Dallas Is a Retail Gateway
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Texas might be the hottest commercial real estate market right now. That's no different when it comes to the retail sector. We spoke with Jones Lang LaSalle's Geno Coradini, retail market lead for the Southwest region, and he talked extensively about the market and the trends that he sees. Visit JLL during RECon at booth C1001.
GlobeSt.com: Texas is considered as one of the hottest markets in the country right now. Is that also the case with retail?
Geno Coradini: Yes, retail is picking up in Texas.† Leasing activity is beginning to pick up in the Dallas-Fort Worth area and retailers are gaining a bit of confidence when it comes to growth. I expect vacancy rates to continue to decline which is ultimately going to create an opportunity for new development. Dallas continues to be one of the more affordable metropolitan markets to live in. Itís proven to be recession resistant by comparison to other metropolitan areas.
GlobeSt.com: What about transactions? Who is buying out there and what is trading? Is it mostly necessity retail?
Coradini: In terms of investment sales, itís the†grocery-anchored centers that are the most sought after and itís the institutional investors that are working hard to find the right product.† Additionally, investors are starting to look beyond core markets to trophy retail assets in secondary cities.† Cap rates for stellar product in Texas range anywhere from 6 to 7% while good product is trading in the 7ís.††
Globest.com:† Are you seeing many stores downsize in your region?†
Coradini:† We are definitely seeing some downsizing.† The trend today is to do more with less and many retailers are finding creative ways to move product into more efficient space.† Itís quite a dynamic nationally, and that same activity is taking place in Dallas as well. Dallas has, in its corner, the affordable, cost-of-living factor that allows entry into this market more so than many other areas of the country.† So while we are seeing many of the big boxes doing more with less, we are also seeing quite a few new retailers coming to the market.†
GlobeSt.com: So what kinds of retailers in your market are taking up empty boxes?
Coradini: We continue to see a lot of wireless, whether it be AT&T, Verizon or T-Mobile. That sector seems to always be active. With grocery, youíre seeing a lot of the national players, but particularly a lot of the regional players as well. In the Southwest, weíre seeing activity within the Hispanic sector.† Organic is also one of the fastest-growing areas in grocery, and we are seeing a lot of activity in this area.
GlobeSt.com: In Texas it seems like there are a lot of local food concepts that are expanding. Is food in general taking up a lot of space?
Coradini: Our research shows that fast food concepts will be the fastest growing segment over the next two years.† There is a lot of activity in that space nationally and here in Texas. For instance, Los Angeles-based In-N-Out Burger made their debut in the Dallas-Fort Worth market recently and theyíve announced plans to open in Austin, as well.† Additionally, our client Smashburger, from Denver, is hot in this space.
GlobeSt.com: How do you see the consumer in the next year? Are they pretty confident?
†Coradini: Consumer confidence is coming around, and the activity in the Dallas-Fort Worth area illustrates that sentiment. Vacancy rates continuing to decline will create the need for product and the continuation of development. Weíre starting to see some of that in the preliminary stages. Itís not as active as it has been in years past, but it looks very promising. Things are beginning to blossom, but itís not in full maturity yet.
GlobeSt.com: Youíve added some people in the Southwest. Is that indicative of the market just being strong?
†Coradini: Weíve added a lot of retail talent to the market in Dallas recently including top brokers in the market Ė Clay Smith, Mark Newman, Lance Taylor and Robin Smith.†† Our clients continue to demand more and more from a retail platform and JLL Retail is built to support all of their CRE needs.† One area that we have been focusing on is the tenant-representation side of the business. Weíre going to continue to build that service across the country as well as here in Texas. People say that New York is the gateway to the US. We view Dallas as the gateway to Texas.