Lauren Paris, CBRE
Fort Worth, which makes up the core of the western side of the Dallas/ Fort Worth Metroplex, has seen expansive growth both economically and in its resident base, making it an attractive destination for businesses and consumers alike.
The population of the Fort Worth- Arlington Metropolitan Division has grown by more than 35 percent since 2000, according to estimates from Moody’s Analytics.
Forecast data from Moody’s indicates a continuation of this trend, with projections through 2030 anticipating a total population of over 3.1 million, which is the current size of Iowa. Personal income is another demographic that has experienced a strong growth rate in recent years. Moody’s
Analytics forecasts the fourth quarter to have been the strongest quarter of year-over-year growth in 2014, with 8.7 percent growth for personal disposable income and 7.9 percent growth for total personal income. This may be a telling sign that the impact of lower oil prices has accelerated consumer spending at the onset of the oil price decline in June 2014.
Furthermore, retail sales growth steadily increased throughout 2014 in the Fort Worth metropolitan division, with the most recent figure for Fort Worth (4.9 percent) outpacing the national rate (4.1 percent) at the close of 2014.
Multifamily Vacancy
Given the amount of residential and economic growth flowing into the Fort Worth region, the residual effect on commercial real estate has resulted in tightened vacancy and higher rents, which has prompted a notable amount of multifamily development and expansion from retail and restaurant chains. For the combined multifamily submarkets that constitute Fort Worth, the total vacancy sat at 7.4 percent at the end of 2014, 135 basis points lower than its level in early 2012.
Over this same time period, average rental rates have grown by 12.8 percent, with the monthly average rising from $0.83 per square foot to $0.94 per square foot. The Downtown Fort Worth/TCU submarket has been a particularly strong pocket for multifamily development.
At the end of 2014, 1,316 units were under construction, which equates to 15 percent of the existing inventory in that area. A prime example of the demand that is fueling this growth is The Lofts at West 7th, which has experienced a waiting list for new residents.
Retail Expansion
Prompted by higher consumer demand, a number of national retailers have recently entered the Fort Worth market or have announced future store openings.
H&M will be new to the area and has committed to a 31,000-square-foot space in Sundance Square, set to open in late fall 2015. Other retailers expanding into Fort Worth include The Fresh Market and Tyler’s, both set to open at Westbend in the University District.
Whole Foods Market will open a newly constructed location in southwest Fort Worth when the Waterside mixed-use development is completed in the spring of 2016. Although not a new market entry, Target opened a new store at Presidio Junction in North Fort Worth in 2014. This was not only the first Target opening since 2009 for Fort Worth, but for all of the metro area.
Additionally, Neiman Marcus will relocate from Ridgmar Mall to anchor the Shops at Clearfork development, an outdoor, open-air shopping center, with the first phase set to open in early 2017. This is significant because it will be the first fully built store for Neiman Marcus in many years.
Restaurants have also been branching out west of the Metroplex, with many Dallas-based restaurants opening new locations in Fort Worth. Some of these include Cane Rosso, Social House, Wild Salsa and Chop House Burger — the latter two are groundfloor tenants at One City Place, a recently renovated mixed-use project in downtown Fort Worth.
This demand for retail and restaurant space has had an effect similar to that of the multifamily sector, including higher occupancy and asking rents. At the end of 2014, occupancy for the collective Fort Worth region hit 92.7 percent, a record high for this area.
The Central Fort Worth submarket, which includes downtown, is driving the overall rise in rental rates, with a year-over-year asking rate growth of 10.5 percent in the fourth quarter.
Despite this growth, retail construction remains relatively low given such high levels of occupancy and rents, with 1.3 million square feet in the pipeline and only a little over 300,000 square feet in the City of Fort Worth.
— By Lauren Paris, senior research analyst, CBRE. This article originally appeared in the May 2015 edition of Texas Real Estate Business.