More property investors are putting retail on their shopping list.
While sales of some offices and other commercial buildings have slowed to a trickle, the number of North Texas’ shopping centers changing hands has accelerated.
Buy/sell, rent/lease residential &
commercials real estate properties.
Buyers are snapping up suburban centers and urban strips that are seeing some of the highest occupancy levels in years.
“There’s been a kind of a reverse of fortune,” said Robert Young, Weitzman’s executive managing director. “Retail is currently probably the strongest commercial real estate category in terms of supply and demand.”
While vacancy rates in Dallas-Fort Worth office buildings have soared to the highest in decades, at the end of the third quarter only 4.3% of Dallas-Fort Worth retail space was vacant, according to the latest estimates from commercial property firm Jones Lang LaSalle.
More than 1.2 million square feet of net retail leasing was recorded in the area in the quarter, outpacing the 915,600 square feet of new supply, according to JLL. Most of the new construction is for grocers, restaurants and other food- and beverage-oriented space users.
The lack of new retail space in the area has pushed asking shopping center rents up by an average of 8% year over year, JLL estimates.
“There is not a lot of new product and if the property is good or could be better, then it just becomes very valuable,” Young said. “There is rent growth that makes these properties attractive.”
Investors have for sure gotten the message. More than $1.3 billion in D-FW shopping centers have changed hands so far this year.
Some of the biggest sales include:
- Florida-based investor CTO Realty Growth paid $61.2 million for the Plaza at Rockwall, a 446,500-square-foot power center on Interstate 30.
- The 163,341-square-foot Prestonwood Park shopping center in Plano sold to a local buyer.
- Addison’s Prestonwood Place shopping center on Belt Line Road traded to an Indiana investor.
- In Arlington, Cooper Street Plaza sold to Dallas investor Vista Property Co.
- Northview Plaza in northeast Dallas was acquired by Los Angeles-based Westwood Financial.
- The more than 150,000-square-foot property on the Dallas North Tollway near the Galleria that was previously occupied by Bed Bath & Beyond was taken by investor Four Rivers Capital.
Dallas-based Precision Investments last month purchased the three-building Shops at Eastside on U.S. Highway 75 in Richardson.
Precision Investments partner Dan Avnery said his firm is seeing a greater interest in retail purchases.
“We are seeing buyers that definitely have the desire to own shopping centers in Dallas-Fort Worth, partly because it’s viewed as a safer place to own property relative to the rest of the nation and the world.”
D-FW led the country in population gains last year with 170,000 additional residents. And the metro area has one of the nation’s fastest-growing job markets.
“We are aggressively looking to buy more,” Avnery said. “There is not much on the market.
“With office buildings, there are almost no buyers there.”
A couple of huge area retail centers are up for grabs.
The 150-acre Village at Allen retail center on U.S. Highway 75 at Stacy Lane includes more than 850,000 square feet of stores and restaurant space. Opened in 2008, the open-air regional retail property is about 90% leased. Eastdil Secured is marketing the property for sale.
And in Southlake, the 185,000 square-foot Park Village shopping center is being marketed for sale by CBRE Group.
Jennifer Pierson, managing partner with Dallas-based retail brokerage firm Strive, said her firm is seeing an uptick in business.
“October has been the highest month of the year for us in both number of trades and total consideration,” Pierson said. “We have 91 properties listed and 25 of those are currently under contract or in negotiation.”
Most of the retail space in D-FW that was left vacant by the closings of Bed Bath & Beyond and Tuesday Morning has already been earmarked for new uses. And despite the low vacancy rates, with current capital market constraints, there won’t be much speculative shopping center construction.
“There is a shortage of retail for expanding retailers,” said Terry Montesi, CEO of Fort Worth-based Trademark Properties. “We stopped building after ‘08, and we haven’t built anything.
“And that’s 15 years of essentially no shop space, no spec space.”
Montesi said predictions a few years ago that storefront real estate would die off were overdone.
“There was all the talk of the retail Armageddon,” he said. “There was real uncertainty about what was going to happen between e-commerce sales and brick-and-mortar sales.
“Retail space is here to stay and it has upward pressure on rents and occupancy.”