Office, Industrial Hold Their Own in 2012

FORT WORTH-When it came to office and industrial space in Fort Worth during the past year, the main thrust involved businesses eyeing the city and county as a good site from which to do business.  Presenters at the 2013 Tarrant County Commercial Real Estate Forecast on Jan. 24 pointed out that vacancies varied, while speculative development was cautious, though build-to-suit projects were holding their own.

David Walters, executive vice president and regional director of Jones Lang LaSalle's Fort Worth Office point out that while businesses have always been enamored with the northern part of Tarrant County (specifically, Alliance Gateway), the CBD was starting to come back into its own. With technology and energy as the drivers, the office side did fairly well when it came to leasing. "If we see a spike in energy prices," he says, "it'll tighten up even further."

Office vacancy was 11.2% out of a total 51.2 millon square feet, with absorption at 620,000 square feet. "Absorption was strong," Walters acknowledges, "but it could have been stronger."

However, one of the main deals, that of Basic Energy Services and its lease at 801 Cherry St., was a good highlight for the year, as was Jacobs Engineering opting to remain at 777 Main St. rather than leaving a potential 70,000 square feet of space vacant. "We'll be seeing more of these deals coming to Fort Worth in 2013," Walters predicts.

His other predictions for 2013 included

• TLC Urban will break ground on 80,000 square feet in its mixed-use, 12-acre Museum Place, located in the Cultural District.
• Last spring, the Federal Aviation Administration (FAA) announced it wanted to move its Southwest Region office to Alliance Gateway. Trammell Crow  has been selected to develop the 357,214-square-foot building at a cost of more than $100 million. But another side to this story is that Hillwood is planning and will likely break ground this year on a speculative development, Alliance Town Center North, across the street from the FAA building.
• Community Trust is ready to launch construction on a 40,000-square-foot building on the western edge of downtown.
• Lancaster Place, a 235,000-square-foot, mixed-use public/private development near the CBD should also break ground in 2013.

On the industrial side, Hillwood Properties' senior vice president Bill Burton pointed out that absorption for 2012 stood at 4.1 million square feet, with deliveries totaling 634 million square feet and an additional 4.4 million square feet under construction. The vacancy overall is 8.7% in a market with a total of 318 million square feet. Typically, he went on to say, these figures tend to lead to a lot of speculative development – while there has been some spec construction under way, it isn't a whole lot. "There are about seven or eight different developers that have around 3.5 million square feet planned," he notes. "But whether they pull the trigger on that remains to be seen." Part of the reason for the hesitancy is that bugaboo of construction lending, which is still problematic. Furthermore, while the warehouse and distribution space is leasing fairly well, flex space remains flat, Burton explains.

His predictions were that restrained speculative development would resume in various industrial submarkets throughout the county, with economic development incentives continuing to play a role in attracting new business. He also predicts that market vacancy will fall below the 30-year average of 9% in the coming year.

Neither Walters nor Burton sees much in the way of overbuilding, however.  Walters says developers are being thoughtful when it comes to what is going into the ground. Furthermore, "there continues to be headwinds when it comes to financing and equity requirements," Butler adds.