Energy Reserves Fuel $2B Promise for North Texas

The economic impact, based on royalties, works out to $250 million to $500 million flowing each year into the North Texas economy, according to Devon Energy calculations released yesterday at the 2004 Tarrant County Real Estate Forecast. Ben Loughry, managing director in Fort Worth for the New York City-based Integra Realty Resources LLP, told the crowd of 500, double last year's head count, that each well will cost $500,000 to $1 million to drill and generate $1.2 million annually. The upshot, he says, "it could kick in as much as $2 billion per year in gross dollars."

In the last two years, there have been 2,000 wells drilled and completed in northern Tarrant, Denton and Wise counties, said John S. Baen, a real estate professor at the University of North Texas. Denton County alone has picked up $3 billion for the tax rolls from the 24-month windfall.

"Texas is the only place to be for the next decade," Baen stressed to the packed room at the Fort Worth Convention Center. And Fort Worth, he later told GlobeSt.com, "needs to nurture the oil and gas business ... and nurture the developers." Fort Worth, unlike its sister city to the east, has annexed and set itself up for growth in all directions. He says the ability to grow and the capital streaming in from oil and gas coffers offer Fort Worth something that Dallas can never have.

That's not to say Fort Worth and the rest of Tarrant County don't have needs. Baen believes micro-markets is the niche play for the coming years. From his perspective, the city's retail is overbuilt; there's no need for additional office; and industrial users will buy instead of lease. And bottom-feeder opportunities will creep into the market as lenders quietly take back properties, he said.

Boring into real estate numbers, Fort Worth ended 2003 with 1.5 million sf of negative industrial absorption in contrast to a 310,870-sf positive reading for office. Industrial vacancy is 12.2%, rising for the fourth consecutive year. Todd Burnette, senior vice president for Staubach Co., predicted the industrial rate will finally go down, perhaps to 11% as the year progresses. An uptick will come from users looking for 20,000 sf to 30,000 sf. "We haven't seen that for some time," he said.

In the office sector, tenant retention is the key. Jim Eagle, president of Fort Worth's Red Oak Realty LLC, says early renewals with longer terms will come from tenants looking to land in class A properties. Meanwhile, building owners will be laying out some concessions and settling for flat rates to keep properties filled.

However, Fort Worth's state of affairs is considerably better than most: 92% occupancy in class A buildings; 89% in class B; and 81% in class C. As for rents, class A properties are getting $22 per sf to $23 per sf; class B, $15.50 per sf to $16 per sf; and class C, $12 per sf to $13 per sf.

James R. Harris, a residential developer of master-planned communities and infill sites, reported 15,000 of the 37,000 housing starts in the metroplex are ticketed for Fort Worth. High-growth spots to watch are Crowley, West Fort Worth and the 114 Corridor whereas infill development, though a hot topic, still has a couple years before it takes root.

Whether it's the Barnett Shale or Lockheed Martin's potential for 20,000 jobs with the Joint Strike Fighter program, Fort Worth is well positioned. And new and different institutional investors are coming to town as a result, Eagle said. As for his final prediction, he ended with a teaser: Before the year ends, at least one corporate tenant will sign for 150,000 sf or more in the CBD.