"The engine of Tarrant County is well-oiled and we're tuned up," Ben D. Loughry, managing partner for Integra Realty Resources DFW, told the 600 professionals attending yesterday's 2006 real estate forecast held at the Fort Worth Convention Center in the CBD. The big picture from the local pros is a mixed bag of promise peppered with caution, particularly for the City of Fort Worth where available class A office space is practically gone.

Vacancy is just 4.5% in the CBD's 4.78-million-sf inventory. Last year ended with 211,008 sf of absorption and rent quotes of $20.50 per sf to $28 per sf--both all-time highs. "We probably won't absorb 211,000 with our existing inventory because that would put us at 100%, which is very unusual," said George D. Duncan Jr., senior vice president for Dallas-based Staubach Co.'s Fort Worth office.

Though it sounds like an enviable dilemma, the brutal fact is Downtown tenants looking to expand "will have to go where they can grow their businesses," Duncan said. As a result, CBD owners this year should brace for some move-outs due to the lack of expansion space and tenants, particularly those bent on renewing, should prepare for "sticker shock" from rent changes, up at least $5 per sf from just a few years ago.

The promise, though, lies in a multimillion-dollar roster of new projects, including some office product that could--and probably should--start to rise this year, Duncan said. Countywide, 600,000 sf to 1.1 million sf of office projects are on the drawing boards. And, he says, the first to rise will be announced within 30 days, a 100,000-sf to 200,000-sf building for the city's southwest side.

The industrial sector made its best showing since the late 1990s, a 200% improvement over 2004, according to Robert J. Scully, principal for a Dallas' favorite son, the Trammell Crow Co. The gains, though, weren't countywide as they were with the office sector. North Fort Worth's vacancy is 4.3%, but the Great Southwest Industrial District and CentrePort Business Park are shouldering 13.8% or 9.7 million sf of empty space. Overall, there was 3.3 million sf absorbed last year in the county's 220-million-sf inventory, setting up an 8.9% vacancy.

The year ended with rental rates averaging $3.43 per sf, a 20-cent gain from 2004. But, the average rent is still 53 cents below year-end 2000.

"This is the best performance we've seen in six years," Scully said. "The net absorption clearly indicates a market recovery is under way." He said tenants should consider early renewals, with longer terms to lock-in lower rates, while building owners should start negotiating for fixed, annual percentage hikes in rents, a trend that has yet to take root in Tarrant County.

Scully predicts industrial net absorption this year will hit four million sf, driving further reductions in concessions and a solid gain in rents before 2006 ends. If his prediction is on target, the pendulum will swing toward Tarrant County owners by the fourth quarter.

From the retail front, James M. Makens, president of locally based Makens Co., said the hotspots for construction will lie to the southeast, southwest, north and northeast of the city. Though there are few spots capable of supporting a true lifestyle center, he said the Trinity River and Seminary areas are places to watch for possible starts. As for power centers, developments most likely will rise in the Sublett Road area of Arlington, Euless, Granbury, Grapevine, Mansfield, Midlothian and Weatherford.

Without a doubt, the region's retail momentum is being stoked daily by the Bentonville, AR-based kingpin, Wal-Mart Stores Inc. "DFW has become the testing ground for Wal-Mart," Makens said. The retailer now controls 31.2% of Tarrant County's grocery market, with more stores on the way for the suburbs and a contract in hand for a 50-acre, inner-city foothold at the corner of University Drive and Jacksboro Highway.

Makens predicts this year could bring the closing of Six Flags Mall in Arlington; market exits by Chicago-based Bally Total Fitness and the Boise, ID-headquartered Albertsons Inc.; and additional reductions by Tom Thumb, Pleasanton, CA-based Safeway Inc.'s upscale leader. Meanwhile, the San Antonio-based H.E. Butt Grocery Co. is starting to cautiously plant flags in the county's southern sector. And that grocer, Makens said, is the only one that "competes well with Wal-Mart.

The convenience store sector this year, like last, will continue to add space--causing Makens to predict an overbuilt label could soon be hanging on the category. "We are going to see sales at construction costs or below due to poor tenancy," he said.

From the residential perspective, the year ended with 16,745 single-family lot starts in Tarrant County. "Last quarter saw a huge spurt in new starts," said James R. Harris, partner in his namesake firm. "It surprised everybody." This year, though, he predicts the total will dip 3%.

Fort Worth, like many other Sunbelt cities, will continue to be a hotbed for condo development. According to Harris, Trinity Terrace will get a second tower with 80 units; Tandy Center's South Tower project will begin; Centex Homes Inc. will start work on flats at the intersection of Texas Street and Henderson Avenue; and a Dallas developer is buying land from Acme Brick Co. for 150 units. The condo wish list will include 100 units in the Omni Hotel project in the Downtown and 500 townhouse-style units at Museum Place in the cultural district.

Here as elsewhere, price is the defining factor for condo product, with the top of the market being $275 per sf, Harris explained. "At $190 per sf, the buyer resistance really steps out," he said, tossing out a word of caution to developers in the crowd.

For the second consecutive year, the forecast event broke the 600 mark for attendees.