, we’re starting to slowly add jobs.”
As of October, Tulsa’s unemployment rate stood at 4.4 percent, around the same rate unemployment stood when oil prices started to plummet in 2014. October’s national rate was 4.1 percent, which includes the majority of the country that didn’t have to experience the full impact of the oil bust.
Ball says Tulsa’s traditional ability to outperform the national unemployment average was upheld even during the worst of the localized downturn. Now that the pain and uncertainty has started to lift, Tulsa has the opportunity to stand out from other similarly sized metro areas once again.
That said, he believes an oil recovery would absolutely benefit the area, even if it isn’t in the cards for now.
“If oil can sustain a price of $57-$59 in 2018, steady growth should occur,” he says. “Tempered production by major oil producers has held prices higher. Worldwide demand for oil is beginning to grow again. Mid-year 2018 is when OPEC and Russia will reassess their production cuts.”
Ball’s prediction is for overall Tulsa employment to grow by 1.3 percent annually for the next five years. The energy sector will grow at about 1.2 percent as the industry rebuilds with stable oil prices in the $57-$59 range. Manufacturing is the brightest spot for growth with an expected average annual growth of 2.8 percent for the next five years, with aerospace and fabricated metals being standouts.
David Roberts, a commercial broker with Coldwell Banker Select, says oil isn’t the only obstacle that has been overcome in the past year. Presidential election years always cause some degree of uncertainty and hesitation from regular citizens and businesses alike, and this one was definitely no exception.
“Our economy took a big turn after Nov. 8,” he says. “Before the election, nobody wanted to do anything because no one knew what was going to happen. After the election, the floodgates opened up.”
Local politics can play a role in commercial development as well, and Roberts is bullish on the impact of Mayor G.T. Bynum.
“Tulsa’s been a better market because we’ve got new leadership with our new mayor, and I think we’re going to see the mayor and city council work together to bring new business to Tulsa,” Roberts says.
Ball reports the Chamber is now fielding more inquiries from regional and national companies looking to expand and potentially establish regional headquarters in the metro area, which would help diversify the local economy.
More jobs means more people could choose to make Tulsa their home. In fact, that might already be happening. According to the Greater Tulsa Association of Realtors, 12,281 homes changed hands during the first 10 months of the year, up nearly 1 percent from 2016.
What’s more, long-term Tulsans are becoming less hesitant to put their homes on the market and find new ones. After years of shrinking inventory, the number of homes for sale finally started to increase in 2017.
Combine that with higher sale prices — the average reached $199,694, up 17 percent from 2016 — and you’ve got a strong indication that even committed residents are ready to spend more money in general, Ball says.
He estimates Tulsa’s overall consumer spending has stayed strong, and it likely equals the national average spending rate.
“We’ve continued to spend disproportionately better than the jobs outlook, which was consistent with the last recession,” he says. “People kept filling parking lots in restaurants.”
Even with the downturn, Tulsa is becoming a more attractive place to live, with numerous development projects in play, including downtown.
Then there’s the Gathering Place. The $400-plus million, 100-acre park being developed by the George Kaiser Family Foundation will offer numerous activities for families when Phase 1 is finished in 2018.
Ball says the visibility and attractiveness of these projects will help pull in workers and employers alike for the entire metro area, not just near downtown.
“Anytime you offer any kind of amenity that’s attractive to a young workforce, it helps,” he says. “People want to be where there are things going on, and we’ve got plenty going on.”
But the abundance of new amenities and redevelopment brings challenges, too. Roberts says tenant mobility back to downtown areas, as well as tenants taking advantage of new developments in the southern part of the metro area, means older properties could become overlooked.
“Our concern is that the new shopping centers were dominating, and older shopping centers had to come up with incentives to make them attractive,” Roberts says.
To make matters thornier for retail properties, a wave of national brands have suffered due to stiff competition from Amazon and other online retailers. Those closures have resulted in more empty spaces in Tulsa.
“Though some individual centers will be affected, I don’t think these closures will affect the retail market as a whole,” he says.
Even so, retail continues to grow around Tulsa. Projects including Shops at Warren Place and the Mother Road Market announced impending construction, and two long-struggling centers, Riverwalk Crossing and Midtown Village, are starting to improve.
Ball says Tulsa’s fundamentals are improving; the long-term employment outlook will move beyond simple stabilization to strength, and corporations are looking to grow in Tulsa.
Roberts also is optimistic, though he’s already bracing for the next cyclical challenges.
“I think things will continue to trend up, at least until the next election,” he says.
Editor’s note: This story first appeared in the Tulsa Commercial Properties publication of the Oklahoma National Association of Industrial and Office Properties Chapter. It was edited for length and some statistics updated.