Amidst the ramshackle collection of lots, older buildings and art deco gems that is downtown Tulsa, Okla., sits a monument to the most recent "good old days." At 750,000 square feet, the newly completed, fifteen-story Williams Communications tower -- the city's first new major office building in 15 years -- sits like a steel and glass cube, reminiscent, in a strange way, to the "Borg" cubes of the Star Trek television series.
And perhaps, all too much like the sci-fi Borg -- a bio-mechanistic race devoted to stripping away the essence of more natural beings -- the Williams cube is now sucking much of the life, and traditional swagger, from this former energy boomtown on the muddy Arkansas River. With Williams Communications now in bankruptcy, and its parent Williams Cos. crippled with debt, there is little hope that the new tower will be anything but largely empty for the foreseeable future.
Already 500 of the telecommunication firm's 2,800 area employees have been laid off, with more layoffs expected to follow. Much larger Williams Cos., whose main asset lies in a network of gas pipeline, has also recently announced that it will sell upwards of $3 billion in assets to raise cash, and will cut its payroll as well. The company, whose stock price has fallen 60% over the past year, has now taken to denying that it will soon face an Enron Corp.-like collapse. "It's had a depressing effect," suggests Brent Johnson, chief executive officer of SecureAgent.com, a successful software firm located blocks from the cube. "It's keeping people down about the future."
In this still-small town, many take the Williams demise personally. Hundreds of people invested much of their savings in Williams stock in the midst of the boom. In recent years, Williams Communications CEO Howard Janzen and his minions strutted through town like conquering heroes, as they took the former subsidiary of the Williams Cos. public in April 2001. A little over a year later, Williams' parent is stuck with large chucks of its progeny's debts, in addition to its own, and an unwanted surplus of downtown Tulsa real estate. "There goes my daughter's college fund," admitted one top local public-relations executive, half-jokingly.
Add to this picture an already weak economy punctured by problems not only at Williams but also at WorldCom Inc., another major local employer in the nearby suburbs, and the beginnings of a possible long-term swoon for this office market seem almost inevitable. A weakening of the energy industry in general -- still an important component in the 500,000-person region -- can only make things worse. "It's going to be a critical time in Tulsa's history," says prominent local developer Paul Coury. Williams has kept the city propped up. I don't know what's next. People need to wake up. This is serious."
In fact, Mr. Coury suggests downtown Tulsa has been headed downwards for over a year already. Rents have been falling and vacancies have been inching upward since the Williams-led boom in 2000. Class A vacancies could more than double from last year's 7% rate just from the immediate effects of the Williams fiasco. Overall, including Class B and C buildings, downtown office vacancy rates already surpass 15% and are sure to climb higher.
For the foreseeable future, the suburban market, which accounts for somewhat more than half of the area's office space, looks to be in better shape. Not nearly as dependent on Williams, and lacking the usual urban problems associated with older downtowns, the peripheral areas, according to an analysis by Tooman Partners, a local real-estate firm, have enjoyed some upward absorption of its Class A space, even as downtown weakened.
In fact, industrial, retail and office markets in suburban Tulsa remain the focus of local developer interest. New warehouses are rising out on the rolling hillsides outside of the center along with new industrial parks, with the Trammel Crow Co. planning to build the region's largest such park in the near future. Fifteen miles northeast of downtown, a multi-story atrium hotel -- the region's largest -- and an 80,000-square-foot convention center are scheduled to be completed next year. |
The shift of interest toward the periphery marks a major departure for this region, whose downtown, with its excellent cultural facilities and art deco buildings, has aspired to become an upscale "boutique" city, a kind of down-home mid-American version of a Boston or Seattle. Yet unlike these cities -- with their storied histories and demonstrated appeal to young professionals and educated childless boomers -- Tulsa has always battled both its traditional Bible-belt image and a dependency on a small group of companies to sustain its economy. From the 1920s to the 1970s this leadership role was played largely by energy firms, who created most of the world-class art deco structures and supported the excellent arts infrastructure, including the first-class Philbrook Museum of Art.
After the collapse of the energy economy in the late 1970s, the city went into a 15-year swoon, recalls Mr. Coury, whose Coury Properties controls some one million square feet of residential, office, hotel and industrial space across the local market. Then came the Williams telecommunications boom and the building of the "Borgian" cube -- a sure sign to many that the city finally had jettisoned its energy-dominated past.
In this context, the Williams collapse has brought on fears, shared by investors such as Mr. Coury, of another long-term decline, at least in the downtown area. Mr. Coury says prices, even for Class A space, are softening rapidly. Some owners, he reports, are offering Class A space now for as little as $11 per square foot where just months ago it was $15 per square foot. "We just renewed a 40,000-square-foot client at $13.75 a square foot," Mr. Coury reveals. "I offered him [the space] at $14.75 per square foot and he laughed in our face."
The Williams collapse, and its aftermath, could prove an opportunity -- not only for opportunistic investors but for Tulsans as well. "Tulsa will be plush for bargains," suggests local real-estate investor Kevin Anderson. Ironically, the best deals may involve the "cube," which might be among the plushest, best-wired facilities in the country. The building boasts Internet cafes on every floor, sweeping views of the city and 16-foot-tall ceilings. "Somebody could move in and have incredible space," suggests Mr. Anderson. But the problem, he believes, is who that "somebody" will be.
Mr. Anderson and others believe the key to reviving Tulsa, and its downtown, lies in a sweeping revaluation of the city's assets and the adoption of a new, forward-looking development strategy. New leaders in the city like Messrs. Anderson and Coury, software entrepreneur Brent Johnson, and recently elected Mayor Bill LaFortune, largely agree that the city's fortune rests on two fronts. One is enhancing the physical, cultural and lifestyle endowments of the city. Critical to this process will be new housing both downtown and in nearby residential neighborhoods, redevelopment and environmental cleanup along the Arkansas River, as well as expanding the arts presence in the city. "The art deco and the arts won't save the city, but it's something other places don't have," argues Mayor LaFortune. "We have to build on our strengths."
This is the only way, they believe, to pave the way for success on the second major front-the transitioning of Tulsa from a large, company-dominated economy to one that attracts a plethora of smaller, entrepreneurial ventures, and the generally young workforce that powers them. "The critical issue now is to focus on the growth of small companies," Mr. Anderson believes. "To do that, we have to focus on the quality of life to get them here and keep them here."
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