CBRE Dallas insights: key trends shaping the future of Large Format Retail
An exclusive briefing hosted by CBRE’s Dallas office has shed new light on the evolving landscape of Large Format Retail across Texas and the broader United States, highlighting the powerful intersection of population trends, shifting supply chains, and economic headwinds. The session, led by CBRE’s Global Head of Research Dr Henry Chin and Economist Daniel Diebel, offered key takeaways on the risks and opportunities shaping Large Format Retail, with lessons for the Australian market.
Economic pulse: growth continues, but slower and uncertain
While the US economy is not forecast to enter recession territory, growth is expected to slow significantly. This has created a climate of uncertainty, a somewhat uncomfortable setting for retailers and developers alike. Deals are not dying, but many are pausing according to Dr Chin. Retailers, particularly those dependent on discretionary spending, are feeling the pinch as inflation impacts purchasing power and product sourcing remains volatile due to global supply chain disruptions and geopolitical tensions.
Economic ambiguity is making long term decision-making difficult, particularly as sourcing strategies evolve and tariffs remain a wildcard. However, retailers in strong positions are taking the opportunity to move fast and secure premium retail space before others do.
Population shifts driving opportunity in Texas
Texas continues to attract significant population growth, driven by its low tax environment and business friendly policies. Dallas in particular stands out as a key growth market, drawing in both consumers and manufacturers, including a growing number of Asian suppliers relocating operations to the US. This migration is not just a demographic story, it’s set to fundamentally reshape retail demand, product availability, and logistics strategy.
Retail fundamentals: supply shortages and shifting dynamics
One of the most telling observations from CBRE’s briefing is that the supply of new retail space remains constrained. The lack of new development is bolstering fundamentals for existing Large Format Retail operators. In a market where prime space is scarce, well-capitalised retailers are actively stepping forward to lock in opportunities.
Risks and opportunities: a double-edged market
CBRE’s outlook presents a market finely balanced between risk and opportunity. On the risk side, some retail sub-sectors are experiencing declining rents and rising vacancies, particularly in apparel and mall-based formats. Higher operational costs are putting pressure on margins, while the ongoing impact of e-commerce and volatility in consumer finance continues to challenge traditional retail models.
On the opportunity side, however, the current environment offers strategic advantages for agile operators. Declining rents and increased availability of space create entry points for those ready to move. Retailers that maintain strong inventory control are better positioned to navigate uncertainty. Demand remains solid in non-discretionary goods categories, and markets with high population retention and growth like many parts of Texas are proving more resilient amid broader volatility.
What the Australian market can validate from the Texas experience
The Australian Large Format Retail sector can take several cues from the Texan and broader US experience:
- Population migration is a catalyst for growth: Just as Texas is benefitting from a surge in population due to lower taxes and a pro-business environment, Australian regions experiencing internal migration, particularly in Southeast Queensland, regional New South Wales and Victoria, represent high-potential zones for Large Format Retail investment and expansion.
- Retail space scarcity can strengthen fundamentals: A limited pipeline of new Large Format Retail developments in the US is reinforcing the value of existing centres. The same applies in Australia. Strategically managing and repositioning existing assets may prove more viable than greenfield expansion in the near term.
- Inventory discipline and operational agility are competitive advantages: In an environment marked by cost volatility, global supply chain shifts and changing consumer demand, retailers with strong inventory control and flexible sourcing models are best placed to navigate uncertainty.
- Riding on the coattails of non-discretionary spending: CBRE’s US insights confirm that demand for essential goods continues to outperform discretionary categories. Australian retail landlords and investors may find more security in tenancy mixes weighted toward everyday needs and even entertainment and fitness.
Sincere thanks to Platinum Associate Member CBRE for their generous support, particularly the Texas office team, including Daniel Deeble and Dr Henry Chin, for their invaluable insights. Special thanks to Ryan Arrowsmith, Vice President, Retail in Dallas, who recently moved from the role of LFR Director in Melbourne to take up this new role. His cross-market perspective has been instrumental in contextualising these lessons for the Australian market.
