Fort Worth looks to convert office buildings as solution to its affordable housing crisis
February 18,2024
See full Fort Worth Report article by Sandra Sadek here.
When the former Fort Worth National Bank Building at 115 W. 7th St. went on the market in 2021, Joe Slezak immediately saw the potential of the property that used to house Oncor Electric.
Slezak, CEO of 3L Real Estate, purchased the property in January 2023 with plans to convert the former office building into more than 300 apartments. He is one of many developers who are looking at the growing trend of office conversion to hotels or residentials with the post-pandemic rise of hybrid and remote work.
“Our view is (this trend) will continue to grow as something that needs to happen,” Slezak said. “That is creating a scenario where a lot of the square footage isn’t going to be office space again. … Inevitably, a change has to occur.”
Unlike other cities now turning to this approach as a last resort, Fort Worth has long been ahead of the trend, said Michael Hennig, economic development manager for the city.
“A lot of cities have had to react to the new environment, where Fort Worth has already been positioned to just continue the trend it’s already been building into,” Hennig said.
Changing landscapes
For a decade, XTO Energy was the largest downtown employer, requiring office space for nearly 2,000 workers.
Its merger with ExxonMobil and subsequent relocation in 2017 to the Houston area, left numerous vacant buildings on the market. Although the vacancies appeared on the market in a phased approach, the impact on downtown was felt.
Hennig said the city was able to work with the company to find a way to use the spaces left behind. A prime example of the resultant reuse was the transformation of the former XTO downtown headquarters at 714 Main St. into what is today the Kimpton Harper Hotel.
That redevelopment brought in $56.1 million in private-sector investment to the city.
The same strategy can be noted in the adaptive reuse of other downtown buildings, including The Sinclair Hotel in the former Sinclair Oil Holdings building, and the Sandman Signature Hotel in the former Waggoner Building.
All these undertakings were pre-pandemic, Hennig said, noting that the city has been working on conversions since at least the 1970s.
“These were, in most cases, very historic and very well-maintained, beautiful Class B offices — some of the nicest Class B offices you will find in America,” Hennig said. “They were already pretty well-positioned for conversion.”
Class B offices, especially those built before the 1950s, are often well-suited for conversions because of their structure: smaller floor plates, more windows and utilities located at the center of the building.
This strategy has allowed the city to not only address vacant office space but also focus on a new goal: more 200-room, four-star hotels to supplement plans to expand the convention center.
“There was a very deliberate effort on our part to work with developers to support the development of new hotels. Some of those were ground-up new development, but obviously, the majority of them have been redevelopment,” Hennig said.
Downtown Fort Worth Inc. President Andy Taft said the popularity of office conversions depends on the real estate market’s changing preferences when it comes to places to live and work.
“What we’re seeing is just a continuation of the appeal of downtown as a place to live and visit and the development community recognizing the value of these very sturdy, historic structures,” Taft said.
However, Taft doesn’t believe the changing work environment post-COVID is the main driver of this trend. He emphasized Fort Worth’s office occupancy rate remains high at 90%.
“It’s more about how the space is being used and not how much is being occupied. There have been reductions in certain industry clusters, but I think it’s too early to say with any degree of certainty that this is COVID-related or work-from-home-related,” Taft said.
The Biden administration also has promoted adaptive reuse by unveiling new federal tools to encourage vacant office conversions, as stated in an October 2023 memo.
Filling in the gap
While Fort Worth has been mostly focused on converting vacant office buildings into hotels to close the room gap needed to support the planned convention center expansion, the city has also been exploring the role these conversions could play in addressing the affordable housing crisis.
“I wish there was a silver bullet on affordable housing,” Hennig said. “That is something that every city in America is grappling with.”
There are many benefits to these conversions, Slezak said. Rather than building affordable housing from the ground up, which can be expensive, starting with a shell allows these types of projects to be more viable. Plus, a lot of these sites, if historic, can qualify for historic preservation tax credits or low-income housing tax credits that help alleviate costs.
One example downtown of this approach is the Historic Electric Building, which was converted into apartments in 1996.
More recent projects include the Oil & Gas/Star-Telegram Building, purchased by Dallas-based Bluelofts in January 2023. The site will house 180 apartment units and amenities, as well as retail on the ground floor.
The new Georgian Oaks project will repurpose the Binyon-O’Keefe Building, former office space for XTO Energy, into 76 multifamily units.
“There’s a huge need for housing, especially in the downtown, where a lot of these properties are,” Slezak said. “This is going to be a way, hopefully, to solve kind of two problems at once.”
According to Downtown Fort Worth Inc.’s 2022 State of Downtown, the average downtown apartment rent price was about $1,700. Taft said the rental cost of some of the new apartments will be lower than the average.
While there is a lot of potential for office conversions, not every building should be converted, he said. 3L Real Estate’s whitepaper on the subject emphasized the importance of finding a cost-conscious property.
With plenty of projects underway to give former office spaces downtown a second life, it’s hard to predict how long this trend will continue as buildings come onto the market and economic conditions change.
Only a few former office and commercial buildings remain, most notably the T&P Warehouse on West Lancaster Avenue.
“This trend comes in waves,” Taft said. “There are a handful of other buildings in downtown that might be candidates in the future, but, for the most part, there’s very little inventory left available for this kind of adaptive reuse.”
Editor's note: this story was updated Feb. 20 to correct the spelling of ExxonMobil.
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Sandra Sadek is a Report for America corps member, covering growth for the Fort Worth Report. You can contact her at sandra.sadek@fortworthreport.org or @ssadek19.
This article first appeared on Fort Worth Report and is republished here under a Creative Commons license.
Locations Mentioned: Historic Electric Building, Oil & Gas / Star-Telegram Building, Sandman Signature Fort Worth Downtown Hotel, The Kimpton Harper Hotel, The Sinclair, Autograph Collection Hotel