Weitzman: Dollar Stores Closing Retail Gaps

The industry leaders--Family Dollar, Dollar Tree and 99 Cents Only--are grabbing locations in better neighborhoods, filling shelves with brand-name goods and rewriting the re-leasing playbook as they upsize into second-generation anchor spots to deliver a new driver for often-tired centers. "The dollar stores are redefining neighborhood centers," Herb Weitzman, president and CEO of the Weitzman Group and affiliate Cencor Realty Services, told a standing room only crowd at his 15th annual Dallas/Fort Worth retail survey and forecast held yesterday in Dallas.

"Thirty-six percent of all households shop at dollar stores," Weitzman said, pointing out it's an increase of 10% from five years ago. Most, if not all, of the Big Four have expansions underway in the metroplex, moving up to class A status and filling holes as large as 25,000 sf.

The Goodlettsville, TN-headquartered Dollar General, which has 6,653 locations in 27 states, plans to open another 675 stores this year. Competitor 99 Cents Only will open its first Dallas store Jan. 29 in 25,000 sf at Broadmoore Village at 950 W. Centerville Rd. in Garland, the first location for a 12-store market entry with another 10 to 15 planned for 2005 in the metroplex, according to the chain's brokerage firm. The Commerce, CA-based retailer entered Texas in early 2003, making Houston its first stop for retail sites and a 740,000-sf distribution facility.

But, it's the Weitzman numbers and insight that draw the crowd to the not-to-be-missed state of the market address. Last year ended with a retail occupancy of 89.7%, based on a survey of 1,100 shopping centers in an inventory of 147 million sf, of which 3.4 million sf came on line last year to mark the lowest delivery since 1998.

"Not all of it is happening in the middle of the retail corridor as it has in the past," Wetizman said. "Retail development continues to go farther and farther out...Cedar Hill is this year's Frisco." But Cedar Hill, sitting 18 miles southwest of Dallas, is far from the only hotspot: McKinney, 33 miles to the northeast, will have a half dozen new centers come on line this year. Leading rooftop development will be northwest Fort Worth, Forney, Anna, South Denton, the 389 Corridor, Crowley and Midlothian.

Weitzman's research shows every 5,000 houses create 677,000 sf of retail. With nearly 38,000 new housing starts projected, it's not hard to understand why the DFW is boasting the highest space count per capita in the nation--26 sf per person. Growth, demand and competition have tried-and-true retailers seeking new concepts, like Albertsons bringing Toys R Us inside its doors, to develop customer incentives beyond the sale signs.

"Overall our occupancy picture still remains healthy, thanks to the consumer," Weitzman says. The suburb of Rockwall's retail is 99% filled; Frisco, 97%; Cedar Hill, 96.3%; Fort Worth CBD, 96.2%; and McKinney, 95%. Dallas at 89.7% is sure to gain ground this year due to a few key in-town announcements in fourth quarter 2003, including a grocery store location being sought by a preferred Kroger developer. "The biggest positive about this market is it's getting leased. Re-leasing has been great," Weitzman said, including the relighting of many big boxes.

However, malls took a hit again in 2003, even the successful ones, Weitzman said. Mall absorption was 269,000 sf; power centers soaked up 1.3 million sf; and community centers had one million sf filled. Neighborhood centers dropped 30,000 sf. Still, malls were 92.1% leased at year's end; power centers, 92.8%; community centers, 89.5%; and neighborhood centers, 86.9%. The region's average rent is $14.46 per sf while some elite in-town pockets can collect as much as $50 per sf.

While there's seemingly no shortage of retail, the buy side is under pressure. "Demand is outstripping supply," Weitzman said of investors' appetites particularly for grocery-anchored community centers.

Looking ahead, Weitzman, who says this year will be better than last, and Ted Wilson, principal of Residential Strategies Inc., concurred that 2004 will bring jobs and a decline in unemployment. "It appears the economic recovery is coming at the right time," Wilson said in a presentation about housing, "as we shift from an interest-rate driven market to one of real demand.