DFW retail market sees strong demand, record-high rents, and sustained growth in 2024

EXECUTIVE SUMMARY

Q3 in Review
The Dallas-Fort Worth (DFW) retail market remains resilient, with robust demand driving 16 consecutive quarters of positive net absorption, marking a significant 86% quarter-over-quarter increase to 872,396 sq. ft. in Q3 2024. Leasing activity continues to exceed 2 million sq. ft. each quarter, fueled by major lease signings, including H-E-B, Netflix House, and Malibu Jack’s. Although construction activity has slightly slowed, with 4.2 million sq. ft. underway, new deliveries are concentrated in the high-growth northern suburbs. Record-high rental rates persist amid near-historic low vacancy levels, emphasizing the competitiveness of the market overall.

DFW Economic Update
The Dallas−Fort Worth economy expanded in August, with employment bouncing back from the declines seen the prior two months. Average hourly earnings held steady but were above year-ago levels. Mass layoffs so far this year trail 2023 figures. Home sales dipped in August, and home prices held steady in the second quarter. In August, DFW employment increased 6.2 percent annualized after contracting for two months. Job growth was strong across the board, including in professional and business services, leisure and hospitality, information and financial services. Employment rose in every sector except government.

MARKET OVERVIEW

Vacancy Remains Close to Historic Low
The overall vacancy in the DFW retail market decreased 10 basis points from the previous quarter to 4.7%. Year over year, the total vacancy rate is unchanged, showing that supply and demand are in lock step with one another, with most of the net absorption going into new construction deliveries.

Strong Retail Demand Continues with 16 Quarters of Consecutive Positive Net Absorption
Net absorption-move-ins minus move-outs—is at 872,396 sq. ft., up a significant 86% from last quarter. Year-to-date, net absorption is at 1.6 million sq. ft., down from the prior year-to-date tally of 2.7 million sq. ft.

Notable 2024 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 and also into 25,652 sq. ft. at Lakepointe Crossing in Lewisville.

Leasing Activity Remains High, but Off 14% From Last Year
Leasing activity has remained high in 2024 so far, with 2.3 million sq. ft. of leases signed in the third quarter of 2024. The market has seen leasing activity consistently at or above 2 million sq. ft. per quarter since late 2020. Recently signed leases include H-E-B signing a lease for a new 140,000-sq.-ft. grocery store in Forney; Malibu Jack’s signing a lease for 137,222 sq. ft. at the former Garden Ridge in North Richland Hills at 8651 Airport Freeway; Netflix House signing a 110,000-sq.-ft. lease at the Galleria Mall for a new retail/entrainment venue; and EoS Fitness signing a lease for 70,853 sq. ft. at the Collin Creek Shopping Center.

Construction Pipeline Down Moderately, still 4.2 Million Sq. Ft. Underway
A robust 823,146 sq. ft. of new retail construction was delivered in the third quarter, pushing the total amount completed so far this year to almost 2.5 million sq. ft. Still, net absorption outpaced deliveries in the third quarter. The construction pipeline is at 4.2 million sq. ft., this is down 19% year over year from 5.2 million sq. ft. in Q3 2023. The North Central Dallas and Far North Dallas submarkets have the highest levels of construction currently under way, with 925,000 sq. ft. and 1 million sq. ft., respectively. These large shopping centers are concentrated 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 778 deals completed, the average transaction price currently stands at $273 per sq. ft. with an average cap rate of 6.6%. 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. Store Capital Corporation purchased a 137,222-sq.-ft. former At Home property at 8651 Airport Freeway in North Richland Hills. Also, several Life Time Fitness locations were sold as part of a large nationwide portfolio sale between a merger of Spirit Realty Capital and Realty Income Corporation. This included the Life Time locations at 4900 Throne Hall Dr. in Frisco, the location at 7100 Preston Rd in Plano and numerous other locations from the country.

Record-High Asking Rents Remain
Retail space in the DFW market remains competitive, which has led to record high asking rates in 2024. The vacancy rate continues to be 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 and remained unchanged over the past quarter. This is an increase of 8.3% over the past year. The submarkets with the highest rental rates include Central Dallas ($27.09 per sq. ft.), North Central Dallas ($26.49 per sq. ft.) and East Dallas Outlying ($23.47 per sq. ft.)—which are well above the metro. On the other hand, submarkets with lower asking rents included Southeast Dallas ($16.03 per sq. ft.) and Southwest Dallas ($16.06

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