Retail Markets in Focus: Dallas-Fort Worth

The Dallas-Fort Worth (DFW) metro region’s retail sector has outperformed the U.S. average. DFW joins Houston and San Antonio to form the “Texas Triangle,” a region with over $1.7 trillion of economic output, which would rank as the world’s 15th largest economy. Booming population growth outpaced new development, causing an undersupply of retail space. DFW’s strong transportation resources and proximity to critical manufacturing hubs provide advantages to DFW’s retail centers. 

Sector Performance and New Construction

DFW retail sales per square foot has exceeded the U.S. average in most years since 2006. CBRE projects the region’s outperformance to widen through 2024. This suggests demand for more regional retail development, even as DFW’s retail construction completion rate remains 20 bps higher than the U.S. average over the next two years. 
Real estate development costs are 10% less in Dallas and 12% less in Fort Worth than the U.S. average. Lower cost of construction materials is a leading factor. Concrete’s cost is about 85% of the U.S. average. Wood, plastics and composites costs are about two-thirds of the U.S. average. Additionally, the hourly wage of construction labor is $23.22, 14% below the U.S. average of $26.87, according to the U.S. Bureau of Labor Statistics.

Figure 1: DFW vs. U.S. Retail Sales Per SF

Source: CoStar, Oxford Economics, CBRE Research, Q1 2023.

Despite robust population growth, developers have not overbuilt retail property. DFW’s construction completion rate over the last 10 years averaged just 1.2% annually. Although this rate is above the U.S. average of 0.7%, retail space per capita has declined more than the U.S. average due to strong population growth. Retail space per capita in DFW has fallen about 8% since 2006, compared to just under 1% for the U.S.

Figure 2: DFW vs. U.S. Retail Space Per Capita

Source: CoStar, Oxford Economics, CBRE Research, Q1 2023.

Transportation and Logistics Advantages

The region boasts two major cargo-moving airports, with DFW International Airport now the world’s second-busiest for total operations. The airport hosts connections to 28 major international cargo markets, including key hubs in Asia and Europe. Interstate 35 (known as the “NAFTA Highway”) is the backbone of a major auto manufacturing corridor that stretches to Mexico, with direct access to Mexican manufacturers. DFW’s trade-driven economic power is advantageous to retailers with multichannel activities, using both store space and e-commerce.

Population Growth

Oxford Economics reports DFW has added over 1.2 million people over the past 10 years, more than any other U.S. metro. Over the past five years, employment growth rose by 3% per year in Dallas and 2.3% per year in Fort Worth, outstripping the U.S. average of 0.8%. DFW’s strong population growth will likely continue.

Figure 3: DFW 10-Year Population Growth vs. Other Top Markets

Source: Oxford Economics, Q1 2023.

Understandably, retail consumption has grown as the city developed. According to Green Street, DFW has four class A+ or higher retail centers: Galleria Dallas and NorthPark Center, both in Dallas, and The Shops at Clearfork and University Park Village, both in Fort Worth. Applying data via Placer.ai, there were almost 24.6 million visits throughout 2022 in those four centers, a 13% increase from 2021. 

Economic Outlook

Over the last decade, DFW expanded into a leading U.S. metro and global business hub. There are 23 Fortune 500 companies headquartered in DFW, attracting job seekers. Dallas employment increased at an average annual rate of 5.7% in 2022, with Fort Worth at 2.3%. The fastest-growing sectors are hospitality & leisure and transportation & warehousing. They are expected to remain the top growth sectors over the next five years, according to CBRE Economic Advisors.

This community, business and logistics infrastructure will support retailer growth and solid retail real estate performance over the next decade.