DFW’s Healthy Retail Market Led By Experiential Retailers

Dallas' retail market is stronger now than it was several years ago when e-commerce wasn't such a force, and part of the reason for its success could be the way it has embraced experiential retail concepts, according to retail experts.

Dallas-Fort Worth’s retail market at midyear 2018 had an occupancy rate of 92.5%, one of its highest rates over the past three decades, despite several major store closings this year, Weitzman reports.

Sears and Toys R Us shuttered DFW locations, resulting in vacancies of more than 1M SF, but a portion of that vacant retail space is being back-filled by experiential retailers.

Those have included GlowZone, a family entertainment concept scheduled to open by year-end in Lewisville; a trampoline park in Fort Worth; Punch Bowl Social, a Colorado-based bowling and entertainment concept opening two locations; and Alamo Drafthouse, which has multiple DFW locations, including a recent move into former grocery space in East Dallas.

Based on projects underway or with announced openings, the DFW retail market is on track to add 3.5M SF of retail space during this year, according to Weitzman.

Among the experiential concepts that have gained traction is iFly Indoor Skydiving, which has two DFW locations and is on a fast growth track.

The Austin-based company, with 39 global locations, looks for high-traffic areas near major highways for its wind tunnels, which allow participants to float on a cushion of air essentially flying without a plane or parachute, iFly CEO David Kirchhoff said.

Although real estate developers were originally skeptical of the concept, it has proven its success and has never had to close a single location, Kirchhoff said. As a result, real estate developers are now seeking out the company for their developments, he said.

Kirchhoff will speak about experiential retail Sept. 11 during Bisnow’s Retail South conference in Plano.

“Whether it’s Topgolf, iFly or an indoor climbing center, you can grab the nectar of life in a way that is missing from social media or e-commerce,” Kirchhoff said. “It is allowing people to get connected back into their world.”

Investors like it, too. CBRE Global Investors recently acquired a stake in a portfolio of Class-A regional malls through a joint venture agreement with Brookfield Property Partners, including The Parks Mall at Arlington, which is thriving due to its location and a retail mix that includes several experiential retailers. 

Occupancy at the mall is above 98%.

“It’s in a market and MSA that is one of the top growth markets in the U.S.,” CBRE Global Investors Head of Commercial Acquisitions Gary Jaye said. Experiential concepts at the mall include an AMC movie theater, an ice-skating rink, Round 1 Bowling and Entertainment and Breakout. Breakout is a themed escape room concept where a team of people convenes in a themed room. They are given 60 minutes and clues to solve a mystery and “break out” of the room.

Experiential retailing is one way to compete with e-commerce, Jaye said.

But whether it has staying power is still up for debate. Retail can change very fast, and the future success of certain experiential retail concepts remains uncertain, said Weitzman Executive Chairman Herb Weitzman, who will also speak at the Retail South conference.

“We have a lot of experiential stuff that is happening, and we think that’s good,” he said. “We closed on a deal with a health club and we have three more deals pending with health clubs. We think those are good for our [retail] centers.”

But Weitzman also said it is difficult to know if experiential retail will be an effective way to compete with the rise in e-commerce.

E-commerce accounts for about 10% of all retail sales in the U.S., up from less than 6% in 2013, according to data provided by Statistica. E-commerce, led by goliath e-retailer Amazon, is expected to capture 12.4% of the retailing market by 2020.

Trying to fight that onslaught with entertainment concepts certainly carries a risk of oversaturation, he said.

Learn more about experiential retail wins and struggles at Retail South, all day Sept. 11 at Legacy Central in Dallas.