New projects will change face of Fort Worth in 2008
The real estate success story that Fort Worth experienced during 2006 and 2007 is poised to continue its record-breaking pace well into 2008, say industry experts, thanks to healthy job growth and a strong economic cycle.
As the 18th-largest and fastest-growing city in America, Fort Worth continues to expand in virtually every market sector. Major developments throughout the city and across Tarrant County are drawing new patrons — both Texas-based and out-of-area investors — to the office, industrial, retail, hospitality and residential arenas, signaling a robust growth stage for the entire area.
High-profile projects — such as downtown’s 280,000-square-foot, Class A Carnegie Building and the 606-room Omni Fort Worth Hotel adjacent to the recently renovated Convention Center, the 320,000-square-foot River Plaza mixed-use development nestled alongside the Trinity River in the University district and the 500-acre Alliance Town Center north of downtown — have bolstered Fort Worth as a world-class city.
“Investors from around the country will continue to target assets in the Dallas-Fort Worth area,” said Tim Speck, regional manager of the Dallas office of Marcus & Millichap Real Estate Investment Services.
Fort Worth commercial real estate broker Karen L. Simon, executive vice president and managing partner of Bradford Corfac International, also sees an increased interest in the acquisition of local properties.
“The future is very positive for Fort Worth. Even the subprime picture looks positive here, unlike other areas of the country,” Simon said. “Certainly, the growth here is pushed by the Barnett Shale, which is attracting multiple business opportunities and investors. People are offering full market price just to get a foothold in our market. It’s making an extraordinarily tight market but I think the interest will increase.”
Downtown office
In 2006 and 2007, downtown Fort Worth was named the strongest central business district office market in the U.S. by MoodyÂ’s Investors Service. Heightened demand has led to unprecedented new construction. More than 1 million square feet of office space totaling $1 billion will become available next year.
“Banking expansion, white collar office growth and continued petrochemical industry growth continue to drive demand for downtown office space,” said Andy Taft, president of Downtown Fort Worth Inc.
Employers in Fort Worth and Dallas are on pace to add 87,700 positions this year, a gain of 3 percent. Supported by healthy job growth, office vacancy rates are being pushed lower while asking rents are on the climb.
Taft said that in 2004, the average rental rate for Class A office space was about $21 per square foot, and the overall vacancy rate in 2002 was almost 18 percent. Today, the rental rate is slightly above $29 per square foot, while the vacancy rate has dropped to 6 percent as of the last quarter.
“That really tells the story. It’s a very robust market,” Taft said.
Many more projects are in the proposal queue that will fuel even greater demand for office, retail and residential space but could possibly push up construction costs, rents and sales figures higher.
“One caveat is that properties are selling for higher prices per square foot than they might have in a softer market,” said Simon.
Downtown residential
The central business district is also experiencing record residential growth. Thousands of people are already embracing the big-city, urban lifestyle, while many other would-be downtown dwellers are attracted by the numerous developments under construction and scheduled for delivery next year. Approximately 200 new units will be added in 2008, split evenly between apartments and condos.
The four-star Omni is including 89 chic condos atop the 34-story hotel at 1301 Throckmorton. The hotel will open its doors in late 2008, while the condos are scheduled to open shortly thereafter in January 2009. The high-flying condos sit on the upper end of the urban housing spectrum, with pre-construction prices starting at $650,000. Sales are brisk, according to sales director Deven Barry.
From the redevelopment of One City Place into high-rise condominiums to the renovation of the historic Texas & Pacific rail terminal into luxury urban lofts to the upscale Lincoln Apartments at Trinity Bluff, demand for downtown residential properties is on the rise, which is pushing up prices.
Apartment occupancy and rental rates have stabilized at about 96 percent. The average rental rate in the third quarter of 2007 was $1,520, or $1.41 per square foot, up slightly from the 2006 rate of $1,442, or $1.33 per square foot. The median residential sales price was $268,071, up from last yearÂ’s figure of $257,596.
“We’re entering a new era of price points with the Omni and Villa de Leon. These and other residential developments are establishing new highs downtown, which is consistent with the upward trend we’ve seen the last three years,” Taft said.
He added that market interest continues to come from corporate purchases of condos and lofts for investment purposes but the individual owner-occupant is driving sales.
