Investors who have gobbled up billions in North Texas commercial properties are adding more retail buildings to their shopping list.
Early in the pandemic, industrial and apartment properties were top picks for investors who are spending billions of dollars on Dallas-Fort Worth real estate.
Almost $47 billion in D-FW investment properties was purchased in 2021, mostly warehouses and rental communities.
But two years after COVID-19 hit the market, more retail properties are trading as buyers look for opportunities in one of the country’s fastest-growing metro areas.
In just the last few weeks, almost a dozen local shopping centers have changed hands. And property brokers say there are more deals pending for 2022.
“I think the activity level we are seeing will certainly continue,” said Dallas property broker David Disney, who has just handled several local shopping center sales. “The shopping centers have performed a lot better during COVID than investors realized.
“They see retail is here to stay, and demand is exceeding supply.”
Disney Investment Group just brokered the sale of shopping centers in West Dallas, McKinney and Irving with almost 300,000 square feet of space.
“Investor activity and demand has shot up,” Disney said. “The pandemic restrained a lot of the retail sales activity in 2020.
“Flip the calendar to 2021, and buyers started re-entering the market.”
Some sellers also decided that it was the right time to make a move.
Dallas-based Centcom Realty just sold its Craig Crossing shopping center in McKinney and Valley Ranch Center in Irving.
“While we owned those properties, we weathered the Amazon revolution and then the pandemic,” said Centcom Realty’s David Pemberton. “With the expectations of higher interest rates and inflation, I thought I should put them up for sale.
“I put them on the market and got 14 offers on both properties, and none of them were from Texas,” he said. “It was amazing to me.”
Dallas-based investor Crow Holdings just acquired the landmark Sylvan Thirty retail center in West Dallas for one of its investment funds.
The more than 45,000-square-foot urban shopping center with many restaurant tenants fit in with the investor’s desire to acquire more retail properties with strong food and service tenants, said Crow Holdings Capital director Sterling Hillman.
“Sylvan Thirty fits nicely into that strategy for us,” Hillman said. “It has great demographics around it with a lot of density added in the last 10 years.
“We own about 20 similar centers in D-FW alone.”
Hillman said investors are getting back on board with additional retail acquisitions.
“We’ve certainly seen a lot of momentum coming back to retail shopping center investments,” he said. “We’ve seen a real robust leasing year over 2021.”
Even before the pandemic hit, Hillman said retail was being negatively painted with too broad a brush when it came to concerns about e-commerce.
“There are many segments of retail that have been very healthy,” he said. “That resiliency through COVID and geographically being in D-FW with all the supporting growth metrics have supported that.
“You are now seeing investors looking at retail as a pretty nice risk-adjusted-return opportunity.”
The slowdown in D-FW shopping center construction during COVID has also made retail properties more attractive to buyers, Hilliman said.
In 2020, developers and retailers added only about 600,000 square feet of North Texas shopping space — the lowest amount added to the market in three decades, according to estimates by Dallas-based property firm Weitzman.
“There has really been a limited supply of properties,” said Weitzman executive managing director Robert Young. “As the market leased up and there is no new product, there is becoming a premium.
“In 2022, we will see more construction and in 2023 we will certainly see more, but development is still measured.”
Young said shopping center buyers and owners are more comfortable with expected returns from the properties.
“Investors are realizing that the retailers that are still standing have survived and adapted and are now valuable to the shopping experience,” he said. “Existing real estate in the retail sector if it has good visibility and a reasonably strong mix of services has become really desirable.”
D-FW retail centers are on investors’ shopping lists
Recent North Texas property sales.
- Craig Crossing, a 128,000-square-foot retail center on U.S. Highway 75 at Eldorado Parkway. The McKinney shopping center is 90% leased to tenants including Club 4 Fitness, Boot Barn, Chair King and Half Price Books. Alto Real Estate Funds purchased the property from Dallas’ Centcom Realty in a deal brokered by Disney Investment Group.
- Arboretum Village, a more than 95,000-square-foot retail center on Gaston Avenue near White Rock Lake in Northeast Dallas. New York-based Brixmor Property Group has acquired the property, which was built in 2014 and is anchored by a Tom Thumb grocery store and Ace Hardware.
- Sylvan Thirty, a more than 40,000-square-foot restaurant and retail center at Fort Worth Avenue and Sylvan in West Dallas. Built in 2013, the mixed-use development was purchased by a retail investment fund represented by Dallas’ Crow Holdings. Disney Investment Group brokered the sale.
- Presidio Plaza, a 166,225-square-foot shopping center on Interstate 35 in Denton. It was purchased by Dallas’ Steeplechase Ventures LLC. The just expanded property is more than 90% leased and is next to the Rayzor Ranch mixed-use development. The sale was negotiated by Jones Lang LaSalle.
- Lewisville West, a 129,129-square-foot grocery-anchored retail center at the northwest corner of Interstate 35E and Fox Avenue in Lewisville. It sold to Chicago-based Newport Capital Partners. Lewisville West was 79% occupied at sale with tenants including El Rancho Supermercado, Liquor Den, Jefferson Dental, Verizon, Cricket Wireless and Starbucks.
- Valley Ranch Center, an 118,000-square-foot shopping center on MacArthur Boulevard in Coppell. It was sold to New Orleans based investor PMAT by Dallas’ Centcom Realty Corp., and Disney Investment Group brokered the sale.
- 615 Main St. in Frisco, a 24,000-square-foot shopping center. It was bought from Oakmont Land Six LP by investor Main STX LLC. Henry S. Miller Equity Partners brokered the sale.
- The Shops at Prosper Trail, an almost 100,000-square-foot retail center on Preston Road. The strip shopping center is next to a Kroger Marketplace grocery store and is 98% leased. Dallas’ Younger Partners Investments bought the property.
SOURCE: Dallas Morning News files