DFW Retail Reaches Highest Occupancy Since 1981
Dallas-Fort Worth's retail real estate market finished 2019 with a 93% occupancy rate, the highest level on record since 1981 when retail occupancy hit 94.8%, Weitzman said in the firm's 2020 Shopping Center Review & Forecast.
But Weitzman's study shows North Texas retail is thriving. DFW retail is in a healthy balance with occupancy levels above 90% in 36 of the area's 42 submarkets and construction activity declining enough to ensure North Texas is not hamstrung by excess inventory. A decade ago, in the heart of the recession, only 17 retail submarkets reported occupancy rates over 90%, according to Weitzman.
The company expects retail construction levels in 2020 to remain at a conservative 1.9M SF and retail's Metroplex-wide occupancy rate to grow to 95% by year's end.
"In the past, we've traditionally seen a bifurcated market in DFW," Executive Managing Director Robert Young Jr. said in prepared statements. "We would see booming new-growth submarkets in Collin County or North Fort Worth at 95%, while at the same time some long-established urban markets [had] no growth; outmoded retail centers were lucky to break 85%. But now, our retail stability is shared throughout DFW."
Retail Construction Is Down, But Right-Sized For Today's Market
DFW retail construction last year hit 1.8M SF, down from 3.5M SF in 2018. Meanwhile, the average new retail footprint declined to 64K SF in 2019, down from 124K SF a decade earlier, according to Weitzman.
This drop-off in construction and overall retail space size is the natural outcome of retailers cutting back on excess space and focusing on convergent retail channels that combine in-store and online sales strategies.
"Our strong occupancy is not a fluke," Young said in the report. "We’re now in our seventh year of near-record occupancy in DFW. This is the most geographically balanced retail market in DFW’s history. Almost every single one of our submarkets is healthy."
DFW malls also staged a comeback in 2019 with the area's remaining 17 malls reaching an occupancy level of roughly 90% at the end of last year, according to Weitzman.
The rise in mall occupancy is the result of weaker malls dropping off the rolls either through demolitions or redevelopment projects and the addition of new tenant types, including discount retailers, food concepts and fitness spaces, filling in vacant spaces.
"Malls never used to accept uses like fitness or medical — now they welcome these. They’ll do whatever it takes to drive traffic during the week," Young said. "This past year proved that malls are good real estate — just not necessarily good retail real estate."