Over the last 15 years, the office market of Fort Worth, as well as that of the metroplex as a whole, has experienced steady growth in both development and absorption of new product. DFW’s office vacancy rate currently sits at 15 percent, according to CoStar Group, indicating the ceiling for new growth has not yet been hit.
The traditional drivers of job and population growth have fueled new construction and strong leasing velocity for office properties in Dallas. But in Fort Worth, particularly the downtown area, the growth is more visibly tied to the live-work-play trend embodied by millennials and other young members of the workforce. The health of Fort Worth’s multifamily, restaurant and hotel markets are all contributing to the growth of the office sector.
Office developers consider a number of factors when constructing new space. But much like any project, location is key. As Fort Worth’s need for more housing, dining and hotels has grown, the walkability factor in the office sector has only increased in importance. As such, it’s not only the employees that are drawn to properties that are located within walking distance to residential buildings and entertainment destinations. Developers are also coveting these sites.
Entertainment Drives Growth
Downtown Fort Worth is currently experiencing a renaissance of sorts in its retail sector. That is to say, the market is rapidly embracing food- and entertainment-based concepts that bring people together and offer some resistance to e-commerce and online shopping.
This retail makeovers are also extending beyond the urban core. In the last 12 to 18 months, we’ve seen everything from movie theaters to concert halls precipitate nearby construction of new office properties, not to mention residential assets.
A good example of this trend in action involves the renovation of the Star Telegram Building in Sundance Square, Fort Worth’s premiere shopping and dining destination. The historic building, which previously housed the operations of the local newspaper, is being converted into a Class A office development.
The property is located near the Fort Worth Convention Center and is served by mass transit. The location offers convenient access to all of downtown Fort Worth’s shops and restaurants, as well as key entertainment-based attractions. Such destinations include Fort Worth’s Stockyards district, which offers food and entertainment in the spirit of the Old West, as well as theater and arts venue Bass Performance Hall and Panther Island, a waterfront destination for concerts.
Fort Worth is also seeing a slight uptick in development of plazas and urban parks throughout its core, another feature that we credit in not only attracting office users, but also in encouraging them to renew and expand their leases.
The convenience of mass transit and rail connectivity also represent key drivers of growth in Fort Worth’s office market. As the city’s population of younger workers increases, the ability to commute to and from work via public transit is rising in priority.
In addition to the convenience factor, Fort Worth residents have expressed a heightened interest in public transit due to environmental concerns, as well as the reduced stress that comes with this mode of transportation.
Fort Worth is increasingly becoming a destination city for convention centers and trade shows. While these events do not directly impact development and leasing of office space, they nonetheless illustrate the strong connection that exists between office-related functions and physical amenities.
When assessing potential event sites, corporations and industry planners consider the status of a metro’s convention center, as well as the vibrancy of its downtown area, quite carefully. Simply put, it’s a huge plus for businesses to be able to have a sizable venue for meetings and networking when planning conventions or conferences. Fort Worth is working to address this requirement.
No project better captures this effort than the renovation of the former Sanger Bros. building, less than a mile from the Fort Worth Convention Center. The project will deliver 80,000 square feet of multi-use Class A office space with an enhanced building façade and streetscape including the conversion of one floor of meeting and banquet space that connects to the adjacent hotel. The project team will also convert some of the existing space for hotel services and incorporate basic amenities into the new property.
Class A or Bust
Demand for more multifamily units and hospitality space has ensured that most of Fort Worth’s Class B office product is on its way out. In large part, these properties have been converted into hotel and residential uses, which in turn bolsters demand for Class A office product.
We see this trend happening in Dallas too, such as with the Centrum project in the city’s Uptown area. This project centers on the redevelopment of a 367,000-square-foot property originally built in 1985.The building was redeveloped into Class A office asset with a ground-floor plaza, retail space and a second-floor terrace rooftop deck for tenant and resident use. Located within walking distance of upscale shopping, dining and residential developments, the property is experiencing a healthy lease-up since becoming available for occupancy.