TEXAS SNAPSHOT, MAY 2005

FORT WORTH OFFICE MARKET

Fort Worth’s office market has been performing exceptionally well in relation to surrounding markets in north Texas. Vacancy rates, currently standing at approximately 10 percent, have been decreasing steadily for some time, and demand for office product continues to be strong, especially from a leasing perspective. Generally, Class A rental rates are sitting between $18 to $22 per square foot, and in most cases those numbers include electric costs. However, several of the new developments, as well as high-demand properties in the central business district (CBD), are commanding rates in the mid-$20s per square foot.

Currently, the biggest trend in the Fort Worth office market is the increasing number of major corporations relocating in the downtown area. RadioShack, Pier 1 Imports and D.R. Horton are all examples of companies that are setting up new locations in the heart of Fort Worth, showing their commitment to the city’s redevelopment. RadioShack recently completed its corporate campus, and Pier 1 Imports has constructed a new headquarters building. Both of these projects have dramatically impacted activity in the downtown area as well as in nearby areas. In effect, the companies’ developments have increased interest and created opportunities for other companies to move into the CBD, which, as a result, has become an area with a high demand for office space.

In addition to the new office development, the city’s Trinity River redevelopment plan is in full swing. The master plan for this endeavor has a vision to preserve and enhance 88 miles of river corridors along the Trinity River and its tributaries so that these waterfronts can remain greenways with open space, trails, wildlife and recreation areas. The plan also is taking great efforts to utilize adjoining land uses, transportation facilities and other areas off the river that can benefit from the greenways. In the city, downtown waterfront initiatives are underway in conjunction with the development in CBD. The addition of new companies’ business ventures has provided momentum for the river plan’s execution.

Overall, development has been on a positive upswing throughout the Fort Worth area. The residential explosions in north Fort Worth and neighboring cities such as North Richland Hills, Westlake and Keller have encouraged additional office and retail development in each respective area.

Several developers have been breaking new ground in the area’s office market. Hillwood continues to develop actively and market the north Fort Worth area as well as the Alliance Airport submarket. In addition, Mercantile Partners has also introduced new office properties in the north Fort Worth area.

While no specific tenants are absorbing an extraordinary amount of space, companies within certain industries are becoming more attracted to Fort Worth. In particular, businesses within the oil, energy and engineering fields are all expanding in the area. As the large companies are moving into the city, several major leases have been signed throughout Fort Worth. At 300 Burnett Street, Kaiser Permanente has closed a lease for 52,000 square feet; D.R. Horton, one of the new major businesses in the downtown Fort Worth area, has leased 160,000 square feet within City Center II, which is located at 301 Commerce Street; and Encore Acquisitions has signed a lease for 80,000 square feet at Carter Burgess Plaza.

In the future, the tightness in the CBD will lead to additional development. With positive absorption trending upward in the form of office space occupation by successful and well-known companies, the area will continue to draw new tenants and developers that are inspired by this growth. Combined with the city planning initiatives to revitalize and invigorate the area, these factors will make Fort Worth’s CBD an interesting submarket to watch.

— Craig Wilson, associate in the Dallas office of New York-based Studley

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