Texas markets

Four Texas markets pace the country in retail recovery

Texas is home to four of the country’s major metropolitan areas within its border, and these four markets – Dallas-Fort Worth, Austin, Houston, and San Antonio – differ from each other in terms of industries, cultures, and locations. leading stories.

But right now, all four share a trend in common: strong retail markets signaling a return to pre-pandemic occupancy and rental after a 2020 marked by chain failures and rates higher vacancy rates.

The downturn in 2020 occurred due to the COVID pandemic, and the improvements seen in 2021 are the result of an industry learning how to successfully meet the challenges of a pandemic that continues in waves.

Marshall Mills, Chairman and CEO of Weitzman

The retail industry has innovated and evolved to meet new challenges with a focus on what we call Tech + Mortar— where concepts communicate with customer needs and meet their needs with services such as takeout, delivery, curbside and buy online, pick up in store (BOPUS). Customers have embraced these changes, sales have shown strong increases and as a result we have seen retail demand recover in all of our markets in 2021.

As we begin 2022, we are in the midst of another pandemic wave due to the omicron variant. And while the risks remain on many levels, we are armed with more tools and more knowledge about how to navigate our lives and how to shop and dine safely. And malls, retailers and restaurants continue to do their part to make it happen.

Market at a Glance: Dallas

In 2021, strong retail rental demand not only boosted occupancy in Dallas-Fort Worth, but also significantly reduced the huge increase in vacant space that occurred during the worst of the pandemic in 2020 .

At the end of 2021, D-FW reported an occupancy rate of 93.5%, which is the third highest occupancy rate for the market that Weitzman has ever recorded since its first survey in 1990.

In fact, 2021 is only the 12and times in 32 years that D-FW has reported over 90% occupancy.

The recovery is most evident in absorption, the measure of net rental. In 2021, absorption totaled approximately 3.9 million square feet, the strongest rental market for D-FW since 2015 and the third strongest rental market in 22 years.

At the height of the pandemic in 2020, the market was hit by closures that led to a huge increase of over 4 million square feet of new vacant homes during the year.

The market also benefited from the filling of vacant flagship positions and an extremely conservative development climate which limited the surplus of vacant spaces.

Construction

In 2021, retail deliveries totaled only about 639,000 square feet, the first time in more than three decades that D-FW has seen construction below market by 1 million square feet.

D-FW’s limited space deliveries reflect the nationwide and statewide trend of anchor contractions and limited anchor expansions, redevelopments of existing projects for new rentals and small mixed-use, non-anchored retail projects. Additionally, many projects were delayed during the worst of the pandemic in 2020, and this delay means that some projects from 2021 will now open in 2022 and beyond.

Construction is expected to increase significantly in 2022 as large-format presenter HEB begins expansion across the market with its first D-FW stores, and presenters including Kroger start with new stores in markets like Melissa and Central Dallas.

Market Snapshot: Austin

The Austin retail market at the end of 2021 reported a recovery in rental demand which filled many existing vacancies in the market and helped bring the overall occupancy rate down to 96.0 %. The current occupancy rate represents a return to the pre-pandemic year-end 2019 rate.

At the height of the pandemic in 2020, a number of retail closures resulted in an approximately 1.5% decline in occupancy, or approximately 770,000 square feet of newly vacant space.

The occupancy rate of the market has stabilized thanks to an overall tight market for commercial space, a recovery in rental activity which makes it possible to absorb well-located vacancies and extremely limited constructions significantly put online or totally rented. Additionally, the market for 2021 has not seen the level of large format store closures that occurred in 2020.

Even with a healthy retail market and a strong economy, Austin had another extremely limited year of construction in 2021. Deliveries, however, were slightly above the 2020 level.

For 2021, the Austin Metro Retail Marketplace added approximately 412,000 square feet of retail space in new and expanded projects each totaling 25,000 square feet or more.

New space deliveries have not reached the 1 million square foot mark since 2016.

Market Snapshot: Houston

The Houston retail market saw overall occupancy return to its pre-pandemic rate of 95.0% at the end of 2021, reversing a pandemic-induced occupancy decline of 2% in 2020 .

Retailers leasing existing space have added vibrancy and cross-buying to market hubs, and these new leases are a key reason market occupancy has leveled off. The Greater Houston retail market also reported limited large format closures, unlike 2020 when pier and junior pier closures added 3.1 million square feet of new vacancies.

In terms of rentals, the catering market has created strong demand, especially for second-generation spaces. Larger format concepts have also expanded through existing space, helping to clear some of the biggest vacancies in the market.

Houston’s limited building trend continued in 2021 following calendar year 2020, when deliveries of new retail space set a new record.

Until 2020, based on the more than three decades that Weitzman has surveyed the market, Houston had never seen new space deliveries fall below 700,000 square feet.

For calendar year 2021, Houston saw deliveries of approximately 615,000 square feet of new retail space in new and expanded projects of 25,000 square feet or more. That total is lower than the previous record, set in 2020, when Weitzman showed the Houston-area retail market added just 695,200 square feet in retail projects of 25,000 square feet or more.

For 2022, however, new shipments will increase significantly due to new and expanded retail projects that have been underway for years, as well as new anchor stores like HEB, Target and Burlington.

Market at a Glance: San Antonio

The San Antonio retail market at the end of 2021 saw occupancy rate reach 94%, a rate that compares favorably to the pre-pandemic occupancy rate of 94.5% reported at the end of 2021. the year 2019.

The higher occupancy rate in the market reflects the continued demand for existing retail space in smaller boutiques, ranging from concepts ranging from restaurants to medical, beauty and fitness services. The past year also saw rentals that absorbed some of the biggest vacancies in the market, such as a vacant department store that was filled with a discount concept.

In calendar year 2021, San Antonio reported a decline in annual retail construction of new and expanded space. Construction has declined every year since 2018, when new space totaled 868,400 square feet.

For the year, Weitzman is reporting approximately 354,000 square feet of retail space in new and expanded projects.

For 2022, new projects going live include a Floor & Décor anchor at Live Oak Town Center anchored by IKEA, as well as a new community and neighborhood space.

Marshall Mills is president and CEO of Dallas-based Weitzman.