Retail Rents Skyrocket In DFW's Northern Suburbs. Retailers Are Happy To Pay Up

Bulging construction budgets and ballooning rents haven’t slowed retailers from rushing to lease space in Dallas-Fort Worth’s hottest emerging suburbs.

Rents in Metroplex cities such as Prosper, Celina and Melissa have jumped from the mid- to high $30s per SF five years ago to as much as $50 per SF now, according to figures from Weitzman.

That's a leap of up to 42%.

The spike is driven by skyrocketing costs for construction. 

Weitzman opened the first half of its 36K SF The Creeks at Celina project in August less than half a mile from Dallas Parkway. The second phase is slated to follow next year, but construction bids have come in 20% higher than the first phase, Weitzman Senior Vice President Ben Terry said.

“The only way a developer can make these projects pencil is, unfortunately, by raising the rents,” Terry said.

While the high price tag for space means mom-and-pop shops are being locked out of the northern suburbs, those cities have some of the highest average household incomes in the Metroplex, affording them the purchasing power to keep high-end retailers happy and new construction profitable.

Limited supply and strong demand drove the broader DFW metro to 4.3% annual rent growth during the third quarter, according to the latest retail report from Matthews. 

The metro’s average asking rent of $25.15 per SF pales in comparison to the prices being charged in Collin and Denton counties. 

Average asking rents in Allen and McKinney were each more than $30 per SF, while Frisco topped the submarkets chart at just over $40 per SF. 

A separate study by Coda Consulting Group found triple-net leases in the mid- to high $40s per SF for new retail construction are common in cities like McKinney and Prosper, and restaurant rents can easily exceed $50 per SF.

And yet McKinney and Frisco each have vacancy rates under 3.5%, while Allen's sat at 4.3% during the third quarter.

President Donald Trump’s trade war and immigration crackdown helped push materials and labor prices up this year nationally, project management and cost consulting company Cumming Group found. Nonresidential construction costs are up 2.6% year-over-year, Bureau of Labor Statistics data shows, and are expected to continue rising throughout the remainder of the year.

“The longer you wait, the more expensive it's going to cost to build these new developments, and the more rents [are] going to be demanded out of it,” Terry said. 

That isn’t slowing retail development in the Metroplex’s high-growth cities like Frisco and Melissa, said Coni Hennersdorf, principal of Fort Worth-based Coda Consulting Group.

“That's where raw land is still available,” Hennersdorf said.

Allen, McKinney and Frisco alone combine for 900K SF under construction, 13% of the DFW metro’s total pipeline.

One way to recoup construction costs is to bring in a larger percentage of food and beverage spaces. Restaurants typically generate higher gross sales than clothing retailers and thus can pay higher rents.

Those tenants demand higher tenant allowances to cover build-outs with specialized seating and lighting, said Wilks Development Vice President of Commercial Development Chad Long, whose firm went vertical on the multibillion-dollar Firefly Park mixed-use project in Frisco earlier this year. 

While Firefly Park will have a healthy dose of restaurants, Long said the development was designed and carefully curated with a specific audience in mind: high earners with disposable income.

The more than 2,000 households within 1 mile of The Creeks at Celina have an average household income of more than $238K per year, according to Weitzman. Census Bureau data shows Celina’s overall average household income was nearly $156K in 2023, while neighboring Prosper’s average was more than $187K. 

“That's why you see Prosper and Celina and all these tertiary markets just explode,” Terry said. 

That purchasing power isn't limited to cities in Collin and Denton counties. Tarrant County cities Southlake and Colleyville ranked on a list of the wealthiest suburbs in the U.S. this year. Southlake boasts an average household income of more than $382K, while Colleyville's was nearly $266K per year.

Weitzman is planning an infill development of around 17K SF in nearby Flower Mound that is part of a large mixed-use project.  

“In order to be able to build this thing, we have to get $50 [per SF] — that's our floor,” Terry said. 

Despite those elevated rents, Terry characterized tenant response to the Flower Mound project as “fantastic.” 

Grocery anchors have become a big component in developing a successful retail project in the Metroplex. But grocers and other major retailers are skipping rising rent rates by opting to own their property.

“H-E-B, Kroger — they're all buying their dirt and building because it's the only way they can make it pencil,” Terry said.

Walmart is in on the trend as well. The retail giant bought its third shopping center of the year this week as it pushes to own its own real estate.  

For tenants that aren’t able to go that route, Terry said they should work with their landlords and be willing to discuss their projected gross sales. 

“What we don't want to do is sign a lease with a tenant that may get over their skis and not be able to perform,” Terry said. “That hurts them, and it certainly hurts us.”