Dallas/Fort Worth’s retail market continues to show the impact of the economic downturn, most notably in a lower occupancy rate. But the market at mid-year 2010 is showing signs of getting a little better. The market is helped by the improving economy. For example, April represented the third month in a row of positive job growth in D/FW, although overall unemployment remains more than 8 percent.
As of mid-year, D/FW shows an occupancy rate of approximately 86.2 percent, compared to 86.4 percent at year-end 2009. The rate, which is very low, results in part from the many vacant boxes that were created in the past few years by the closures of Circuit City, Linens ‘n Things, Shoe Pavilion, Steve & Barry’s and Mervyn’s, plus underpforming grocer and department store locations. The rate remains fairly consistent thanks to a market where no major chains have gone out of business. Other than a handful of 2010 closings of underperforming Blockbuster stores (following a number of 2009 closings), we haven’t seen major chain pullbacks similar to when Linens ‘n Things failed in late 2008 and Circuit City and closed its last stores in early 2009, putting hundreds of thousands of feet back onto our market.
The market continues to see fairly weak small-tenant leasing, keeping small-center vacancy high at 18 percent. Also, the slowdown in leasing means that some new projects, like Park Lane, have an excess of vacant, small-tenant space, despite strong lineups of anchor tenants. Still, the market’s key vacancies are being filled, although not as fast as we’d like to see. Here are some recent deals:
• PetSmart leased a 35,000-square-foot Linens ‘n Things space at Vista Ridge Village in Lewisville.
• Sprouts Farmers Market grocery is backfilling 30,000 square feet that formerly housed Albertsons in Fort Worth’s Overton Park Plaza.
• Kroger purchased a former Albertsons on University Drive and Berry Street in Fort Worth.
• Crate & Barrel is relocating to the Shops at Willow Bend mall in Plano and, in the process, removing the vacancy created by Lord & Taylor.
• CompUSA leased a former Bassett Furniture space in Arlington.
• Aldi is entering the market with several locations in backfilled or redeveloped space.
• Disney leased the former Bailey Banks & Biddle at NorthPark center mall for its new interactive store concept, the first in D/FW.
One plus for the retail market is the dramatic slowdown in retail construction that began in 2009 and continues today. All told, new projects for 2010 are on track to add just more than 1 million square of new multi-tenant space this year. That compares to 2009, when our market saw 2.9 million square feet of new space, the lowest construction level in the previous decade.Grocers and a handful of project additions drive new construction for 2010. New retail projects include:
• Walmart, D/FW’s largest grocery chain, will open this fall in Rayzor Ranch in Denton, north of Dallas. Sam’s Club also will open at the site. Rayzor Ranch represents around 321,000 square feet of new space this year.
• Kroger Marketplace, the grocer’s 123,000-square-foot concept that combines groceries and general merchandise departments, opened its first D/FW location in Frisco in January.
• Kroger Marketplace at Fort Worth’s Alliance Town Center added 123,000 square feet to that center when it opens in the fourth quarter 2010. Kroger also is in the works with additional Marketplaces for Mansfield (Fort Worth area) and Little Elm (Dallas area) between now and 2011.
• Kroger Fresh Fare, a new concept from Kroger, is opening in Fort Worth on University Drive and in Dallas near downtown at the site of the former multi-screen theater on Lemmon Avenue. (The Fort Worth location represents the redevelopment of a closed grocery, and the Dallas store is new construction.)
• Tom Thumb, a traditional grocery operated by Safeway, is under way with two new stores – its first in years – in Rockwall and Frisco. Both are scheduled to open this year or early next year.
• Dillard’s, the Container Store and Gold Class Cinemas opened as anchors for the newest phase of The Village at Fairview.
For 2011, we expect to see construction decline even further, with new projects limited to grocery-anchored centers and a handful of major anchors. For example, outdoors superstore Cabela’s plans to open a 100,000-square-foot store, its second in D/FW, in Allen in the spring of 2011. All told, the D/FW retail market as of mid-year 2010 is seeing increased leasing activity when compared to 2009, expansions from strong anchors and limited new construction. All of these factors will help the market regain a balance of supply and demand starting in 2011.
— Herbert D. Weitzman is chairman and CEO of The Weitzman Group & Cencor Realty Services.