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DFW Retail Sector Sees Slight Slip In Occupancy, Anemic Construction Activity

The Dallas-Fort Worth retail occupancy rate dipped a modest 1% from late 2019 to mid-2020 even after the coronavirus pandemic ravished shopping traffic and pushed store revenue to near zero for several months, a new report from Weitzman says.

But, this slight dip in retail occupancy during the first half of the year doesn’t tell the whole story of the complex DFW retail market.

DFW Retail Sector Sees Slight Slip In Occupancy, Anemic Construction Activity
Retail occupancies declined in DFW after the coronavirus shutdowns in March, but not as much as many may have expected.

Heading into 2020, North Texas boasted a 93.4% retail occupancy rate out of a total counted inventory of 200.2M SF, when including local shopping centers with 25K SF or more.

A smaller construction pipeline in recent years and a strong economy this past decade helped DFW retail absorption remain in line with actual demand heading into 2020. 

But, by mid-2020, pressures from the coronavirus pandemic pushed the retail occupancy rate down to 92.6%, with Weitzman reporting high levels of uncertainty heading into the second half as retailers continue to struggle with the pandemic and traffic concerns. 

Thus far, as a black swan event, the coronavirus has failed to rival the 2008-2009 recession, which pushed DFW’s retail occupancy down to 86%. 

Weitzman is predicting a further decline in absorption but said it will be offset by lower levels of construction in the coming months. The company is expecting the market to add 1.3M SF of new and expanded retail space in 2020, down from 1.7M SF in 2019 and a dramatic drop from 3.5M SF in 2018. 

"The new space deliveries on track for 2020 remain conservative and reflect not only construction delays and caution during the pandemic but the nationwide and statewide trends of limited anchor expansions, existing project redevelopments and mixed-use and unanchored retail projects (which tend to be well under 100K SF)," Weitzman wrote in its latest report. 

DFW construction activity next year is expected to drop even further to 1.2M SF of retail, according to Weitzman. 

What's helping DFW retail is demand from ongoing population growth. 

"Retail follows rooftops, and in DFW, single-family construction and new home sales were up during the first quarter of 2020 over the same period in 2019," Weitzman wrote. "More than 8,000 new single-family homes started during the first quarter of 2020, according to MetroStudy, and the annualized rate shows almost 34,000 new single-family homes."