A pandemic-induced traffic slowdown pushed DFW retail to its worst year ever on record when it comes to total absorption, or retail net leasing activity, brokerage Weitzman said in its 2021 Retail forecast survey.
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"Even through the worst cycles, we’ve reported positive net leasing," Weitzman Executive Managing Director Bob Young said in a presentation Thursday. "Because of the sharp increase in total vacant square footage at a time of low construction, DFW absorption turned negative for the first time ever in 2020."
Last year, total retail absorption came in at negative 2.7M SF, down from positive net absorption of 3.2M SF in 2019, according to Weitzman data.
With retailers like Belk, JCPenney, Pier 1 Imports and Tuesday Morning falling victim to lower traffic and more local store closings last year, plenty of retail spaces were left in the hands of owners and brokers.
"The market now reports 16.7M SF of vacant space, compared to 12.6M SF at year-end 2019," Young said. "That jump in vacancy helped DFW set a record that we hope we never see again."
Still, a combination of slow construction pacing and increased demand for some existing space buoyed DFW retail enough to avoid the worst of the pandemic crisis and to keep overall occupancy above 90%. In past recessions, the market easily saw overall occupancy dip below 90%, according to Weitzman.
DFW's retail occupancy rate decreased from 93.7% in December 2019 to 91.7% last month.
The addition of takeout and mobile options at retailers and restaurants along with government aid in the form of the Paycheck Protection Program also helped retail tenants survive the most intense part of the coronavirus storm.
Heading into 2021, Weitzman expects absorption to remain modest but improved, with the firm estimating leasing absorption of 1M SF in 2021. The pipeline of new space also is expected to remain "extremely conservative" with Young estimating approximately 1.4M SF of new deliveries, which he called one of the lowest construction totals ever in DFW.
Weitzman projects the DFW occupancy rate will grow back to 92.5% by year-end as the market stabilizes and exceed 94% by 2022.
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