A lull in construction and one of the most robust economies in the nation is enabling retail operations to gain footing in the Metroplex, according to a new real estate report.
In general, Fort Worth operators are buying occupancy through aggressive concessions, while Dallas-area owners have opted to hold rents firm, according to the latest market update from national real estate investment firm Marcus & Millichap.
As the national economy teeters on the edge of a prolonged period of stagnation, a strategy favoring occupancy in lieu of future rents could pay off, the report says.
Local economic indicators remain favorable, however, which should result in lower vacancy in the coming months without significant additional incentives.
Risk-averse investors are targeting single-tenant and core properties, while value-add buyers are seeking properties with below-market rents and dark space. In some instances, newer properties report vacancy nearly twice the marketwide average, and new leases are being signed well below peak rent levels, according to the report.
Among the report’s forecasts:
Employment growth in the Metroplex will slow. The report expected 50,000 jobs to be added this year, a gain of 1.7 percent.
Building activity will accelerate. The Metroplex as 1.9 million square feet scheduled to come online this year. In 2012, completions will increase further as some of the 27 million square feet of space planned for the market resumes development.
Vacancies will drop. An influx of heavily leased development and improving tenant demand will push vacancies to 11.9 percent by the end of the year, an annual improvement of 40 basis points.
Rents will tick upward. Asking rents will inch up 1.1 percent this year to $15.31 per square foot while effective rents increase 1.4 percent to $13.21 per square foot. Despite the modest gains, retail rents will still remain 3.3 percent and 6.5 percent below pre-recession peaks.