Target at the Gates of Prosper, a shopping center developed last year by Jerry Jones' Blue Star Land Holdings, will open in October in Prosper, a fast-growing town about 55 miles north of Dallas. provided one-stop shopping for residents.
When it comes to real estate, the metroplex's first new construction target in five years is indicative of something more important.
“The market currently financially supports building retail businesses from the ground up, which is a little crazy to say out loud,” said Jim Dilavou, national director of retail at Lincoln Property Company. ” he said.
The past 15 years, between the Great Recession, the e-commerce explosion, and the economic impact of the COVID-19 pandemic, have seen a flood of dire predictions about the future of retail real estate. New construction work has almost come to a halt.
As a result, retail vacancy is at an all-time low and retail rents are higher than ever.
Meanwhile, retail real estate has become a reliable haven for investment capital as high interest rates and remote work trends put multifamily housing and offices out of business. In Dallas-Fort Worth, fastest growing metro In this country, the reversal of fortune is even more striking.
This is the reverse of the trend following the Great Financial Crisis, Dillaveux said.
“Occupancy and demand for essential retail stores are the highest they have been in my career,” he said.
Retail industry in numbers
The combination of high demand and low supply is putting incredible pressure on the market, especially in fast-growing Texas.
After all, housing development follows people, and retail is close behind.
Dallas-Fort Worth's retail vacancy rate is 4.7%, according to Partners Real Estate. Low vacancy rates have pushed rents to a record high of $19.75 per square foot, up 9% from last year. This rent increase rate is more than double the national average of 3.5%.
Rent prices are highest in North Central Dallas, where the average is $26.44 per square foot.
“While some retailers are paying more to accommodate store counts, putting pressure on profitability, retailers with stricter rent standards are out of luck,” said Carla Smith of SRS Real Estate. Stated.
DFW's rent growth is second only to Austin among large Texas cities. Here are photos of his three other metros in Texas.
houston
- Vacancy rate: 5.1% (0.1 increase)
- Rent: $20.43 (4.8% increase)
austin
- Vacancy rate: 3.2% (stable)
- Rent: $26.52 (14.7% increase)
san antonio
- Vacancy rate: 3.9% (0.2 decrease)
- Rent: $18.95 (up 4.8%)
Responding to inventory shortages
When Toys R Us' bankruptcy in 2017 and 2018 led to more vacant big-box stores across the country, strip mall vacancies were heralded as the beginning of the end for brick-and-mortar retail.
Less than a decade later, the retail chain's bankruptcy could be a blessing in disguise for the rest of the market.
Bed bath and beyond. When the home goods retailer filed for bankruptcy protection in April 2023, its remaining stores were quickly backfilled with stores like Burlington Coat Factory and Hobby Lobby, Dillaveux said. And the rent has also increased.
This reflects the limited choices retailers have.
Developers are scrambling to build, but as is the case in many sectors, high construction costs and financing issues have significantly delayed project schedules.
Retail delivery space in Dallas-Fort Worth fell 70% year-over-year in the third quarter, falling from 1.7 million square feet to 523,000 square feet, Partners said.
victory of capital
The high-pressure environment has made retail real estate lucrative for investors.
Mr Dilavou said the retail industry offers investors “secure and durable” returns, and investors can obtain creative debt for these types of assets.
Dallas-based Lincoln moved deeper into retail five years ago with the launch of the Lincoln Retail Income and Growth Fund. In July, the company partnered with Paragon Commercial Group to strengthen Lincoln's West Coast retail real estate investment business.
Lincoln is part of a strategic trend of purchasing and renovating commercial properties built decades ago.
Updating shopping centers and strip malls is all about meeting the needs of modern consumers: convenience, Dillaveux said. That means streamlining online pickup, coordinating parking and attracting the tenants consumers want. These days, that means food and beverage providers.
In 2022, single-person households accounted for 29 percent of the nation's homes. In 1960, the proportion was only 13 percent. census data indicates. As a result of that demographic shift, people are eating out more than ever before, said Brandon Svec, national director of retail analysis at Coster.
what's next
Developing from scratch is rare, but retailers are waiting for the next Bed Bath & Beyond.
Experts are closely monitoring the possibility of a merger between grocery giants Kroger and Albertsons. If approved, the stores could be consolidated and have larger boxes available, Svek said.
“Aside from grocery-oriented centers and entertainment venues, there is very little major development going on in Texas.'' said Smith.
With retail space in high demand, Dillaveux expects more new construction, like the development at Gates of Prosper, not far away.
“More will happen once the bond market stabilizes,” he said.
