Texas Retail Landscape Evolves Before Our Eyes

by Taylor Williams

It’s no question that 2020 has become a turning point in history. Within a few short weeks, what was a booming time in our industry has changed in the blink of an eye.

Although the good times may not last forever, it’s safe to say many didn’t expect a sudden change so soon — and on such a large scale. While health remains the nation’s top priority, COVID-19 has taken a toll in some shape or form on plenty of industries in the weeks following its arrival in the United States, with retail unquestionably being one of the hardest hit.

However, innovative players are still finding opportunities. Plenty of retailers were already adapting to a changing market defined by e-commerce, and their improvements were unknowingly preparing them for a world under COVID-19 restrictions and limitations.

Rob Solls, Mohr Capital

Dinner at a Tap

Food delivery apps have become saving graces since COVID-19 changed the daily lives of Americans. Delivery apps such as DoorDash, Uber Eats and Favor are allowing customers who may not want or be able to leave their homes to support their favorite restaurants.

While one benefit of these apps would usually be supporting increased sales and avoiding standing in line, these apps are becoming increasingly crucial in supporting the day-to-day operations of many national chains, as well as in assisting many smaller local businesses during a time in which foot traffic is slow or nonexistent.

Fast casual restaurants have also begun adding pickup windows designated specifically for delivery, providing a more efficient way of getting meals to customers with little to no interruption to the dining scene inside. However, these are proving useful in tougher times as many state governments have forced mandatory dining room closures.

This option, originally designed for speed and efficiency, is allowing these dining locations to serve as essential services and help them stay afloat while they serve their communities.

Aside from pickup and delivery, a major trend employed in restaurant operations is the use of AI, or ordering through touch screen devices. This allows diners to customize their orders and add or remove items while maintaining a sense of privacy. This option can prove financially beneficial for the business by reducing operational and staff costs while working with a leaner team, as many restaurants are currently doing.

Grocery Goes Mobile

In addition to food delivery apps, traditional grocery shopping has seen its business surge as well. On the big box side, grocery pickup apps for stores like Whole Foods and Walmart are making it easy to complete your shopping for groceries and other essentials entirely online.

Many of the apps make it simple to pick out items, check out and pickup with a just a few taps, but a flood of newcomers to the trend has resulted in delays. Consequently, inventories have been backed up, forcing many shoppers to return to traditional in-store shopping.

To accommodate social distancing measures and the influx of shoppers, retailers like Trader Joes are keeping count of the number of shoppers inside the store at one time and distributing hand sanitizer upon arrival.

Brick-and-Mortar Evolves

Although e-commerce has earned its rightful spot in retail, the physical store concept isn’t going away for good anytime soon.

This notion will become evident as soon as the economy restarts. Big box stores that are commonly known for housing vast arrays of products now operate as showrooms, providing both an experience and  entertainment for customers, even though the majority of their inventories are only available online. These more efficient prototypes create value for retailers through downsizing and focusing on top-selling merchandise.

Service retailers, like doctors, dentists and nail salons, are seeing their fair share of growth as well. Telemedicine is taking off, enabling doctors to treat patients and prescribe medication with zero physical contact. And the services that can’t be replicated online have leveraged the internet for appointment scheduling and payment. All have flourished with access to prime real estate due to their smaller sizes.

How Does Texas Compare?

Texas has seen unprecedented economic growth in recent years, with many corporations moving here to escape high taxes and regulations in states like California. Furthermore, various studies have suggested that Texas is poised to lead the economic recovery post COVID-19.

With the influx of families and businesses to Texas cities like Dallas-Fort Worth (DFW), Austin and Houston, the state has become a favorable area for investment due to its central location, absence of state income tax and diverse business climate. In addition, land in areas like Frisco and the northern suburbs of DFW can still be obtained for reasonable prices.

When you look at Texas cities individually, Houston is a great example of a market that has seen strong growth in its retail and restaurant sectors due to it’s central location and the diversity.

For these reasons, it is also often considered a great test market for new concepts. Mohr Capital acquired a local Houston restaurant recently with plans to reposition the building into a freestanding structure consisting of a Chipotle Mexican Grill restaurant and a Regions Bank branch. It’s likely the market will see more of this type of retail redevelopment and mixed use of space.

DFW also has a few successful restaurant models to highlight. Katy Trail Ice House, an outdoor eatery in the bustling Uptown area, earned its place as a staple to many by capitalizing on its sprawling location and creating a unique indoor-outdoor dining experience. Many of these local businesses have kept the momentum moving through the COVID-19 situation by setting up takeout stations, a feature that will be increasingly important to future operations.

Impacts of Location

For retailers, foot traffic is usually a necessary factor in deciding where to locate. For example, urban settings like New York or downtown Miami rely on very different metrics than Frisco.

In these densely populated areas, foot traffic can be measured, and cell phone data can be gathered, revealing a more accurate number of people in the area. In areas like Frisco, cars driving by can be a more reliable source.

— By Rob Solls, director of retail investments and acquisitions at Mohr Capital, a Dallas-based commercial investment and development firm.

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