“We’re seeing a wide range of people coming into the downtown residential market, mostly single-, double-income retirees and empty nesters,” Taft said. “No kids is the common denominator.”
Single-family market
A driving factor in Fort Worth’s robust office market activity is that the local area boasts a housing market that has not seen the same value loss as in other cities. Fort Worth real estate – and the Metroplex as a whole – continues to have healthy appreciation and affordable housing compared to most parts of the country.
Purchases of pre-owned homes through the end of November dropped 7 percent; however, home inventories are stabilizing. The average home is taking about 6.2 months to sell instead of the 10-month average nationwide, according to the North Texas Real Estate Information System and Texas A&M UniversityÂ’s Real Estate Center.
Home prices are edging up, following a nationwide trend. The National Association of Realtors forecasts that home sales will rise slightly in 2008 as will the median price for U.S. existing homes, from $217,600 this year to $218,300.
A study by the Office of Federal Housing Enterprise shows local home prices appreciating in the second quarter of 2007 at a rate of about 5 percent when compared with the second quarter of 2006. The average price of units sold so far in Fort Worth in 2007 is 4.4 percent higher than the 2006 average price tag, from $192,582 to $201,070.
Substantial new residential developments are under way in virtually every part of the city. One of the most anticipated is Terrell Heights, a neighborhood of 100 affordable single-family homes being constructed in a once depressed section of southeast Fort Worth.
Prominent developer Tom Struhs and former Mayor Kenneth Barr are revitalizing this area, located just south of downtown and adjacent to the medical district.
“This is an area that hadn’t seen any attention in decades and is now a new residential market in the central city. That, I think, is a bellwether event,” Taft said.
“It speaks to the return of the central city. We still have growth and development in other areas but this project reflects a real and sincere return to the center and that’s good for the whole city,” he said.
Industrial
In its 2008 report, commercial real estate brokerage firm Sperry Van Ness lists Fort Worth as one of the top 10 industrial markets to watch in the coming year.
The company cites above-average job growth in transportation and warehousing as well as construction-related jobs. With the successful expansion of logistic and military defense companies in the local market – in particular, Lockheed Martin’s development of a new fighter jet – the projected vacancy rate in 2007 could drop to 11.9 percent, and then to 11 percent by the end of 2008 as construction completions remain minimal, and absorption for the next two years adds up to an expected 5.3 million square feet.
“With all of these things going for it, Fort Worth is well positioned to see above-average activity where it counts for quarters to come,” the report said.
Mixed-use, multifamily
Buoyed by the expectation of another 125,260 residents in 2008, mixed-use and multifamily housing remain on a positive track, according to Sperry Van Ness predictions.
Apartment vacancy rates are expected to drop by 1.3 percent between 2007 and 2008, as construction completions add a much-needed 4,258 units in 2007 and 3,665 in 2008. Rents are currently below other markets, with an average of $709. But as demand continues and supply lessens, rents can expect to go up as much as 3.1 percent.
Mixed-use developments to come on line within the next two years include the Cultural DistrictÂ’s Museum Place and nearby West 7th and Montgomery Place.
Fort Worth Cats owner Carl Bell is planning 1.5 million square feet of space for office and retail on 36 acres next to LaGrave Field. This is the first significant project in the $300 million redevelopment of Uptown Fort Worth led by Struhs and in conjunction with the $435 million Trinity River Vision project and new 38-acre Tarrant County College downtown campus.
As part of the deal, Bell is making 15 percent of the 850 proposed residential units in Trinity Uptown area affordable to middle-to-lower income families.
The future
Even with its rampant expansion, Fort Worth is still an affordable and attractive address for businesses and residents, say real estate professionals. While many other metropolitan markets are suspended in a wait-and-see mode regarding the economy, Fort Worth continues moving forward.
“Fort Worth has not been afraid to think boldly and to think big,” said David Feehan, executive director of the International Downtown Association, which named Fort Worth its downtown of the month for December.
“Fort Worth has set itself apart not just from every other city but from the world’s top tier of cities. It’s got Texas-sized vision but an ability to appeal to every individual, to do something to make it hospitable and friendly and attractive to everyone, from the top of the income rungs to the bottom of the income rungs. You can expect Fort Worth’s current growth to continue far into the future.”
Contact Dillard at bdillard@bizpress.net
