TEXAS SNAPSHOT, AUGUST 2010

Dallas/Fort Worth Retail Snapshot

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 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.

The market continues to see fairly weak small-tenant leasing, keeping small-center vacancy high at 18 percent. Still, the market’s key vacancies are being filled, although not as fast as we’d like to see. Here are some recent deals:

• Crate & Barrel is relocating to the Shops at Willow Bend mall in Plano and, in the process, removing the vacancy created by Lord & Taylor.

• 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 DFW.

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 feet 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, DFW’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 DFW location in Frisco in January.

For 2011, we expect to see construction decline even further, with new projects limited to grocery-anchored centers and major anchors. The DFW retail market is seeing increased leasing activity when compared, expansions from strong anchors and limited new construction. 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.

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