Tuesday, January 19, 2010

Weitzman: Another tough year for retail

Occupancy of retail real estate across North Texas fell in 2009 and will likely continue a downward trend this year as store closings, weak consumer demand and shifting shopping habits continue to take a toll on the market.

That was the conclusion of a Shopping Center Survey and Forecast presented Tuesday morning in Dallas by retail real estate firm The Weitzman Group.

Overall occupancy in the Dallas-Fort Worth retail sector fell to 86.5 percent at year end 2009, a 1.2 percent drop from the previous year, according to the survey of more than 1,300 shopping centers in North Texas. Occupancy fell in all five types of properties measured — neighborhood centers, community centers, power centers, mixed-use centers and malls.

"No doubt we're in for a slow market and more store closings (this year)," said Herb Weitzman, chairman and CEO of The Weitzman Group.

In today's environment, "tenants are king," and landlords should be pro-active in helping tenants weather the recession by offering rent reductions and other relief, when appropriate, Weitzman said.

"Stability is the new up" in 2010, Weitzman joked. He said it will be another five years before the D-FW retail real estate market fully recovers.

Absorption, which measures the net gain or loss in occupancy of existing and new retail space, rose by 464,404 square feet across the area, said Bob Young, managing director of The Weitzman Group. The good news was that absorption ended the year in positive territory; the bad news was that it was the smallest gain in a decade, Young said.

In terms of construction, 2.9 million square feet of shopping space was built in 2009, which is the lowest total of new space in a decade, Young said. Most new construction occurred in Allen, Northeast Dallas and Arlington.

Most of 2009's building was the completion of projects in progress, and very little new retail space will be developed in 2010, Young said.

"This year we're looking at basically no new projects," he said.

On the bright side, the retail picture looks worse almost everywhere else.

"Even with the challenges, Dallas-Fort Worth is performing as good or better than any retail market in the country," Young said.

Retailers should be helped somewhat by a slowly improving housing market, said Ted Wilson, principal of Residential Strategies Inc., who also presented information at the morning session held at Nick & Sam's restaurant in Dallas' Uptown area.

Residential foreclosure filings in North Texas have moderated, prices have stabilized, homebuilders' margins are improving and the pace of housing starts seems to have bottomed at about 13,000 units — a decline of 74 percent from the market's peak, Wilson said.

"While there are still challenges in the housing market, we do believe the worst is behind us," he said.

Dallas Business Journal