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Retail rebounds to record highs

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Economic expert says physical location markets online presence

Retail not only did not die post-pandemic but rebounded stronger than ever in 2023.

If questions remain about the future of retail in the face of online shopping, current trends indicate that physical locations are very important for retailers in the current days of digital marketing. Brick-and-mortar buildings now drive consumers to online stores.

The 2024 Weitzman Annual Forecast and survey of retail real estate revealed Thursday that the Dallas – Fort Worth (DFW) area has reached and surpassed the highest occupancy rate ever in 2023. With an inventory of 199 million square feet of retail space in the metropolitan area, 95.2 percent of it was occupied in 2023.

By contrast, the previous record of 94.8 percent occupancy was hit in 1981 with 80 million square feet.

“Our retail is looking so good, in fact it’s the best it’s ever been,” said Bob Young, Executive Managing Director of Weitzman, which owns and manages retail properties across Texas, including several in Farmers Branch. 

The most prominent Weitzman properties within city limits are Midway Commons, 13605 Midway Rd.; 5Thousand5 Galleria, 13465 Inwood Rd.; the Boardwalk at Mercer Crossing, at I-635 and Luna Road; and the building formerly occupied by Goosehead Insurance at 2824 Valley View Ln.

Young said the annual survey, now in its 34th year, shows that brick-and-mortar retail is now vital to consumers because it fulfills their needs for convenience as well as experiences. 

In the DFW area, Fort Worth’s retail occupancy was the highest at 95.5 percent of 62.3 million square feet leased.

The forecast separates retail categories into community centers, which are anchored by grocery stores and were 96.2 percent occupied; neighborhood centers, which are not anchored by grocery stores and were 94.4 percent occupied; mixed-used centers, which benefits from high-density, multi-family units and office centers and were 96 percent occupied, and power centers, which are outdoor shopping malls that include multiple big-box stores and had a 95.7 percent occupancy rate despite both Bed Bath & Beyond and Tuesday Morning’s bankruptcies creating a high number of vacancies.

Young said that wherever new space comes available, it quickly fills, limiting availability.

“We expect the market to remain stable and occupancy to remain 95.8 percent leased” in 2024, he said.

Weitzman Founder and Executive Chairman Herb Weitzman followed Young’s presentation with an interview of Anton Pil, managing director and global head of J.P. Morgan Global Alternatives.

Pil was enthusiastic about the economy and the state of retail.

“Retail is going tremendously well across the entire United States,” he said. “It’s going twice as well in Texas.”

Pil said retailers with physical locations find that their website traffic grows because consumers cannot purchase everything on Amazon, and most especially not experiences. The brick-and-mortar building becomes a marketing strategy, allowing consumers to touch and feel items before buying online.

He emphasized that consumers expect experiences with their shopping and said that is the area where grocers have failed to fulfill consumer expectations.

He also said that 120 major national retailers went bankrupt during the pandemic, primarily because they didn’t effectively switch to an online presence.

However, he said he thinks the retail washout has taken place. Malls in United States decreased from 1,500 before the pandemic to 1,000 now, and they currently have waiting lists for retailers wanting a storefront.

Another major shift in trends that has taken place is restaurants now anchor many retail centers.

“I worry about fast-food chains that are cheap,” Pil said. “Americans don’t need a $1 burger. They can afford a $12 burger … We’re not living in 1975 where people need two burgers for a dime.”

In addition, Pil said retailers and communities in general need to watch for the growing use of diet drugs. He said his company can identify consumers who use the newest prescription pharmaceuticals for weight loss because their spending habits change so drastically. 

He said fast-food consumption decreases by 85 percent, snacks by 80 percent, soda by 70 percent and alcohol by 60 to 70 percent.

“You lose 15 to 20 percent of your weight, but it completely changes your spending habits.”

He said he expects alcohol sales to struggle, and fast-food companies will need to change to meet the needs of their target audience.

In the upcoming years, he said he expects gym memberships and beauty services will increase as people feel better and become physically fit. In addition, consumers will likely buy new clothing as well.

Herb Weitzman asked Pil to comment specifically about inflation because while it is falling, consumers still feel the pinch, but Pil said J.P. Morgan anticipates that 2024 will be “a pretty decent year.”

Because the U.S. Federal Reserve is such a large institution, Pil said he expects interest rates will fall slower than people would like but does not think it will hurt homeowners. 

“If you aren’t a homeowner, you are going to feel the pain,” he said.

Pil said he thinks a demographic issue that isn’t frequently discussed is a bigger issue when it comes to homeownership than most people know: People are getting married later so the need for single-person housing is high.

“I think that’s pushing back homeownership because you don’t have dual incomes to be able to afford a home until much later.”

Mayor Terry Lynne and City Manager Ben Williamson attended the forecast, which took place at the George W. Bush Presidential Center in Dallas.

“I think it says a lot for the value of Farmers Branch when industry leaders such as Herb Weitzman personally reach out to invite me to participate on behalf of the city. I was privy to very valuable information to help move our city forward,” Lynne said. “With all of the building going on in Farmers Branch, it was interesting to hear [of J.P. Morgan Chase’s] ownership position of companies in the timber industry. Timber is in high demand and the forecast is for continued high demand. To learn that wood is now being used to construct taller multi-story buildings was really interesting.”

Williamson said the city’s diverse economy provides the resources that allows the city to provide a high level of service to both residents and businesses.

“We are 73.54% commercial, and the presentation reinforced that the economic forecast remains strong for Farmers Branch and the region, at least from Herb and Anton’s perspective,” he said.

The full 2023 Texas Retail Market Report will be available free online next week at https://www.weitzmangroup.com/report.