The occupancy rate is at an all-time high for retail space in Dallas-Fort Worth. There are very few available options for tenants seeking new locations. Development is picking up, but is not keeping up with demand. Most of the space that’s currently available needs to be repurposed, redeveloped, or torn down.
Grocers, fitness chains, restaurants, and medical users are all actively looking for space and having a hard time finding it. They are being disciplined about not getting “out in front of the bodies” and are refraining from taking fundamentally flawed space.
Although new construction has picked up, developers—with the help of lenders and high construction costs—are showing discipline as well. Demand for new space is continuing to grow. Shopping centers have almost re-invented themselves overnight, adjusting to the threat of increasing online sales. Hard goods retailers have downsized, fitness and entertainment users are being added to many developments, and restaurants have become an even more important part of tenant mix.
Developers are building less in-line space and adding more multi-tenant out parcel buildings. They have also become better at giving their properties a sense of place and giving shoppers a reason to come to their properties more often and stay there longer.
With record amounts of money raised, a stock market that has been unpredictable at best, and a robust market overall, investing in real estate has become the favored investment for both institutional and private investors. Cap rates are now at an all-time low across all product types. The strength of a very healthy retail market has caused retail to become the leading product type for investors at this time.
With the strong demand for retail space, coupled with restraint from both users and developers, the retail market should remain healthy for a long time—making investment in retail real estate a very smart choice.
John Zikos, a partner at Venture Commercial Real Estate, specializes in landlord and tenant representation, leasing, income property sales, disposition, and new development consulting. Contact him at [email protected].
