Weitzman’s survey of the D-FW retail market shows a near-record-high occupancy rate and strong demand for the market’s large vacancies left by Toys “R” Us and other failed retail concepts. Marshall Mills, president and CEO of Weitzman, discussed the current market and outlook for 2020.
Q. Why is the current occupancy level so healthy?
A. We’re entering 2020 with 93.0 percent occupancy, the highest recorded since 94.8 percent in 1981. This past year, the total multi-tenant inventory reached 200.5 million square feet for the D-FW retail market. The healthy occupancy is due to strong leasing in existing retail centers and the backfilling of mall and power-retail anchor vacancies. For example, almost all of the 700,000 square feet vacated in 2018 by Toys “R” Us has been backfilled by concepts like Burlington, Haverty’s and other leading concepts. In addition, even mall occupancy climbed thanks to leases to non-traditional mall anchors like fitness, health care, grocery and entertainment concepts.
Q. What does the new construction market look like?
A. Twenty years ago, a tight retail market would jumpstart a round of new construction. Today, new space remains constrained by the limited number of expanding anchors like grocery stores or power retailers. During 2019, construction added only 1,823,000 square feet, compared to 3,502,000 square feet in 2018.
The total reflects a nationwide and statewide trend of limited anchor expansions, existing project redevelopments and mixed-use and unanchored retail projects (which tend to be under 100,000 square feet) designed to meet the demand for the new generation of boutique fitness, restaurant and other shop-space users.
For example, the average size for a new retail project in 2019 was 64,600 square feet. A decade earlier, the average size of a new center was 124,300 square feet.
Q. What does 2020 look like?
A. Thanks to our economy that continues to lead the nation, and a new generation of retail tenants who know how to drive traffic and generate sales, we expect to see another strong year for D-FW retail. We’re even projecting occupancy to achieve the 95-percent level. That’s optimistic, but with the way things are going, I think it’s achievable.This Q&A originally appeared in Connect Daily Texas.