The Commercial Real Estate Landscape in 2024: Fort Worth's Unique Outlook
As we step into 2024, the forecast for the commercial real estate market suggests a shift from the challenges faced in the past two years. The sector, grappling with higher interest rates, inflation, and global energy conflicts, anticipates a more favorable landscape in the coming year.
In 2022 and 2023, the impact of these factors was felt across the commercial real estate market, causing fluctuations and uncertainties. However, with stabilized interest rates, easing inflation concerns, and a resolution to various global conflicts, 2024 brings a glimmer of optimism, particularly in Fort Worth.
Todd Burnette, Managing Director at JLL in Fort Worth, notes that contrary to popular belief, the downtown office market in Fort Worth has fared well. Despite a decrease in leasing activity and companies seeking space, the office market remains tight. The year-end report from JLL indicates a 12.3% vacancy rate in downtown Fort Worth, a notable difference from other cities like Dallas, San Antonio, Austin, and Houston, where vacancy rates range from 21% to 35%.
Companies searching for contiguous space in downtown Fort Worth might face challenges, with only 11 full floors available. The flight to quality continues, causing Class A spaces to diminish rapidly. Simultaneously, Class B buildings are undergoing repurposing into hotels or residential projects, showcasing the adaptive nature of the market.
Rents are on the rise due to this constrained office market, with JLL projecting an increase in Fort Worth office rent from the current $30.58 per square foot in 2024.
Burnette emphasizes that despite the ongoing trend of companies pushing for a return to the office, the Fort Worth office-using employment peaked in October 2023, indicating a positive trajectory. Companies are leveraging amenities to attract employees back to the office, with the West 7th/Cultural District corridor experiencing increased demand, driven by projects like the Crescent office project.
Looking ahead, Fort Worth anticipates new projects shaping up in 2024, including developments by Goldenrod and a mixed-use project at the former Fort Worth ISD headquarters site.
In the broader Dallas-Fort Worth area, the industrial real estate market leads with 41.4 million square feet of projects under development, according to CommercialEdge's industrial report. Jon Pharris, President of CapRock Partners, expects a robust year for industrial development in 2024, suggesting a potential return of institutional investors to quality industrial properties as interest rates stabilize or decrease.
Pharris emphasizes the resilience of the industrial space, contrasting it with the challenges faced by retail and office sectors. The pandemic has underscored the importance of maintaining a robust industrial base, especially with corporate relocations and the trend of reshoring or near-shoring manufacturing operations.
As the commercial real estate market in Fort Worth and the broader Dallas-Fort Worth region navigates through the complexities of 2024, optimism prevails, fueled by adaptive strategies and a dynamic industrial landscape.
For more insights into the commercial real estate market in 2024, you can attend the Tarrant County Commercial Real Estate Forecast for 2024, sponsored by the Real Estate Council of Greater Fort Worth, on Thursday, Jan. 25, at Texas Christian University’s Brown Lupton University Union.
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