Herb Weitzman: Is It Time to Worry?

At our recent shopping center survey and forecast event, I talked about the factors that are operating in our favor:
• In Dallas-Fort Worth’s residential market, demand is outpacing supply.
• The retail market, with an occupancy rate of 91.6 percent, is enjoying its lowest overall vacancy in more than three decades.
• The Fed’s recent move to raise the federal funds interest rate indicates a belief that the economy is strong enough to do so.
So now that things are going great, we have to ask the question: Is it time to worry?
Well, I don’t think it is. I think we have a market that is in balance. There’s nothing looming out there that is going to knock it sideways. I believe what our research for the retail market—and other firms’ research for multifamily, office and industrial—is telling us: our market is in balance.
Balance in real estate means funds are available for new lending, equity is available for new development deals, and in every commercial sector, we are not seeing overbuilding like we’ve seen in every other boom and bust cycle.
When the financial crisis hit the retail market in 2008, only the strongest could survive. We lost dozens of major chains virtually overnight. In just one year, retail vacancy in existing North Texas space jumped 4 million square feet. At the same time, we had 5 million square feet of new space under construction. That was not a recipe for a balanced market.
In the long term, though, construction evolved to become almost all anchor-driven. The slowdown in construction allowed the big blocks of vacancy we saw in 2008 and 2009 to get absorbed as residential and population growth increased retail demand.
Today, every single category of retail, from mixed-use to mall to community and more, is reporting healthier occupancy. DFW job growth, population growth, and corporate relocations—combined with some of the lowest sustained annual construction we have ever seen—have created a very stable retail market with incredible momentum.
To read our full report, covering year-end retail market conditions for North Texas, as well as Austin, Houston, and San Antonio, follow this link.
Once you do so, I think you will agree with me: It’s not time to worry.


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