Tornado Anniversary: Rents Up, Space Still Down

Still unresolved is the closing date for the sale of the 487,000-sf Bank One Tower between Fine Line Diversified Realty Inc. and owner, Loutex Ft. Worth. The ink is a month old on a purchase option and the deal's not done. There is some speculation that a signing could come on today's anniversary. The final signing brings a wrecking ball with it.

What is a reality is that the sale will give the Bass family control of two of the four class-A office properties in the CBD. "It's a great move on their part to tear it down," Ben Loughry, managing director of Integra Realty Resources, tells GlobeSt.com. "I think it was the smartest move they could have done. They've solidified their Downtown interests."

Loughry, who is a third generation commercial real estate professional, says the early 1980s and two years in the early 1970s might have had higher class-A occupancies, the latter of which had forced the construction of the now ruined 37-story Bank One Tower. Loughry believes occupancy in the CBD, which had more than one million sf displaced in one day, right now is riding in the mid-90% range. Hours before the storm, occupancy had hovered at 85%, with rents falling in the low end of the $18 per sf to $22 per sf range. Today's rents are reaching into the upper end of the scale, with property owners driving tougher terms at the bargaining table.

In the coming two years, Loughry foresees rents will jump between 5% and 10% because of the CBD's lack of class-A space. And, he says, the rent increases very well could trickle into the high-end class-B locations. The Bass family's new Bank One tower already is commanding rates of $22 per sf to $25 per sf, he says.

Many of the Bank One tenants had held out hope that the structure would be returned to the market, inking only six-month to one-year leases at temporary locations. Hope fell by the wayside just 60 days ago when Trammell Crow Co. withdrew a bid to buy the Bank One Tower and restore it to the market. Now, displaced tenants are searching for permanent space and it's tough going.

Companies are looking at the immediate alternatives, which could be downsizing or jumping to Dallas, Ft. Worth's chief rival. Dallas' class-A rates are running between $22 per sf to $28 per sf, but the upside is there is ample room to be had. And, says Loughry, it's been proven that the out-of-towners "can work in Dallas as easily as they do in Ft. Worth." Moving to Ft. Worth's suburbs could be as tricky as trying to stay in town, says Loughry, a valuation and counseling professional. "They're running at 95% occupancy."

Building of the class-A variety is sure to come, but Loughry estimates that it will take two years for any completions, including a planned makeover for the former one million-plus sf Montgomery Ward office building. He estimates it will be at least another year before the dust settles from the tornado and all who want to stay in Ft. Worth have found their resting place. "It's tight," he reiterates. "If they can find something they like, they better not delay making a decision.