The region’s population is booming, and retail is expanding, although there are some worries about a space glut.
The Dallas-Fort Worth Metroplex, the fastest-growing U.S. metropolitan region, is in a retail expansion that is running counter to the national economic slowdown — although there is some concern about too much growth.
The area is already heavily stored. Dallas has more shopping and retail venues per capita than any other U.S. city, according to the City of Dallas, which estimated there are 26 square feet of retail space for each person in the metropolitan area, compared with the national average of 14 square feet.
“Looking ahead, the biggest concern for the retail market is that the number of retail projects currently under construction may result in an oversupply of new space, particularly in select submarkets,” real estate brokerage firm CB Richard Ellis said in a March research note. “[Retail] construction is down moderately from 2006, but still above the historical norm for the Dallas-Fort Worth market.”
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Mindful of the realities, developers’ efforts often include aggressive and incentive-laden preleasing offers and highly focused demographic and psychographic studies on whether potential stores resonate with shoppers. In many cases, lenders hinge the approval of construction loans on the success of such preleasing activity.
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Tod Ruble, a partner at Harvest Partners, which is among the developers of Park Lane Place in Dallas, across from upscale NorthPark Center, said the project “is 80 percent leased,” including stores such as Old Navy, Children’s Place and Nordstrom Rack.
In the context of overall U.S. economic weakness, Paris Rutherford, a founder of real estate development firm Icon Partners LLC, which is developing the Midtown and Mercer Crossing projects in the region, said, “Texas has managed to avoid much of the subprime debacle and continues to enjoy positive job growth, affordable quality housing, a pro-business government and a strong quality of life.
“Although this climate mitigates some of the risk, the projects also rely on strong public/private partnerships for their success,” Rutherford continued.
Despite the region’s economic resilience, developers are taking a careful approach in planning and constructing retail and mixed-use venues. They are looking to a future mostly with open-air lifestyle shopping districts that also feature upscale housing, hotels, entertainment and office space. An estimated 20 million square feet of retail space is set to open in the region from 2010 to 2012.
Developers are targeting diverse suburbs and neighborhoods for expansion, from the wealthy and bohemian-flavored Uptown neighborhood close to downtown Dallas to projects 20 to 30 miles north of Dallas in once bucolic towns such as Frisco, Fairview, Melissa, Princeton and Prosper.
“North Texas is better positioned than any other region of the country to ride out the recession of 2008,” said Bernard L. Weinstein, professor of applied economics and director of the Center for Economic Development and Research at the University of North Texas in Denton.
The region has a diversified business infrastructure that includes technology, health care, manufacturing, transportation and energy-related companies, most notably Exxon Mobil.
U.S. Census data released in March said the estimated 6.1 million population of the Dallas-Fort Worth area increased by 162,250 for the year ended July 1, 2007, trailed by Atlanta, Phoenix and Houston, all of which gained more than 100,000.
“Since 2004, the metroplex has added almost 300,000 jobs, more than New York or Los Angeles,” Weinstein said. The area unemployment rate was 4.3 percent in March, compared with 5.1 percent nationally, according to Labor Department statistics.
The Dallas-Fort Worth median household income is $49,740, versus $48,451 nationally, but developers of shopping and mixed-use lifestyle centers have their sights set even higher. The new venues are typically in neighborhoods and suburbs with many household incomes of more than $100,000.
Although residential construction has declined about 25 percent in the last year, Weinstein said: “The Dallas-Fort Worth Metroplex is not in a recession like the other parts of the country…Importantly, the basic industries in North Texas remain healthy. Defense-related manufacturing continues to expand. The information technology sector has rebounded strongly…Dallas-Fort Worth’s role as a major logistics center continues to increase in tandem with growing global exports from Texas.”
A falloff in housing construction “has been more than offset by new commercial, industrial, retail and public infrastructure projects,” he said.
Retailing has long been an integral part of the region. Dallas was founded in 1841 as a trading post. Now retailing and fashion pump billions of dollars into the economy each year.
“Although the occupancy rate and rental rates declined moderately in 2007, compared with 2006, the D-FW retail market performed well,” according to CB Richard Ellis.
Among the positive factors for development are the lack of a state income tax, a relatively low cost of living and, in Dallas-Fort Worth, a multicultural population that helps retailers focus on specific demographic profiles with specialized and destination products.
“The economic momentum that has built up in recent years should help insulate us…and if the past is prologue, when the recession ends the D-FW Metroplex will continue to grow at some multiple of the national trend,” Weinstein said.
Among the key developments are:
– Icon Partners’ Midtown project, a 19-acre retail, entertainment and office and residential complex that is expected to cost more than $1 billion and encompass nearly 4 million square feet of space, including 525,000 square feet of retail. It is among several mixed-use developments under way near the Galleria Dallas shopping center at I-635 and Dallas Parkway.
– Glory Park, a $742 million mixed-use project in Arlington, midway between Dallas and Fort Worth. It will have 825,000 square feet of retail and a total of 1.4 million square feet. The 75-acre project, developed by Hicks Holdings LLC and Steiner + Associates, is to open in phases starting in March 2010. It is next to the Texas Rangers Stadium and near the new Dallas Cowboys stadium.
– The Gates of Prosper, a 500-acre mixed-use project that is scheduled to start construction this month and open in 2011 with 2.5 million square feet of space. It is owned by Dallas Cowboys owner Jerry Jones and his Blue Star Land development company.
“We’ve bought 1,000 acres of prime land in Prosper and we’re following the rooftops and following the line of growth — we’re building where our target customers are living,” said Joe Hickman, vice president and general manager of Blue Star Land.
– Park Lane Place, a $500 million retail, residential, hotel and office project comprising more than 2 million square feet is taking shape on 33 acres about five miles from downtown Dallas. It is directly across U.S. Highway 75 from NorthPark Center, which just completed a $225 million expansion and renovation. The first phase of Park Lane Place will include some 750,000 square feet of shopping.
– Bridge Street Town Center in McKinney, a $200 million complex on 91 acres to include retail, a hotel and a convention center. It is expected to break ground this spring and open in the fall 2009.
– Village 121, an 80-acre mixed-use project with at least 500,000 square feet of retail. Construction is to start this month. It is located along Highway 121 north of Dallas and near Dallas-Fort Worth International Airport.
– The Shoppes at Fairview located at Stacey Road and U.S. Highway 75 in Fairview. It is across from a popular designer outlet shopping center, Premium Outlet Mall. The area was farmland less than five years ago, complete with cattle and horses. That’s been mostly replaced with huge homes built for their proximity to the region’s Silicon Prairie, the area that is headquarters for several high-tech companies such as Nortel, which has its U.S. headquarters in Richardson.
– Brick Row, a $140 million neighborhood with nearly 100,000 square feet of retail and restaurants and town houses, is to start construction this month in Richardson, across from the global headquarters of Texas Instruments.
– The Shops at Mercer Crossing, a 500,000-square-foot upscale fashion center to be located in Mercer Crossing, an 1,100-acre master-planned development in the geographic center of the Dallas-Fort Worth metroplex in the suburb of Farmers Branch. Icon Partners is developing the project.