Low oil prices could bring office vacancies and job losses in Tarrant County

Tarrant County commercial real estate professionals are preparing for some office tenants to walk away from leases if oil prices continue to decline and companies lay off employees.

“My concern is not for the large energy companies, it’s for the mid-level upstream companies and the service companies,” said David Walters an executive vice president in Jones Lang LaSalle’s Fort Worth office. “They’re going to cut their budgets and result in significant layoffs in that level of company. It’s going to add more sublease space to our market, and additionally it could lead to just outright lease defaults where people walk from their leases.”

Real estate professionals speaking at the 26th Annual Tarrant County Commercial Real Estate Forecast, hosted by the Real Estate Council of Greater Fort Worth, said continued depressed oil prices could impact all sectors of real estate.

They all agreed that continued low prices will result in job losses, which will in turn reduce demand for apartment rentals, which will stall rent growth, as well as store closures if consumers are not spending money.

“This could be a huge cliff for retail,” said Jay Redford, senior director at the appraisal firm Integra Realty Resources in Fort Worth.

Peter Beck, executive chairman of the Dallas-based construction firm The Beck Group, said the lower oil prices could result in lower prices for some petroleum-based materials and products. In the past year, Beck said prices had been increasing 3 percent to 5 percent, but now, “All bets are off. I can’t really tell you where prices are going.”

Not all of the forecasts were dire, however.

Drew Kile, director of Institutional Property Advisors, a multifamily brokerage division of Marcus & Millichap commercial firm, said 87,500 new renters will move to Dallas-Fort Worth in the next five years.

And Tony Creme, senior vice president for Hillwood Properties, developer of the 18,000-acre Alliance project in north Fort Worth, said Dallas-Fort Worth currently leads the nation in the construction of industrial space, with one in every 10 square feet of space being built in the U.S. in North Texas.

Last year, Fort Worth was among finalists for the $5 billion Tesla Motors battery factory, confirmed David Berzina, executive vice president of economic development for the Fort Worth Chamber of Commerce. In September, the project was awarded to Reno, Nevada, after the city and state offered the company a $1.3 billion incentive package.

Fort Worth could not compete with the offer, Berzina said, but Tesla CEO Elon Musk looked at the Alliance development. Berzina said city and business leaders were told in November they could break a confidentiality agreement not to disclose the finalists.

Cities in California, Arizona and New Mexico, along with San Antonio, were said to be among the final group.

“There will be another Tesla project coming along someday and we will certainly be ready,” Berzina said.

This story was originally published January 15, 2015 at 2:59 PM with the headline "Low oil prices could bring office vacancies and job losses in Tarrant County."