Downtown office space mostly unfazed by oil downturn
March 12,2016
Reposted from Fort Worth Business
By Lee Graham
While falling oil prices have hit job markets and real estate in other parts of Texas, they appear to have spared the downtown Fort Worth office market.
“I think it is typical for downtown to see some office space open up in a down cycle. And oil and gas works in cycles,” said Andy Taft, president of Downtown Fort Worth Inc., a nonprofit downtown advocacy group.
While several energy companies chose to sublease some of their downtown space, real estate agents continue leasing in the Central Business District.
“Despite the surge in sublease availabilities, there have been several large deals signed in the CBD,” said Kurt Cherry, executive vice president of leasing with PM Realty Group’s Dallas office.
Those include XTO Energy Inc., which leased 23,000 square feet in the 777 Main office tower in recent months.
Still, several oil-and-gas-related companies have or have tried to sublease space in their leased downtown offices. Those are FTS International, trying to sublease space at 777 Main; Willbros Group Inc., which has 23,000 square feet on the sublease market; and Holland Services, seeking to sublease 13,000 square feet, all in downtown.
In all, about 180,000 square feet of downtown office space is subleased, according to PM Realty Group, which reports that about 10 percent of total downtown office inventory is occupied by oil-and-gas-related tenants.
Even if the figure is about 14 percent, according to Taft’s slightly higher estimate, oil-and-gas-related firms trail finance, insurance and real estate (collectively known by the acronym FIRE) as industries leasing the most downtown office space.
“There are many others, including oil-and-gas-related, but FIRE is still the core,” Taft said.
At a recent citywide commercial real estate forum, local observers reported that downtown office absorption is rising even as downtown vacancy stands at 13 percent, down from a high point of 17 percent at the end of 2014, according to Todd Burnette, managing director of JLL’s Fort Worth office.
Speaking at the Jan. 21 Greater Tarrant County Commercial Real Estate Forecast, Burnette said Fort Worth is somewhat insulated from unstable oil prices.
"Although energy jobs have declined recently, they are not the main driver of the Fort Worth office market and will continue to play a minor role with exception of sublease inventory,” Burnette said.
Cherry agreed, pointing to the city of Houston, which has a greater percentage of oil-and-gas-related firms in its downtown core compared with Fort Worth.
Fort Worth “has been very deliberate in its diversification of industries,” Taft said. He not only dismissed effects of the slide in oil prices on downtown real estate, but he speculated that a rise in available sublease space could actually strengthen the downtown office market.
“The glass-half-full guy in me says we have office space we didn’t have before and we can recruit new businesses,” Taft said.
Downtown office occupancy stands at 88.5 percent, 4 percent higher than the same time last year, according to fourth-quarter 2015 research from PM Realty Group.
On its recently released Dallas-Fort Worth fourth-quarter 2015 submarket occupancy ranking, South Fort Worth led the list at 91.5 percent occupancy, unchanged from last year. Downtown Fort Worth ranked fourth. Dallas’ Stemmons area ranked 21st, the lowest position on the list, at 73 percent, which was 1.3 percent below last year.