Todd Burnette Forecast 2010

8/14/2019 Todd Burnette Forecast 2010

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Fort Worth office market

January 13, 2010

Todd Burnette


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Fort Worth Office Market

2009 Market Recap

Market Conditions - Choice, Competition and Economics

2010 Outlook and Advice


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19.5% Vacancy


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Fort Worth Market Recap

CBD vacancy up over 17%

200,000 SF + shadow space downtown

Concessions up

Effective rents down 20% (in most buildings) vs. Peak Tenants wanted deals


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Market Deals

Oncore 201,354 SF

Lockheed 61,945 SF

eRx 19,317 SF

Dunaway & Associates 30,304 SF Weaver LLP 36,000 SF

Goff Capital/Barclays 17,000,000 SF Crescent Portfolio

Jackson Walker 18,014 SF

McDonald Sanders 19,765 SF

Corinthian College 40,794 SF


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Reduction in operating costs

Reduction in capital investments

Reduction in spending on philanthropic activities

Hiring of talent that would not have been available otherwise

Close offices

Top steps taken by Tenants in response to economy


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Choice, competition, and economics

Choice: Increased number of options.

Competition: On the tenant demand side, competition is minimal.

Economics: Rent reductions can be found in most buildings.


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Choice: Class A vacancy levels continue to climb

2009 Class A vacancy rate 2008 Class A vacancy rate

0%

5%

10%

15%

20%

25%

30%

Washington, DC Chicago Fort Worth Houston

Fort Worthvacancy up

174%


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Choice: Sublease options grow

New York Chicago Atlanta Fort Worth

Fort Worth subleasespace up 275%

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000


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Rent: Effective rents down 20%

-50.0%

-45.0%

-40.0%

-35.0%

-30.0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

NYC Washington, DC Fort Worth Chicago


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Combination of lender tightening

and spread between ask/bidcrippling transaction activity

Investment Sales:


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Notable Investment Sale

Carter Burgess Plaza Goff Capital & Barclays Capital

954,000 SF

96% Leased

Stabile Ownership

Aggressively Doing Deals

- Jackson Walker

- McDonald Sanders- Petroleum Club


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Market Outlook - 2010


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Economic recovery - positive signs but too early tocelebrate

The good news- Financial crisis averted

- Equity markets will improve- Pace of job losses will slow

And the risks- Foreclosures push values down further

- Credit Crunch lingers

- Consolidations/Acquisitions could add more space to the market


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Investor and lender mindset heading into 2010

Lenders will continue to deleverage balance sheets Opting to extend and pretend

Widespread distress only beginning to develop, more is inevitable Equity from 2005-2007 purchases is gone

Sellers better off holding than selling at distressed prices

Transaction activity likely to remain flat Trades likely to be distressed or super core assets Banks holding properties taken back rather than selling distressed


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Tenant mindset for 2010

Focus on cost savings Align space with new demand levels Restructure leases

Focus on the employee Reduce costs and improve productivity

Elevate employee performance and job satisfaction


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Advice for 2010

Tenants- Tremendous opportunities for Tenants

- Enhance non-economic lease provisions

- Upgrade space and location


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Advice for 2010

Landlords- Work renewals hard and early

- Make every deal at the best rate you can


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2010 Outlook

Office fundamentals likely to lag 12-18 months behind recovery in theeconomy

Further job losses are expected

Speculative office construction will be on hold for the foreseeablefuture

Landlords will compete aggressively for tenants

Concessions will remain high

Sublease opportunities will continue to exist


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2010 Outlook

Most Fort Worth Landlords will remain stable CBD Class A rates will average $23 + E

Suburban Class B rates will average $17 Full Service

Effective rents should level out in 2010

Vacancy rate will peak in late 2010


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www.us.joneslanglasalle.com

19.5% Vacancy

Tarrant County will hit

Documents

Todd Burnette Forecast 2010