Fort Worth's Center City Market
Sees a Texas-Sized Rebound

In 2001, Fort Worth's office market appeared headed for trouble. The area was losing jobs, two of the city's largest employers would soon empty their office space in favor of new digs and the former Bank One Tower remained vacant one year after being hit by a deadly tornado that tore through the city.

These days the Fort Worth commercial real estate market is riding high again. The energy boom -- juiced locally by natural gas deposits in a 15-county area, including wells being drilled within Fort Worth's city limits -- has given it one of the U.S.'s strongest center-city office markets. With a larger supply of undeveloped land than the more-mature Dallas market 30 miles to the east, Fort Worth is also enjoying faster population growth, a strong warehouse sector and an expanding retail market.

"Dallas has already popped and Fort Worth is popping now," says David Porter, president of PNL Cos., a Dallas-based real-estate investment company. Mr. Porter recalls he bought the downtown office buildings formerly known as the Tandy Center for less than $20 a square foot in 2001, when it "appeared to be a white elephant" poised to lose RadioShack Corp. to new headquarters in town, in a move completed in 2005. Retailer Pier 1 Imports Inc. also moved into a new Fort Worth headquarters in 2004.

Now Range Resources Corp., a Fort Worth-based energy company, has signed on as an anchor tenant in one of PNL's towers, while the second will become condos -- a move Mr. Porter says he was encouraged to make after the successful conversion of the Bank One Tower to residential use.

Fort Worth's office market benefits in part because its lower profile has helped it avoid Dallas's historical struggle with oversupply, even as demand has risen. Known as "Cowtown" by some locals because of the cattle drives that used to go through the city, Fort Worth recently upstaged its more cosmopolitan sister city in a ranking, based on fourth-quarter statistics by Moody's Investors Service Inc. The report rated Fort Worth's center-city office market the healthiest out of 46 surveyed in the country. Dallas's downtown, though improving, tied for the fourth-lowest ranking with San Jose, Calif.

Vacancies in Fort Worth's office sector shrank to 5.7% in the first quarter, well below the 29% vacancy rate of Dallas's downtown. Average rental rates in Fort Worth are slightly higher than in Dallas, according to Property & Portfolio Research Inc., a Boston-based real estate research firm.

The good times can be traced, in part, to demographics and an improving economy. From 2000 through 2004, Fort Worth was the fastest-growing large city in the nation. Its population jumped 12.8% to 603,337, besting Las Vegas's 11.8% growth, according to Fernando Costa, Fort Worth's planning director. The population of the larger city of Dallas increased 1.8% over the period to 1.2 million. Job growth in the four-county region that includes Fort Worth has also been robust, rising 2.5% in April from the year-earlier month, well above the national rate of 1.4%.

The Fort Worth region also has benefited from some signature developments. Sundance Square, a 20-block downtown area once marked by urban decay, has been revitalized as a vibrant pedestrian-friendly hub with about 500,000 square feet of restaurants and retail and about 3 million square feet of office space added since the early 1980s. In north Fort Worth and several adjacent communities, Ross Perot Jr.'s Hillwood real estate company is continuing to expand its mixed-use AllianceTexas development, which includes a large industrial and office park called Alliance, anchored by an industrial airport that opened in the late 1980s.

David Berzina, executive vice president of the Fort Worth Chamber of Commerce, credits Alliance with helping put Fort Worth on the radar of larger corporations that formerly only considered locating in Dallas. "Fort Worth is starting to get a more aggressive second look," Mr. Berzina says.

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