| TEXAS SNAPSHOT, AUGUST 2011
Fort Worth Office Market
Fort Worth’s office market is in recovery mode. Net job growth during the past 12 months added more than 9,300 new jobs according to recent figures from The Texas Workforce Commission. Education, health services and the energy sector have continued to add jobs and are performing well in Fort Worth. This positive job growth along with strong population growth and higher energy prices make Fort Worth one of the leading markets in the recovery.
Leasing activity has increased in recent months with positive net absorption during the past few quarters. Net absorption in the first half of 2011 was 91,784 square feet. In 2010, net absorption totaled approximately 490,000 square feet. The healthy demand for space in recent quarters has pushed the total vacancy rate down to 12 percent, which is much lower than the Dallas side of the Metroplex with a vacancy rate of 22.4 percent.
The lower vacancy rate has helped to firm up asking rents. The Fort Worth Class A average asking rate rose slightly during the past quarter and currently stands at $25.99 per square foot, while Class B rates have remained relatively flat at $19.14 per square foot (full-service gross).
Noteworthy Transactions
Two of the more noteworthy transactions in the first half of 2011 occurred in downtown Fort Worth. The first was the investment sale of City Place. Dallas-based Spire Real Estate purchased the three-building, 628,000-square-foot former Tandy headquarters. Spire plans to renovate the 300,000-square-foot south tower and build a new parking garage. Completion of the project is scheduled for mid to late 2013. This will add much needed Class A space to downtown Fort Worth’s tightening market.
In addition to the City Place sale, the 200,000-square-foot former Star-Telegram headquarters was sold to a partnership led by Bob Simpson, the former chairman of XTO Energy. Simpson and his team have extensive experience restoring historical buildings to their former grandeur. As a result of the sale, Star-Telegram signed one of the largest leases of 2011 in Fort Worth and will occupy 64,328 square feet in the Oil & Gas/Commerce Building soon to be renamed The Star-Telegram Building. Star-Telegram is set to occupy their new space this fall.
These notable transactions along with the increase in leasing activity and positive absorption are all positive signs that the Fort Worth office market has turned the corner.
Trends
Noteworthy trends occurring in the first half of 2011 are as follows:
• Competition for vacant office space
• Urgency by tenants not seen since 2008
• Oil and gas companies are back
• Fewer concessions
• Effective lease rates are stabilizing
• CBD — hottest submarket
• Sublease space helped fuel activity in the CBD
Outlook for Tenants
The overall outlook for the Fort Worth office market looks good. The above average population growth can lower business costs that will help propel above average gains in output, wages, and employment relative to the nation as a whole. Asking rents are believed to be at the bottom. Effective rents are beginning to rise in properties that have seen significant occupancy gains in recent quarters (primarily Class A properties).
Increased competition for vacancies combined with no new space added to the market since the crash in 2008 will put upward pressure on rents by year’s end. Concessions are disappearing and should be ending by early 2012. Activity will continue to be strong in the CBD, especially in the Class A market and vacancy should continue to drop below 10 percent by year’s end. Time is slipping by for tenants to lock in lower rents. Several larger leases are close to being completed, which will make the market tighter by year’s end.
— Todd Burnette is a managing director with Jones Lang LaSalle.
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