Monday Morning Scoop - DFW's Retail Market Saw Net Absorption Nearly Triple Last Quarter

DFW’s Retail Market Saw Net Absorption Nearly Triple Last Quarter

Demand for retail is surging in Dallas-Fort Worth as a dearth of new construction and minimal vacancies stir up competition for available space.

Net absorption nearly tripled between the first and second quarters from 396.5K SF to 956.5K SF, according to new data from Partners, which includes any lease of more than 5K SF in its reporting. Vacancy also tightened to 4.8%, down from 4.9% in Q1.

Those findings were buttressed by a midyear report from CoStar, which found 2.7M SF have been absorbed over the past 12 months. A flurry of commitments from retailers like pOpshelf — which has signed more than 57K SF worth of leases across seven DFW locations — are driving the positive absorption trend, CoStar said.

The vast majority of space coming online is already spoken for. Of the 4.5M SF underway across 247 buildings, only about a third is available for lease, per Partners’ report. 

Projects that broke ground last quarter include High 5 Entertainment at The Farm in Allen and Marsh Lane Plaza, a shopping center that is being rebuilt after it was destroyed by the October 2021 tornado.

Competition for space is pushing rents to new heights, with average triple-net rates topping $19.45 per SF in the second quarter, up 10% year-over-year. This is a significant jump, Partners’ researchers said, given the average annual growth rate of 2% over the past four years. 

These dynamics are expected to continue as higher interest rates discourage new builds and DFW’s population snowballs. The elevated cost of debt is also causing fewer retail properties to trade hands, with $631M in transactions over the past 12 months paling in comparison to the historical average of $944.6M, per CoStar.

By: Olivia Lueckemeyer 
Source: BisNow