Welcome back to the Deep Dive. This week we are jumping right into the very volatile world of commercial real estate news from January, 2026. We’re focusing in on the retail sector specifically. Exactly. And the Texas market, which is it’s always dynamic. It really is, and our mission today is to try and cut through what feels like a fundamental contradiction in the market.

It really does seem that way on the surface. On one hand, you’ve got real pain. High profile bankruptcies, huge anchor spaces coming back on the market, and some serious local distress in big urban centers. Then on the other hand, you have this surge of investor capital debt markets that are easing up and a record number of store openings.

How can both of those things be true? That’s the question. We need to synthesize that conflict and show you where the real opportunity is. It’s a great way to frame it because the sources are all suggesting 2026 is a quote, new chapter for cre, a new chapter. Yeah. We’re moving past that deep uncertainty of the last few years, but that opportunity, is not spread out evenly.

The biggest risk now isn’t the market collapsing, it’s just investing in the wrong type of asset or the wrong part of town. And for anyone focused on Dallas-Fort Worth. That kind of surgical knowledge is everything this year. Absolutely critical. Okay, so let’s start with the big picture, the national story around retail.

For years, all we’ve heard about is the retail apocalypse, the doom and gloom. Yeah, it felt endless, but the data we’re seeing right now, it seems to definitively bury that storyline. It does. The shift in national sentiment is powerful. JP Morgan is reporting that retail has the, strongest valuations in a decade.

In a decade. Wow. Now they are careful to exclude regional malls from that statement, which tells you a lot right there. It tells you where the strength is. Exactly. And commercial property executive just came out and said the retail apocalypse narrative is officially considered buried. And you can see that confidence in what retailers are actually doing with their physical space and their long-term plans.

Yeah. Core Site Research is tracking a really remarkable number, 11,118 planned store openings for 2026, and you have to compare that to the closures, right? Only 566 planned closures. So it’s a clear net positive. The trajectory is up. It just shows you that brands still believe a physical location is vital.

And consumer behavior is backing this up too. It is. We’re seeing data from retail stat. That shows Trip Mall foot traffic is up around 18% from pre COVID levels 18%. People want that convenience. They want quick necessity based trips. These smaller centers are just proving to be way more resilient. And you saw this play out over the holidays, right?

The data really highlights this split. It really does. Mall foot traffic actually jumped 22.6% in December. Driven by those last minute shoppers looking for value. Exactly. But contrast that with downtown retail traffic that actually slipped. It’s still 5% below where it was a year ago. So people are choosing accessibility and value over that, big destination shopping experience, especially in those dense urban cores.

What’s fascinating is how the overall health of this sector hides these huge shifts happening inside it. The market is completely bifurcated. Winners and losers, big time necessity, retail, and these open air centers are driving all the good news. While the older specialty formats are the ones creating all this vacancy, it’s like the market’s shedding dead skin.

That’s a great way to put it, and reinvesting that energy into healthier tissue. Okay, so let’s dive into the winners first, because that data is really compelling For sure. The winning categories are pretty clear, gross, anchored, and necessity based retail. It’s the boring stuff that always works, right?

First National Realty Partners confirms they’re seeing historically strong fundamentals here, record occupancy, strong rental growth, and critically very limited new construction. There’s no new competition showing up to dilute the market, and that predictability is exactly why the big money is pouring in.

It is investors are snapping up, net lease retail properties like crazy. Maybe explain net lease for our listeners really quickly. Sure. It’s basically a property where the tenant, usually a big corporate chain, pays for almost everything. Taxes, insurance, maintenance. It minimizes the landlord’s risk. And gives them a very predictable income stream, and that’s why Morgan Stanley’s head of Real Assets is calling it their highest conviction strategy.

Right now. It’s as safe a bet as you can make in CRE. We just saw a perfect example of this out in California actually. The Village Del Lomo Mall Sale. Yep. In Torrance, a great, located open air center. It’s sold for a massive $108.3 million. And the interesting part is the buyer was a 10 31 exchange buyer.

So that’s sophisticated capital that had to be reinvested immediately from a previous sale. Exactly. It shows that investors are willing to pay up for these quality, predictable assets, even in a higher interest rate environment. Okay, so now let’s pivot to the other side of the coin. The losing retailers, this is where all that anchor space is coming from.

And for local professionals, this is where you find the risks, but also the repositioning opportunities. And the luxury segment is facing a huge disruption. One that hits very close to home for DFW, it does sacks global. Which owns Sax Fifth Avenue and Neiman Marcus filed for bankruptcy and they filed in Houston, Texas.

And that move immediately casts this huge shadow of uncertainty over that iconic Neiman Marcus flagship store in downtown Dallas. I’m sure city officials are pretty nervous about that. You have to be and beyond luxury. The consolidation just keeps going in other sectors. Macy’s is moving ahead with its big plan, their bold new chapter, right?

They’re shutting down another 14 stores this year, part of 150 planned closures by the end of 2026. And then there’s GameStop. Their headquarters is just outside Dallas in Grapevine, and they’re closing 470 stores nationwide. They’re calling it portfolio optimization, basically shifting away from brick and mortar.

Even fast food isn’t safe. Jack in the box is going through a huge retrenchment closing 200 restaurants after an $81 million loss, and the real warning sign is that their same store sales fell by 7.4% in the last quarter. That signals deep trouble. And the cuts are heavily focused in California, Texas, and Arizona.

