The other day, I spoke to representatives of our North Texas cities at an event sponsored by the Dallas Regional Chamber. Here’s a recap of some key points.
Weitzman/Cencor recently released its 2013 Shopping Center Survey & Forecast, and the news is good. To pull the numbers together, we drive nearly 1,400 DFW shopping centers in 42 submarkets for a total of 186 million square feet of retail space.
Now, let me give you an idea of how large 186 million square feet is. If you took all the retail in Boston and added it to all the retail space in Austin, you’d still need to add another 14 million square feet to equal the inventory in Dallas-Fort Worth.
If you combined all the retail space in Miami and Orlando, you’d still need to add another 26 million square feet to equal DFW.
Phoenix? Add another 31 million square feet.
You get the point.
Now, as to our survey highlights, the main metric that everyone wants to know, of course, is how does occupancy look? In a word: better. So good, in fact, that we’re back to basically where we were before the recession hit so hard.
We ended 2012 with 89.1 percent occupancy—a 10.9 percent vacancy factor. The last time our occupancy exceeded 89 percent was 2007, when our market inventory totaled 168 million square feet.
That 10.9 percent vacancy compares well to the 12.4 percent rate posted at year-end 2011. We actually hit 13 percent vacancy in 2010, so you can see how good today looks by comparison.
So now that we know occupancy is better, the critical question is, why? What types of properties were the big drivers of improvement?
Last year, for the first time in a long time, every one of our shopping center categories—neighborhood, community, power, mixed-use, malls, etc.—showed improvement.
Why? Well, there are several major reasons:
• First, although construction remains low, the new developments are opening well leased.
• Second, limited construction means expanding anchors are backfilling existing space. This has created a landlord’s market.
• Third, service categories like medical, dental and beauty are very active. That is boosting small-shop space and filling up our existing community and neighborhood centers.
• And finally, almost every retail category—apparel, luxury, home related, discount, specialty—s reporting stability, which means we aren’t seeing widespread closings.
In 2011, the market saw 1.6 million square feet of new space built in all-new, redeveloped or expanded projects. That was a near record low.
But last year, it went even lower, at 1.17 million square feet. For a market with 186 million square feet, this is only a blip.
To make my point, a little over a decade ago, our market added that much in just one power center in Frisco.
Another thing to note: The great majority of the new space was in redeveloped projects, like the Krogers on Haskell and on Maple Avenue or the Walmart Neighborhood Market on Greenville Avenue. At no time in recent memory has the window of opportunity to improve existing centers or locations been better. That bodes well for continued improvements in our occupancy.
For the complete survey, as well as our retail market reports for other Texas metros, check out our website at www.WeitzmanGroup.com.