For decades, all classes of commercial real estate in Dallas enjoyed somewhat lopsided advantages over Fort Worth.
Until about 15 years ago, Dallas, the main beneficiary of the job, housing and population growth coming to the metroplex, commanded the lion’s share of demand from commercial real estate users while also having more capital for new development. Retail was no exception.
Today, the Dallas area has seen its retail scene push northward toward Plano and Frisco, the new hubs of corporate relocations and regional workforce consolidations. But the combination of a shortage of developable land and a tight vacancy rate within the Interstate 635 loop is pushing rents.
Frank Bullock, Henry S. Miller
On a triple-net basis, rates are now as high as $60 per square foot in top submarkets like Uptown, Lakewood and Deep Ellum and $90-plus per square foot in the tony Preston Hollow and Park Cities submarkets, according to HSM’s research.
Our data also shows that the average retail vacancy rate within the Interstate 635 loop in Dallas is approximately 2.6 percent, while there is 205,000 square feet of new space under construction within this area. By contrast, the urban core of Fort Worth inside the Interstate 820 loop spans about half as much land as that of Dallas.
Conversely, our data shows that the average retail vacancy rate in the Fort Worth area is 7.1 percent, with 32,000 square feet of new product under construction.
The result of all this activity is that retail users — including many of the “lifestyle” tenants that operate within the entertainment, retail boutique, personal fitness, full-service and fast casual restaurant categories — are looking at Fort Worth for continued expansion within the metroplex.
The growth of energy-related businesses, financial services and other white-collar jobs has already contributed to this trend. If Fort Worth can land a couple major corporate relocations of its own, it may very well explode, Dallas-style, in the coming decade.
And Fort Worth is more than ready to welcome these new office and retail users. The city, known for its laid-back atmosphere and high quality of life, has grown increasingly affluent during this cycle.
An extremely pro-business city government — coupled with strong residential construction throughout the Fort Worth area and development of new infrastructure like the Chisholm Trail Parkway and the expansion of Interstate 35W — has made the city much more appealing to retail tenants, even in the e-commerce era.
But whereas a typical expansion plan for a retailer in Dallas might consist of 10 new stores, a retailer rolling out in Fort Worth would probably only open two or three new stores — all other economic factors being held equal.
But for the developers and city officials of Fort Worth, moderated expansion relative to Dallas is quite all right. These community leaders want their city to retain its cultural flavor and quality of life that renders it distinctly different from Dallas. After all, as local residents often say, “Fort Worth is where the West begins.”
We can identify several tenants whose footprints in Dallas versus Fort Worth speak to the comfortable disparity that exists between the two, and of Fort Worth’s rightful concerns about potentially oversaturating its retail market.
Austin-based Alamo Drafthouse Cinema is a great example of this discrepancy between the two endpoints of the metroplex. The theater-based entertainment concept, which was among the first to pioneer the combination of food, alcoholic beverages and cinema, has three locations in the Dallas area: Downtown, Lake Highlands and Richardson.
Alamo Drafthouse’s bullishness of the Dallas market has occurred despite the fact that this side of the metroplex has increasingly seen more competition from entertainment users. Alamo Drafthouse has yet to enter the Fort Worth market, however, though the demographic factors and supply of adequate spaces are certainly there.
Another good example of the “big brother, little brother” dynamic that exists between the Dallas and Fort Worth retail markets lies in its multi-use entertainment arena. Fort Worth recently opened Dickies Arena, a 16,000-seat venue that will host some of the nation’s top rodeos and concerts. The arena is approximately the size of the old Reunion Arena in
Dallas.
That venue was torn down a number of years ago to make way for American Airlines Arena, where the Dallas Mavericks and NHL’s Dallas Stars play. So in this context, Fort Worth is on its first iteration of a major entertainment venue while Dallas is already on its second.
Fort Worth will eventually eclipse Dallas in terms of size and population, while remaining a city very much committed to its Texas heritage and quality of life. When that happens, citizens, retail tenants, brokers and landlords will all stand to
benefit.
— By Frank Bullock, executive vice president of retail, Henry S. Miller. This article first appeared in the December issue of Texas Real Estate Business magazine.