And this is where that contradiction just becomes so stark. You see those closures, but then you see aggressive expansion from other players, from the necessity retailers. Exactly. While department stores shrink, a company like Aldi is planning to open 180 new stores in 2026 alone, they’re betting big on that convenient value-driven grocery model.

And the convenience store space is absolutely on fire, thriving. Seven elevens, parent company seven and I holdings had a great quarter. Net income was $1.26 billion. They even raised their profit forecast for 2025, and their strategy is key. Focus on fresh food and build digital relationships. Their online sales were up 21%.

That’s how physical retail survives and thrives. That strong performance brings us right back home to the Texas market. This is where we see the ultimate paradox playing out. It is DFW is ranked number one nationally for growth, but that’s happening right alongside some very specific, very painful corporate uncertainty on a local level, which creates both tremendous risk and enormous potential.

The DFW Advantage is still undeniable though. PWC and the Urban Land Institute ranked it the number one market to watch again for 2026 for the second year in a row. Oh, that covers commercial and home building. The fundamentals, population growth, job diversity are just so powerful, but that top ranking is fighting a major headwind right now in downtown Dallas office space.

The huge headwind. We just got the news that at and t is moving its global headquarters from downtown Dallas out to a suburban campus in Plano, and that’s not happening tomorrow. It’s by 2028. But the decision is made and that decision alone is gonna leave 2 million square feet of downtown office space empty, which is about 6% of the entire downtown submarket.

But it’s more than just the square footage, it’s the signal it sends. Exactly. It confirms that the traditional nine to five central business district tower model is structurally impaired, and this is just adding to an already high CBD vacancy rate of around 33%. We’re seeing the fallout from high interest rates too.

The national, that huge 52 story, landmark Tower downtown. It’s heading to foreclosure. The owner is literally handing the keys back to the lender. They said even with 80% apartment occupancy, the math just didn’t work with their debt. And yet, despite all that DFWs, industrial and Logistics Foundation is as strong as ever, which confirms where the real strength of the metroplex is.

It’s in its ability to move goods. It is a developer like IAC Properties just broke ground on a massive 727,000 square foot speculative industrial park in Southern Dallas County, and this is their 13th development in the area. So they have long-term confidence. Absolutely. And we’re also seeing that confidence in infill locations.

Dolphin Industrial just bought a smaller, 70,000 square foot building in Carrollton, and they called it an irreplaceable infill asset. For industrial infill just means it’s already close to consumers. Perfect for last mile delivery. Okay, so let’s bring it back to DFW retail specifically. The investment activity here really does mirror those national trends we talked about.

It does. It’s favoring stability over flash. We saw a great example with SRS Real Estate Partners selling a Crunch Fitness and R 40,000 square feet sold for $13.75 million at a 7% cap rate. For those who don’t know, the cap rate is the expected return. A 7% cap shows a really stable asset, and it demonstrates that investor interest is still incredibly strong for things like health and wellness anchored retail, especially in strong suburban areas like Row.

So we have this massive contradiction downtown, office distress, major anchor closures, but capital is flowing everywhere else. Let’s connect this to the macroeconomic picture because the debt markets are really the catalyst for everything, and the outlook there is definitely getting better. It is because expectations are finally stabilizing.

Inflation is hovering near 3%, so the markets are anticipating at least one fed rate cut in early 2026. And that anticipation is helping borrowing costs, solidify. Commercial mortgage rates are stable now around 5.17%. That return of certainty is the key, but here’s the massive headline. This is the core of the deployment story.

The dry powder. Exactly. Investors have piled up $250 billion in unspent capital. Just for North American real estate, that is a massive wave of cash just waiting for the right moment, and after two years of waiting for rates to stabilize, 2026 is expected to be the year of deployment, and all that dry powder is aimed squarely at the maturity wall, which is the $936 billion in CRE mortgages that are maturing in 2026, right?

All these loans have to be refinanced. Probably at much higher rates. That strain creates buying opportunities for these investors with all the cash and the banks are finally loosening up. The data is dramatic. Only 9% of banks are tightening lending standards. Now, back in April, 2023, that number was 67.4%.

Wow. What a shift. It’s huge. And you’re also seeing government backed lenders like Fannie Mae and Freddie Mac increase their loan purchase caps by 20%. Injecting more liquidity. So bringing this all back home for you, the listener, focused on DFW retail, what’s the big message? The message is that the market is still incredibly attractive.

It’s ranked number one for a reason, but you have to be, surgical investors have to avoid those big old anchor boxes being empty by Macy’s or the uncertainty around a downtown Neiman Marcus. The priority should be. The priority should be necessity based, high traffic, service oriented retail, and it has to be in strong growing trade areas.

And all the corporate moves we talked about, like at t, they confirm where that growth is. They do. It’s in the suburbs, the rapidly growing corridors like Plano, rtt, Carrollton. That’s where capital needs to be focused right now, and that really is the crucial application of all this. You have to understand the dichotomy between the national confidence, which is backed by all this capital and the specific local distress like the downtown Dallas office Corps.

Being able to tell the difference between a structural flaw and a cyclical opportunity is everything. This year it’s the whole game. So let’s leave you with a final thought to mull over. We know there is $250 billion in dry powder out there waiting to be deployed, and we know DFW is the number one target market nationally.

So the question is, what is the competitive landscape going to look like over the next 12 months for those high quality grocery anchored retail sites Right here in DFW? Excuse me, fierce. And maybe more importantly, how quickly is that wave of institutional capital gonna compress the cap rates on the very best, most resilient assets?

That is the immediate pressure you need to be anticipating as you plan your acquisitions.