By Cullen Donohue Senior Associate, Fort Worth.
Fort Worth is the 12th largest city in the U.S., based on population. Surprising, but true. The city is home to the oldest stock show and rodeo in the country, the Southwestern Exposition, and is nicknamed Cowtown for its deep roots in the cattle ranching industry. As a city whose business portfolio was once comprised primarily of oil and gas-related business, the landscape is changing. Fort Worth is experiencing increased demand for corporate office relocations from companies spanning many different industries, plus the much-lauded “flight to quality” movement is increasing demand for Class A office space. The challenge—or the opportunity—is that Fort Worth is severely lacking the Class A office inventory to support its large and growing population.
It starts with labor data
The City of Fort Worth reported (June 2021) that U.S. Census estimates show Fort Worth leaped from the 13th to the 12th largest city in the country. The Census reports Fort Worth’s population at 927,810, up 26% from 2010.
To examine U.S. cities comparable in size (ranked by population) we reviewed data to compare the labor force against available office space (per square foot) for white collar workers across markets.
Labor data and office statistics – listed by population size.
| City | Population Total (2021) | Employed Population (16+) | White Collar Workers (% of Pop.) |
Total Number of White Collar Workers |
Blue Collar Workers (% of Pop.) |
Service Workers (% of Pop.) |
2021 Office Inventory (SF) |
Office Space (SF) per White Collar Worker |
|---|---|---|---|---|---|---|---|---|
| Houston | 2,402,820 | 1,183,294 | 58.80% | 695,777 | 25.20% | 15.90% | 263,320,479 | 378 |
| Phoenix | 1,637,800 | 811,492 | 61.90% | 502,314 | 22.00% | 16.10% | 122,080,095 | 243 |
| Philadelphia | 1,587,938 | 685,091 | 62.60% | 428,867 | 17.40% | 20.00% | 195,998,978 | 457 |
| San Antonio | 1,463,625 | 667,360 | 60.60% | 404,420 | 21.70% | 17.70% | 51,411,651 | 127 |
| San Diego | 1,379,090 | 702,692 | 71.80% | 504,533 | 13.00% | 15.20% | 73,520,240 | 146 |
| Dallas | 1,367,628 | 690,150 | 59.10% | 407,879 | 25.20% | 15.70% | 240,396,465 | 589 |
| San Jose City | 1,015,492 | 526,766 | 69.40% | 365,576 | 16.50% | 14.10% | 96,683,236 | 264 |
| Austin | 992,111 | 553,860 | 72.70% | 402,656 | 14.40% | 12.90% | 81,848,888 | 203 |
| Jacksonville | 939,480 | 457,326 | 64.20% | 293,603 | 20.30% | 15.50% | 37,182,831 | 127 |
| Fort Worth | 927,810 | 441,643 | 60.60% | 267,636 | 25.10% | 14.30% | 45,908,415 | 172 |
| Columbus | 888,790 | 483,569 | 66.10% | 319,639 | 18.20% | 15.60% | 65,461,103 | 205 |
| Charlotte | 880,019 | 466,103 | 68.20% | 317,882 | 18.30% | 13.50% | 79,091,014 | 249 |
| Indianapolis | 874,859 | 464,248 | 61.50% | 285,513 | 23.30% | 15.20% | 62,612,580 | 219 |
| San Francisco | 873,035 | 516,674 | 78.50% | 405,589 | 9.10% | 12.40% | 145,112,414 | 358 |
| Denver | 756,840 | 408,155 | 71.00% | 289,790 | 15.50% | 13.50% | 131,979,440 | 455 |
| Seattle City | 746,668 | 446,720 | 80.30% | 358,716 | 8.60% | 11.10% | 157,109,933 | 438 |
| Washington City, DC | 705,054 | 400,424 | 83.10% | 332,752 | 6.00% | 10.90% | 416,842,269 | 1,253 |
| AVERAGE | 67.70% | 17.60% | 14.7% | 346 |
Despite being the second fastest-growing large city in the U.S., our findings indicate that Fort Worth has the fourth-lowest rate of office space per white collar worker among seventeen of the top-20 largest cities in the U.S.
Given Fort Worth‘s 24.62% population increase from 744,504 in 2010 to 927,810 in 2021, and the current comparably low percentage of office space per white collar worker, it is our view that Fort Worth is well-positioned for new office developments and should be on the radar of developers across the nation.
What is driving the population growth? And will it continue?
We reported on the growth of “Hot Markets” in the Sunbelt and why masses of people and businesses are relocating to places like Austin and the Carolinas. The biggest magnets are comparably low taxes, business-friendly environments, and the high standard quality of living. Fort Worth also offers those benefits with favorable personal taxes, a large pool of professional talent, and numerous business incentives, combined with vibrant, walkable urban districts, great nightlife, proximity to eight prestigious universities, public parks, and green spaces, and world-renowned art museums. Fort Worth’s burgeoning population is good news—as long as the city and its infrastructure can sufficiently and sustainably grow to accommodate, employ, and provide for its residents within city limits.
