A survey of thousands of malls across DFW unveiled on Wednesday showed high letting and occupancy levels in 2021, indicating brick-and-mortar retail is still relevant despite a massive shift to e-commerce during the pandemic .
Courtesy of Weitzman
Weitzman’s Michelle Caplan and Matthew Rosenfeld discuss the results of the 2021 annual survey at an event Jan. 12.
Weitzman, one of the Metroplex’s largest commercial real estate agencies, said in its latest year-end review and forecast that overall retail occupancy landed at 93.5% in 2021, the third highest tier. highest in 32 years, the company conducted its survey.
“Demand for commercial space in 2021 has not only boosted occupancy, it has almost completely reversed the huge increase in vacant space [created] by the pandemic in 2020,” said Matthew Rosenfeld, executive vice president and chief brokerage officer of Weitzman DFW, at the company’s annual forecast event on Wednesday.
Absorption also rebounded in 2021, with Weitzman reporting a net increase of 3.9 million square feet in occupancy. That’s the third-largest rental market in 22 years, Rosenfeld said.
“This is a complete reversal from 2020, when pandemic-related closures caused vacancies to increase by more than 4 million SF,” he said.
High-demand concepts include restaurants, medical facilities, gyms, beauty and service businesses, said Weitzman DFW executive vice president Michelle Caplan. Vacancies created by large anchor tenants, such as Stein Mart and Pier 1, were quickly filled by other large retailers, such as Sprouts Farmers Market, which plans to add four new stores to the flagship spaces, it said. -she adds.
All areas of retail saw improved occupancy in 2020, with even tougher categories, such as loose neighborhood centers, which account for nearly 41 million square feet of retail in DFW and were 92.5% occupied by year-end, Rosenfeld said.
The best performing retail category in 2021 was grocery stores, which saw a 2% annual increase in occupied space, ending the year at 94.1% occupancy. DFW retailers, led by grocery stores, have leveraged technology to gain a competitive advantage, Rosenfeld said.
“Grocery stores are the MVP of DFW retail, driving sales and traffic and leading the way in technology and mortar,” he said.
Tenants are rolling out new strategies, including drive-thru pickup windows for digital prepaid orders or dedicated order fulfillment sections of grocery stores, to meet changing consumer needs brought on by the pandemic.
“At all levels, retailers have access to more and more data that helps them understand what works and what doesn’t with customer engagement,” Rosenfeld said. “This insight-driven approach helps drive further innovation.”
One area for improvement is retail construction, which had its worst year on record in 2021, Rosenfeld said. The market added 640,000 square feet of new space, which is significantly lower than the previous low total of 1.2 million square feet in 2012.
It’s the first time in three decades that new construction has dropped below 1 million square feet, Rosenfeld said, and it points to a decade-long trend, nationally and across the board. State, of anchor tenants that are downsizing or not expanding. Rising construction costs, redevelopment efforts and delayed projects during the pandemic also contributed to the fall, he said.
Based on what’s in the works, Weitzman predicts a rebound in new construction of around 2 million square feet in 2022. He also forecasts an increase in overall retail occupancy to 95% and an absorption of 2 .5 million square feet.
“The pandemic has resulted in what’s been called the ‘Great Retail Reset,'” Caplan said. “The weakest chains have closed. Chains that have restructured following bankruptcy or the closure of loss-making sites now have stronger balance sheets, and retailers have focused on innovations that have created a better shopping experience. So our retailers are stronger, our market is stronger and our economy is stronger. »