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DALLAS-After delivering more than 5.7 million sf of retail space in 2006, the Dallas/Fort Worth region is still practically 90% occupied in its 163-million-sf inventory. Credit goes to North Texans’ penchant to spend and continued growth of “retail districts.”

Local market watchers know all too well about the hotspots that are sprouting up in all directions of the metroplex. But, the build-out capacity is a hard-hitting fact. In his 17th annual retail forecast for the industry, Herbert D. Weitzman, chairman and CEO of locally based Weitzman Group and Cencor Realty Services, laid it out: 2.2 million sf at Cedar Hill; two million sf in the Flower Mound-Highland Village corridor; 2.5 million sf in Garland; three million sf in Southlake; and millions more in North Fort Worth.

Weitzman admits he has some concerns about the rise of retail districts although they are generating the greatest impact on the region. “They’ve got to be nurtured with a good tenant mix for years,” he stresses to GlobeSt.com. “The market doesn’t stay still unless you’re at such a location that you have high barriers to entry. That’s the logic of it.”

The nuts and bolts of the region’s retail market, though, was the thrust of yesterday’s event, which drew 350 industry movers and shakers to Nick & Sam’s restaurant at 3008 Maple Ave. in Dallas. Weitzman’s savvy about the market and annual survey results are the drawing cards.

The 2006 survey showed Dallas delivered 4.4 million sf and Fort Worth brought 1.3 million sf on line. As for absorption, Dallas filled 2.2 million sf and Fort Worth, 1.1 million sf. Since 2000, the region has absorbed 30.5 million sf.

Region-wide occupancy is 89.6%: Dallas at 89.7% and Fort Worth at 89.4%. In boring down into the numbers, Cedar Hill has the highest suburban occupancy with 99%; McKinney, 98%; Allen, 97%; Park Cities-Oak Lawn, 95%; and Northeast Tarrant County, 95%. And rental rates are running, on average, from the mid-$25 per sf to mid-$30 per sf. On the sales front, Weitzman said class A cap rates of 6.3% to 7% are keeping demand high for “good retail.”

In other survey results, the highest leased product is mixed use at 97.3% followed by power centers, 93.5%, down nearly 1.7% from last year. Malls are 92.5% leased, up1% due to some expansions and backfills; community centers, 89.1%, which account for 71 million sf of the inventory; and neighborhood centers, 85%. Weitzman forewarned that developers are building too many neighborhood centers larger than 20,000 sf. “They need to be smaller,” he says, citing sustainability over the long term.

Weitzman predicted construction this year will taper to 4.5 million sf in all product types. “It will be the start of a slowdown that we see continuing into 2008 and 2009,” he said.

Among this year’s hot trends will be the surge in grocery chains opening larger stores so they can include non-grocery inventory. The evolution is aimed squarely at gaining ground in the daily grind with Bentonville, AR-based Wal-Mart Stores Inc., which has 110 stores in North Texas.

The retail forecast, as always, included news from the housing front. Ted Wilson, president of locally based Residential Strategies Inc., predicted starts will return to more normal levels of 43,000 to 46,000 units after topping 51,000 last year. The 2006 pace has pushed the housing supply to far more than the norm. Wilson said it will take until spring until there is a noticeable decline in the inventory.

“It’s a tough time to maintain discipline because the market is still awash with capital,” Wilson said. But, he stressed, there is a need for restraint to allow the market to fall back in line with industry guidance for a two-month supply. “A 19% reduction is needed this year to maintain a two-month supply,” he said. “2007 is a time to be cautious with new lot development.”

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