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January 16 , 2004

Retail Realty Redux

January 16th, 2004 - Christine Perez Senior Writer Emboldened by strong sales in the local housing sector, retailers loved Dallas-Fort Worth in 2003. After cooling in 2002, the retail/D-FW romance heated up again last year, with storeowners snapping up 2.4 million square feet of retail space here. The absorption figure comes from a 2003 retail-market report just released by Addison-based Roddy Information Services. "When compared to the mere 45,074 square feet absorbed in all of 2002, this last year's performance soared through the roof and into outer space," said George Roddy, the company's president. Despite the gains, Roddy described the 2003 absorption level as "moderate" from an historical perspective. "Although this is certainly exciting news, let's not forget the proportion issue," he said. "It is nowhere near the record-level high of 5.8 million square feet absorbed in 2000." The flurry of leasing activity last year had a positive impact on retail lease rates, which jumped an average of 3% to 4%, depending on product type. But with 2.4 million square feet in new construction -- identical to the net-absorption gains -- occupancy rates remained unchanged at 89%. The best-performing retail submarket was South Arlington, which gained 676,209 square feet. Retail darling Frisco, which is about half the size of South Arlington, gained nearly as much with a net absorption of 673,960 square feet, and led the market in occupancy at 96%. Only Far West Plano had a higher average lease rate than Frisco, at $22.78 and $22.38 per square foot, respectively. The city of Denton also performed well in 2003, with 507,202 square feet gained in a submarket of just 3 million square feet. Those not faring as well included West Fort Worth, which lost 259,718 square feet, and North Fort Worth, which lost 174,081. Occupancies in both submarkets dropped to 79%. Comparing central business districts, downtown Fort Worth showed only a slight gain of 2,700 square feet, but maintained a high occupancy rate of 96%. Downtown Dallas lost nearly 82,000 square feet and saw its occupancy drop to a pathetic 77%. Onus on employers Steve Lieberman, CEO of The Retail Connection in Dallas, said last year's retail growth was driven by the residential sector. "Retail follows housing," he said. "There was a tremendous amount of home sales and refinancings last year, and that's the No. 1 contributor to retail spending. "The negative to that is it artificially propels the market forward," Lieberman added. "We can't anticipate the same stimulus in 2004. The key this year will be employment. Housing has done its job to drive retail; now we need employers to do theirs." Major chains, particularly companies that sell home-related products, led the market last year, a trend that will continue in 2004, Lieberman said. "We had a very good idea of what will happen in 2004 six to nine months ago, because of our active role in our clients' strategies," he said. "Large, well-capitalized retailers are continuing to show good sales comps and have aggressive expansion plans." It's easy for chains in the Metroplex to expand here because they already have distribution, management and advertising infrastructure in place. Dallas-Fort Worth also is one of the first markets retailers turn to when rolling out new concepts. Lieberman named IKEA, Conn's and 99 Cents Only Stores as stores entering the market this year. (See related story on page 8.) Existing retailers with big expansion plans include Target, Bed Bath & Beyond, Kohl's, Sports Authority and Best Buy. Outlying areas should continue to see strong demand, Lieberman said. "The suburbs are still hot," he said. "Sherman, Denton, Watauga and Burleson are all coming on strong, and there's a lot of activity in McKinney and North Richland Hills. The big-box retailers will follow the houses, and the smaller specialty stores will ride their tails."
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