DFW Retail Inventory Targets 200M SF

DALLAS—The DFW retail market as of mid-year 2018 has been able to maintain steady occupancy in the face of major store closings because the closures are being largely offset by pre-leased new construction and the backfilling of large vacancies. At mid-year, the occupancy rate was 92.5%, a slight increase from year-end 2017’s 92.4% occupancy, according to a recent report by Weitzman.

The occupancy rate is one of the market’s highest in more than three decades, second only to the 92.7% occupancy DFW reported at year-end 2016. The mid-year 2018 occupancy rate is based on Weitzman’s review of a total DFW retail market inventory of 198.1 million square feet in projects with 25,000 square feet or more, the largest retail inventory in any Texas metro area.

“The market remains solid and healthy thanks to conservative construction, steady retailer demand and an incredible economy that ranks as one of the best in the nation in just about every category there is,” Ian Pierce, vice president of communications for Weitzman, tells GlobeSt.com.

There are two major legacy retailers closing stores this year, creating more than 1 million square feet of vacancy. Together, these closed stores represent only about one-half of 1% of vacancy, based on DFW’s retail inventory, which limits the overall negative impact on the market’s health.

These closings involve three Sears mall-anchor stores and Toys R Us stores, totaling approximately 600,000 square feet. Based on interest from concepts ranging from fitness uses to multi-tenant redevelopment, the best located of these vacancies are expected to be absorbed or redeveloped within the next 18 months. The Sears stores are set to close by fall 2018 and operators are seeing interest in the locations as anchor or multi-tenant space.

Leasing in existing centers boosted occupancies by eliminating vacancies from the market. Many of these projects involve renovations and redevelopments, with examples including The Shops at Willow Bend in Plano, The Hill in northeast Dallas, a new Central Market in the Preston Hollow neighborhood of Dallas, and sister centers Trinity Valley and Trinity Plaza in Carrollton.

In terms of new space, DFW has a good deal of development activity, with space expected to open by year-end, on pace to mirror the 4.1 million square feet in 2017. Based on projects underway and announced openings, the market is on track to add approximately 3.48 million square feet of retail space during 2018. With those additions, the year-end DFW retail market inventory will hit the 200-million-square-foot mark for the first time.

The outlook for 2018 and going into 2019 remains positive as retail is supported by growth in the key areas of population, job gains and single- and multifamily housing deliveries.