Charles Schwab’s recent relocation from California to Fort Worth, with the delivery of their new, three-building, 1.2M SF headquarters, is further evidence that Fort Worth is attracting interest from other large corporate relocations (including financial services, technology, and manufacturing companies). However, Fort Worth faces a challenge as the relatively small amount of Class A office space cannot satisfy the demand and needs of these corporate tenants, resulting in Fort Worth oftentimes losing out to Dallas and Austin. Fort Worth has lagged behind other major Lone Star cities in new office development, but the city has the potential to become an economic hub and has the intangibles to capture the attention of more large corporate companies who are considering Texas as a location for their future headquarters. It is critical, however, that Fort Worth delivers new Class A office space to keep up with demand and continue to provide options to continue to attract the large corporate tenants.
Over the past 5-years (dating back to 2016) Class A space has accounted for over 97% of the 5M SF of total net absorption in Fort Worth. And, we continue to track market activity and demand for office space.
| >1.6M SF | 9 | >1.3M SF |
|---|---|---|
| Large Deals in the Market |
# Downtown Fort Worth Buildings that could accommodate a 20K SF requirement |
Leasing Activity Over 10K SF 2020-2021 |
Flight to quality
Relocations aren’t the only thing driving demand for high-quality office space. According to Downtown Fort Worth, Inc., there are 1,500 existing businesses in downtown Fort Worth, with around 46,000 employees. More and more workers in Fort Worth are returning to their offices each week, a parking survey by Downtown Fort Worth Inc. reported in July 2021 that 50% of workers were back in the office, a number higher than the 36% average across 10 tracked U.S. markets as reported in October 2021 by Dallas Business Journal. With expectations of herd immunity and increasing rates of vaccinations, the number of workers returning is anticipated to steadily follow suit. Leasing activity from existing businesses as well as incoming investment is up, in lockstep with predictions and expectations, but interest is closely focused on Class A space.
Fort Worth is experiencing a noticeable flight-to-quality, with demand for Class A significantly outstripping every other office product type. Demand is a result of occupiers choosing to maximize their work environments with collaborative workspace, daycare, leisure space, dining options, modernity, walkability, and convenience. The once acceptable Class B or C space—with rows of 1980’s beige cubicles, minimal amenities and dated interiors—is no longer tolerable. For existing Fort Worth companies, as well as businesses moving to the area, the focus is on attracting new talent and bringing existing talent back into the office. Companies are upgrading their office spaces to achieve this, and Class A space is the expectation.
The findings in Stream’s Fort Worth Q3 2021 Quarter Report support this point:
- +1.67M SF of net absorption Class A space with an average rental rate of $28.76
- Negative 160,000 SF of net absorption in Class B space with an average rate of $21.46
- Rental rates continue to increase because of demand and limited inventory
Change is coming
To step out of Dallas’ shadow and compete for a high-growth business, the supply and quality of office space in Fort Worth must be increased. Fortunately, this evolution is underway as developers are now realizing this opportunity and potential of Fort Worth.
Stream’s Q3 Quarter Report notes total office inventory as 43.3M SF with a 12.1% vacancy rate. Only three new office buildings delivered over the last three years, but there are currently five notable office buildings under construction-the quality, and the landscape of Fort Worth’s office base and business appeal is about to flourish.
High-profile new Fort Worth developments include:
- Fort Worth-based Crescent Properties broke ground on a new development in the Cultural District. 160,000 SF, Class A office with a luxury hotel and multifamily residences.
- Construction of Triune Centre, a 30,000 SF, Class A office development by Cornerstone Projects Group and Trident Structures and leased by Stream. Stream and the landlord were successful in pre-leasing half the building to Vantage Bank Texas before breaking ground.
- Goldenrod Companies will deliver The Van Zandt, a mixed-use development with 100,000 SF of Class A office, 11,000 SF retail and 150 multifamily units—also leased by Stream—located in the Culture District. The Van Zandt is the first sizeable, speculative office development in Fort Worth since 2017 and will break ground in Q1 2022.
- The 701, a 52,000 SF office over retail development in the Near Southside, includes roughly 12,000 SF of retail space and 40,000 SF of office.
- The recently delivered District 114, a 100,000 SF, 4-story office building, located off Highway 114 in Southlake.
Dan Harris, Stream’s Managing Director of Tenant Representation, emphasized the need for continued Class A growth, “Fort Worth has recently emerged as a realistic option for some of our larger occupier clients who are looking to expand their operations or relocate to the metroplex. We have seen the demand for more projects like the Van Zandt come to market. If the city can bring additional Class A office developments to the area, Fort Worth will become a major contender for corporate relocations and has the opportunity to be the next area in DFW to see an explosion in office development.”
Fort Worth continues to need additional Class A office development. Sustained and sustainable economic growth depend on it. Economic development is the key to providing opportunities for the growing number of residents and the main element to shape the future of the city.
Fort Worth is already known as an incredible place to live, that’s why the population keeps on growing—people are drawn to the small-town friendliness and big-city benefits. Building up Fort Worth to compete for business and win against the likes of Dallas and Austin will secure inward investment, opportunities, and the city’s future as a leading place to do business.
Cullen Donohue serves as a Senior Associate within Stream’s Fort Worth office division. He specializes in tenant representation, project leasing, development, acquisitions, and investment sales throughout the greater Fort Worth market.
