Thursday, May 14, 2009

Young to Crowd: Be Glad You're In Texas

DALLAS-Population and job growth, combined with prevention of overbuilding on the retail end, mean Texas should weather the economy fairly well. Weitzman Group managing director Bob Young said that, thanks to the attitude that retail space should be demand-driven, Texas doesn't find itself drowning in a lot of excess inventory.

"We learned our lessons from the 1980s," said Young to participants at Appraisal Institute North Texas Chapter's North Texas Realty Symposium on May 12. "Construction was done right this time."

Even better news for the retail sector is that the grocery sector is in the best shape it's ever been. "People have to eat," Young remarked. "The dollars are going to grocers, rather than restaurants." Kroger is taking advantage of the demand by expanding, as is Wal-Mart, he said. Furthermore, specialty grocers, such as Sprouts, "is taking a health-conscious society into retail," Young remarked.

Still, as anyone picking up a newspaper or watching television knows, the retail sector isn't firing 100% on all cylinders. The lifestyle concept is struggling, Young remarked, as are malls and high-end restaurants. Even power centers are being hit, especially as the larger anchors declare Chapter 7 and are forced to liquidate.

The good news in the Dallas-Fort Worth area, however, is that "tenants are stepping up to backfill the vacant space," Young commented. He pointed out that Conn's, for example, is seeing a lot of opportunity in the big boxes vacated by Circuit City and Linens 'n Things.

The problem is, the market can't depend on the Conn's of the world to come in and bail out the empty spaces. Young predicted that in 2009 through 2010, vacancy would continue to increase. Furthermore, "the more the category killers reduce, the Staples, the Max's, the Depot's, the fewer there will be to backfill," Young said.
By Amy Wolff Sorter with