DFW Retail Market Records Positive Net Absorption in Q2 2025

EXECUTIVE SUMMARY

The Dallas-Fort Worth (DFW) retail market experienced an uptick in net absorption during Q2 2025, with a 10-basis-point decrease in the vacancy rate. The 4.8% vacancy rate remains low compared to historical highs between 9% and 10%. Net absorption for the quarter was positive, posting 1.1 million square feet, reflecting increased tenant demand. Submarkets with the highest contribution to positive absorption include Far North Dallas, Suburban Fort Worth, Mid-Cities, and North Central Dallas. Leasing activity remained robust at 2.2 million square feet, up 7.3% from the previous quarter.

Construction deliveries increased significantly in Q2, totaling 1.5 million sq. ft., as did the under-construction pipeline, which rose 71.9% to 7.7 million sq. ft. Most of the construction underway is concentrated in the northern Dallas and Fort Worth suburbs, aligning with housing growth. Average asking rates fell 1.2% quarter-over-quarter but rose 2.4% year-over-year to $20.25 per sq. ft. Central Dallas and North Central Dallas continue to command premium rents, while Southeast and Southwest Dallas offer more affordable options. Overall, the DFW retail market exhibits a healthy balance of demand, investment, and growth opportunities given its strong market fundamentals.

Q2 in Review

Employment in DFW increased in May at an annualized 2.1% after rising 1.9% in April. Texas Job growth increased 2.6% in May. The growth in payroll employment was strong, and the Dallas-Fort Worth unemployment rate remained at 3.9% in May. The jobless rate was 4.0 percent in Dallas and 3.9 percent in Fort Worth, below Texas’s jobless rate of 4.1 percent and the nation’s rate of 4.2 percent. The most significant gains were in construction and mining, education and health services, and leisure and hospitality services, while employment slipped in manufacturing, professional and business services, and information services.

MARKET OVERVIEW

Vacancy Ticks Down Slightly to 4.8%

The vacancy rate in the DFW retail market fell 10 basis points from 4.9% over the quarter and remained at 4.8% over the year. This small decrease is most likely due to increased demand along with elevated quarterly deliveries that are not fully pre-leased. Vacancy is still low compared to historical highs of 9.0% to 10.0% in 2009 through 2013.

Net Absorption Turns Positive

Net absorption-move-ins minus move-outs—is at 1,124,631 sq. ft., which is up significantly from recent quarters. Far North Dallas, Suburban Fort Worth, Mid-Cities, and North Central Dallas were the submarkets posting the most significant positive net absorption, at 417,246 sq. ft., 179,679 sq. ft., 161,647 sq. ft., and 117,590 sq. ft., respectively. Some of the notable moves during Q2 2025 include Life Time Fitness’s move into 190,000 sq. ft. at 13331 Preston Rd, The Home Depot taking 136,000 sq. ft. at 200 N Central Expressway, H-E-B taking 131,000 sq. ft. at 1230 Central Expressway, and Bass Pro Shops moving into 120,000 sq. ft. at 12901 Cabela Dr. Submarkets recording negative absorption during Q2 2025 include Central Fort Worth and Central Dallas.

Leasing Activity Up Quarterly, but Down from Last Year

Leasing activity increased in Q2 2025, coming in at 2.2 million sq. ft., up 7.3% from the previous quarter and down 39.1% from Q2 2024. Some of the more notable transactions in Q2 2025 include IKEA signing a lease for 63,000 sq. ft. in The Shops at Park Lane, EOS Fitness’s lease for 45,000 sq. ft. at Spring Creek Plaza in Plano, Slick City Action Park’s 44,200 sq. ft. lease at Town Center Colleyville, and Harbor Freight’s 22,000 sq. ft. lease at 900 E Pioneer Parkway in Grand Prairie.

Construction Deliveries and Construction Pipeline Up in Q2 2025

Construction deliveries were up significantly over the past quarter, increasing by 47.3% from 1.0 million sq. ft. in Q1 2025 to 1.5 million sq. ft and up 38.9% from 1.1 million sq. ft. delivered one year ago. The under-construction pipeline increased sharply by 71.9% quarterly from 4.5 million sq. ft. and more modestly by 31.3% from 5.9 million sq. ft. annually to 7.7 million sq. ft. Far North Dallas, Suburban Fort Worth, and North Central Dallas submarkets have the highest levels of construction currently underway, with 2.4 million sq. ft., 1.2 million sq. ft., and 1.1 million sq. ft., respectively. The largest shopping centers are concentrated mainly in the northern suburbs, following the recent delivery of several thousand residential homes.

Investment Sales Trends Remain Robust

CoStar Capital Market Analytics reports the cumulative 12-month sales volume at $492 million in the DFW retail market. With 843 deals completed, the average transaction price currently stands at $230 per sq. ft. with an average cap rate of 6.8%. Notable sale transactions in Q2 2025 include Rise Commercial’s purchase of the 121,500 sq. ft. 380 Crossing in the McKinney Submarket for an undisclosed amount. Additionally, a 61,000 sq. ft. Tom Thumb located at 11401 Coit Rd was sold for an undisclosed price Five Below, Marshall’s, ULTA Beauty and Petco.

Rental Rates Trend Down Marginally Quarterly, Up Over the Year

Average asking rental rates decreased by 1.0% quarter-over-quarter and increased by 2.5% year-over-year to $20.28 per sq. ft. The submarkets with the highest rental rates include North Central Dallas ($28.43 per sq. ft.), Central Dallas ($24.25 per sq. ft.), and East Dallas Outlying ($22.37 per sq. ft.), which are well above the metro average. On the other hand, submarkets with lower asking rents include Southwest Dallas ($16.45 per sq. ft.) and Southeast Dallas ($16.79 per sq. ft.).

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