According to Weitzman’s 2023 Shopping Center Survey of DFW’s growing retail market, the region reached and surpassed its highest occupancy ever. Per the survey, the local retail market reached an all-time record high occupancy rate of 95.2 percent.
In Dallas, brick-and-mortar retail proved to be resilient through the age of Amazon and on-demand deliveries, as the city saw an occupancy rate of 95 percent in 2023—up from 93.8 percent at the conclusion of 2022. In all, the retail market accounts for 137 million square feet based on 1,001 projects in Dallas. In Fort Worth, occupancy was at 95.5 percent based off 62.3 million square feet of inventory.
In competing Texas markets, Austin was at 96.8 occupancy, Houston was at 95.4 percent, and San Antonio was at 95 percent.
Grocery-anchored retail dominated the market inventory with 488 properties in the region, totaling 74.1 million square feet. “Community centers were the most active construction category, accounting for almost a quarter of all new retail space in 2023,” Bob Young, Weitzman’s executive managing director, said. “This trend will continue in 2024 with new stores from leading grocers like Kroger, Tom Thumb, and H-E-B.”
In terms of net leasing, 2023 experienced positive health at 1.8 million square feet of absorption, per the Weitzman report. “Large vacancies were leased by retailers like Sprouts, Barnes & Noble, Nordstrom Rack, Ross, and Burlington,” Young said. “Fitness concepts were also especially active backfilling locations.”
New space deliveries during 2023 created just north of 1 million square feet, the report says. Compare that to 2022, which experienced a record low construction of 539,000 square feet. But why aren’t we seeing construction totals higher? “One factor is phase construction,” Young said. “The largest projects in our region, like The Gates of Prosper or Grandscape, deliver space over several survey periods. Another factor is the cost of construction. Higher costs need higher rent levels to economically justify new development. So whatever new space does come on the market today, it commands some of the highest rents, both for inline and junior anchor positions.
“The limited availability of well located vacancy still allows active anchors to expand in existing space, but the tight market for space means we can see more anchor demand push new construction and infill redevelopments,” Young said.
In terms of anchors constructed in 2023, two new H-E-B’s led the way—one in Allen and one in McKinney—accounting for nearly 22 percent of all new space delivered. “2024 will be the most active new construction market for grocers in a decade—at least 14 new grocers will either open or be on the way,” Young said. Grocers expected to build in DFW this year include, H-E-B, Kroger, Target, Tom Thumb, Joe V’s Smart Shop, and Sprouts.
This year, Weitzman projects that North Texas will experience occupancy levels around 95.8 percent, net absorption will come in around 2.2 million square feet, and about 2 million square feet of new developments is expected to be constructed.