Is Oaklahoma City Recession Proof?

Question

During the 2008 collapse, OKC was one of the least impacted markets for real estate. For those of you who are familiar with OKC, how do you think this pandemic will impact multi-family housing and the surrounding sub-markets?

Ryan Daigle · Answer

@Steve Chan here are some of my sources, in no particular order:

• https://www.bls.gov/lau/metrossa.htm
• https://www.bls.gov/web/metro/...
• https://www.bea.gov/data/income-saving/personal-income-county-metro-and-other-areas
• https://www.huduser.gov/portal...
• https://www.realtor.com/resear...
• https://www.census.gov/data/ta...

Good luck wading through it all!

Rhett Tullis · Answer

on commercial side it has been a bit of a bloodbath as all are being hit,  the ones that manage their money well are still paying and getting the PPP loan.  the others are just falling behind.  small time commercial like hair dressers and nail folks are way behind and will take a year or more to catch up but most are starting to open up again.  on residential side most folks have been and still are paying but i think layoffs may sink in soon once some employers don't see foot traffic pick up in their stores/shops.  overall on residential it has been service industry folks like restaurant , store clerks and the like that have taken a hit in what we see.  i am however still greatly amazed at how many folks are still taking care of their rent,  It is nice to see lots of people taking care of paying their bills and many owners we manage for have given tenants discounts on rents even before requested.  overall i have seen everyone really pulling together to get through this.

Steve Chan · Answer

@Rhett Tullis Thank you for the "boots on the ground" perspective. Specifically from your tenant base, what industries have been impacted?

Rhett Tullis · Answer

I am heavily involved in residential property management and fairly active with commercial.  These thoughts are just based on what i have seen over the past several months.  Overall I would agree that we will not feel the hit as strongly as some other regions/cities.  I do however think there will be a hit.  Overall I have been surprised at the number of folks (residential and commercial) still making their rent payments.  I am still waiting "for the other shoe to drop" however and wont have a full picture of the impact for another month or so for the group of properties that we manage.  Overall I think we will see unemployment go up here and many of the industries here will be hit but so far not as hard as many in the media have predicted nor as hard as I have thought it would be.  Again this can all change in a week as we have seen.  The reality is this will all depend on how quickly we can get everyone back out and spending money again,  If things open up and old habits do not return things will be tough for some time.  (i am only referring to economic situations I know there is a health and safety side to all this).  Overall our economy is however much more diverse than it was in the 80's and even more so than the early 2000's.  While oil and gas is a big business here it is far from the only industry here.

Ryan Daigle · Answer

@Steve Chan great to hear – you're welcome!

Steve Chan · Answer

@Ryan Daigle Thank you so much Ryan! I was able to get more good information from all of sources.

Steve Chan · Answer

@Ryan Daigle Thank you! What source are you pulling most of your data from? I went to Marcus & Millichap and CBRE's website to get some data, but they did not have a lot to offer on OKC. Also, I found a really nice article about OKC in 2020 from roofstock.com. Finally, I found some good information on their chamber of commerce website.

Ryan Daigle · Answer

@Steve Chan there's no such thing as recession proof. Resistant? Perhaps.

There are many factors that contribute to recession resistance including economic diversity, affordability, etc... I've done a bunch of slicing and dicing on government data that tries to measure this for each MSA and come up with rankings for economic strength for each. Here's how Oklahoma City ranks (that 48 on the far right is the overall rank and is pretty good - this is out of 1000 areas):

So Oklahoma City may have a strong energy sector, but it also has good job diversity.

When you combine general area rental affordability, Oklahoma stacks up even better (my "investability" rank of 8 out of 380 MSAs):

So... OKC looks pretty good overall.

Disclaimer: These rankings are my own proprietary algorithm and may be flawed. Additionally, a lot of this data is based on 2015 government data which is the last time it was updated (various programs have been defunded since 😭). So it's both proprietary and potentially outdated - you've been warned!

Jai Reddy · Answer

Even with Oil and Gas having been the   major source of employment, the employers have been steadily thinning  their workforce since 2015, after the global oversupply of oil led to price crashes. So I believe the last 5 years have led to these companies already getting by with as little as possible, thereby ‘steadying’ the drawdown.

The way I feel it (not data driven), there was not much draw for  outsiders to move to the OKC area and hence not much to leave from  either. Moderate is the word that comes to mind

Steve Chan · Answer

@Jai Reddy Looking through their Chamber of Commerce website, the one thing that really concerns me is the fact that energy is one of their 4 major economic drivers. I've seen the impact of oil and gas on Houston's economy first hand. https://www.greateroklahomacity.com/

Is Oaklahoma City Recession Proof?

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