DFW Retail market continues to show strength with near-record low vacancy rates and record high asking rates

EXECUTIVE SUMMARY

Q2 2024 in Review
The DFW retail market continues to exhibit robust demand, marked by 15 consecutive quarters of positive net absorption. In Q2 2024, net absorption reached 470,081 sq. ft., an 81% increase from the previous quarter, with year-to-date absorption at 3.2 million sq. ft. Meanwhile, the construction pipeline remains strong, with 4.8 million sq. ft. underway, primarily in the northern suburbs. Record-high asking rents further underscore the market’s competitiveness, with rates climbing to $20.65 per sq. ft. in Q2 2024—an 8% increase year-over-year. High rental rates in North Central Dallas and Central Dallas highlight the ongoing demand for prime retail locations.

Dallas-Fort Worth Economic Update
Employment in DFW rose 2.4% in May, after climbing 4.8% in April. Job growth was mixed across the major sectors, with strong gains seen in construction, finance, and trade, transportation and utilities. Employment held largely steady in the education and health services and leisure and hospitality sectors, but declined in information, professional and business services, and other services. The unemployment rate in DFW was unchanged at 3.8%.

The Dallas–Fort Worth economy expanded in May. Employment growth remained strong but moderated from April’s brisk pace. Average hourly earnings held steady, above year-ago levels, and inflation ticked up in May. Home sales dipped in May, and home prices rose in the first quarter.

MARKET OVERVIEW

Strong Retail Demand Continues with 15 Quarters of Consecutive Positive Net Absorption
Net absorption—move-ins minus move-outs—is at 470,081 sq. ft., up a significant 81% from last quarter. Year-to-date, net absorption is at 3.2 million sq. ft., down from the prior year-to-date tally of 7.1 million sq. ft. Notable Q2 move-ins include QuickLotz taking 144,000 sq. ft. at the old Cinemark space at Music City Mall; Red White & Blue Thrift Store taking 40,025 sq. ft. at Cooper Oak Crossing; and The Picklr moving into 33,351 sq. ft. at 1701 S Cherry Lane in White Settlement.

Recent leases include Malibu Jack’s signing for 137,222 sq. ft. at the former Garden Ridge in North Richland Hills at 8651 Airport Freeway; Netflix House inking a 100,000-sq.-ft. deal at the Galleria Mall for a new retail/entrainment venue; and EoS Fitness taking 70,853 sq. ft. at the Collin Creek Shopping Center.

Construction Pipeline Down Moderately, Still Near 5 Million Sq. Ft.
Retail construction is at 4.8 million sq. ft.—down 7% year-over-year from 5.2 million sq. ft. in Q2 2023. The North Central Dallas and Far North Dallas submarkets have the highest levels of construction currently underway, with 1.3 million sq. ft. and 1.1 million sq. ft., respectively. These large shopping centers are concentrating mostly in the northern suburbs, following the recent delivery of several thousand residential homes.

Investment Sales Trends
CoStar Capital Market Analytics reports the cumulative 12-month sales volume at $347 million in the DFW retail market. With 728 deals completed, the average transaction price currently stands at $253 per sq. ft. with an average cap rate at 6.5%. Notable recent sale transactions include Corsair Property Company purchasing The Crossing At Pleasant Run; the 195,394-sq.-ft. grocery-anchored center was 95% leased at the time of the sale. Also, several Life Time Fitness locations were sold as part of a large nationwide portfolio sale following the merger of Spirit Realty Capital and Realty Income Corporation. This included the Life Time locations at 4900 Throne Hall Dr. in Frisco and 7100 Preston Rd in Plano and numerous others across the country.

Record-High Asking Rents
Retail space in the DFW market remains competitive, which has led to consistent rent growth throughout 2024. The availability rate continues to trend near all-time low levels, tightening to under 5% since the beginning of 2022. In turn, asking rents reached $20.65 per sq. ft. in Q2 2024—a record-high for the metro’s retail sector. This is an increase of 8% over the past year. The submarkets with the highest rental rates include North Central Dallas ($28.90 per sq. ft.), Central Dallas ($27.36 per sq. ft.) and East Dallas Outlying ($23.97 per sq. ft.)—which are well above the metro. On the other hand, submarkets with lower asking rents included Southeast Dallas ($15.11 per sq. ft.) and Southwest Dallas ($15.85 per sq. ft.).

Steve Triolet
SVP of Research and Market Forecasting
tel 214 223 4008
[email protected]