Welcome to the Deep Dive. This week we’re really zeroing in on the key commercial real estate headlines from the first part of October, 2025, and we’re looking at everything specifically through the lens of strategic retail investment right here in the Dallas-Fort Worth market. We’ve sifted through the major reports.

Everything from, big finance moves to the, frankly, the collapse of some legacy retail brands. Our goal here is simple, cut through that noise and give you the actionable insights you need. If you’re looking at opportunities in DFW retail. That focus is so important. Right now we’re seeing what some analysts are calling extreme divergence.

The gap between the winners and losers in CRE, it’s reportedly the widest it’s been since since the 1980s. And understanding where capital is flowing and why is absolutely critical when you see that kind of spread. Absolutely. And it sounds like you had these pockets of really high demand and tight supply driving huge returns while.

Other properties are just becoming serious liabilities and it seems like DFW is a prime example of this divergence playing out. Exactly. We’ll use our time today to really unpack what makes DFW such an engine for outperformance and critically what that means for retail, especially ground floor retail planning.

Okay, sounds good. Let’s start with maybe the main catalyst driving all this DFW demand right now. That huge influx on the financial sector, the whole Y street phenomenon. And it’s not just talk anymore, is it? It’s showing up in the numbers. Financial services and insurance firms, they count for half of DFWs top 10 office leases.

Just last quarter, Q3 we’re talking big commitments like Penny Mac Financial services, taking a whole 300,000 square foot building in Carrollton. Wow. Or Scotiabank grabbing 133,000 square feet over in Victory Commons one. These are major moves. And that momentum feels well structural. It doesn’t feel temporary.

And then you add the news this week that the Texas Stock Exchange, the TXSE, got SEC approval, they’re planning their Dallas headquarters for next year. That just cements it. You know when you already have giants like JP Morgan, Goldman Sachs, moving major operations here, plus a new stock exchange, setting up shops.

It just reinforces DFWs position as really one of the absolute top performing CRE markets in the entire country. And the proof is right there in the investment sales data up an incredible 116% year over year. Wow. 116%. That’s a staggering number, but I guess I have to ask, with that kind of financial rush in sales growth, does it feel sustainable?

Is there a risk of, overheating? That’s what’s interesting. The growth seems quite targeted. It’s not like an across the board boom. It’s really focused on high quality, newer assets, the kind that cater directly to this, while this relocating professional class often with higher net worth. So the demand feels rooted in actual demographic shifts, not just, speculative building.

Okay, that makes sense. And that focus on quality, it seems to translate directly into the retail strategy we’re seeing, especially in these big premium best use projects like. Let’s look at that. Preston Center development, the one at 8,300 Douglas. That project is clearly betting hard on this y’all street energy.

They’re planning what, a 17 story luxury residential tower, new class, A office space. And crucially for our focus, they’re specifically allocating 24,000 square feet just for ground floor retail and restaurants, right? They know exactly who they’re building for and that location. Preston Center tells you everything.

Office asking rents there hit $60 and 25 cents per square foot in Q3. That is a very high number. It’s second only to uptown in Dallas. So if developers are justifying those kinds of office rents, the retail component has to be premium enough to support that whole environment, so that 24,000 square feet isn’t just generic retail space.

No, absolutely not. It has to be a destination retail. It’s the same thinking in projects like the Vickery, that mixed use community over in Fort Worth developers are intentionally creating these vibrant, walkable environments. The retail isn’t just retail, it’s almost a luxury amenity. It serves the lifestyle that this new, often more affluent population demands and.

That kind of experience-based retail is much more resilient against, e-commerce pressures. Okay, so that paints the DFW picture. Yeah. This finance engine driving demand for high-end experience focused retail. Yeah. Now let’s pivot a bit and look at the national retail scene because we’re seeing these two extremes playing out and it really gives us a blueprint for what might happen with existing spaces, even here in Texas.

So one on and the collapse side. We just saw the official end of Rite Aid after what, 60 years and a couple of bankruptcy filings. They finally closed their last 89 stores last week. That suddenly creates this huge volume of dark, large format retail space across the country that well. Needs a new life that is a lot of square footage hitting the market, needing a new strategy.

But then you contrast that collapse with the, frankly, incredible confidence from other brands that are thriving. I was really struck by Sprout’s, farmer’s Market. They’re planning to triple their footprint. They’re targeting 1400 stores nationwide, up from about 455 now, aiming for all 50 states.

Triple. Yeah. That’s not just optimism. That’s signals, a real structural belief in their model. Yeah. It really highlights the strength of those health-focused, supplemental grocers. They occupy that niche between a full service supermarket and a specialized health store. Exactly, and this contrast, Rite Aid closing and Sprouts booming, it really highlights the two big trends driving successful retail leasing right now, affordability and service.

So on the affordability side, you see the off price chains, the TJ Maxx, dollar General Burlington, they’re expanding like crazy because consumers are really focused on value. And then on the service side, which is frankly a perfect fit for many of those empty large Rite Aid boxes, you’re seeing huge growth in tenants that are basically e-commerce proof.

We’re talking fitness studios, specialized medical clinics, personal care services. That’s really the playbook for backfilling, that kind of vacant space, including here in DFW. We are seeing some of those national trends to down locally, aren’t we? Uniqlo, the fashion retailer, they just announced plans for 11 new stores in the us.

It confirms they’re serious about hitting that goal of 200 US locations by 2027. And importantly, they already announced five Texas stores back in April. So their continued investment here specifically, it’s a pretty strong signal about their confidence in Texas consumer spending. It absolutely is. But then you contrast that sort of global Giant’s confidence with the maybe.

Tougher situation for a local favorite Muya burgers. Based right here in Plano. Now they are looking to expand, but they’re operating in that super crowded, fast casual burger space. That means they’re constantly fighting pricing pressures, and of course those escalating real estate costs here in DFW.

Mia’s situation really illustrates the challenge for operators. Even in a hot market like DFW, you have to have a really strong differentiated concept to justify paying these rising rents for prime retail spots. It’s just a very competitive landscape out there, right? And this need for transformation for differentiation, it’s pushing capital towards making some pretty drastic decisions about existing, especially large format.

Properties. We saw that with the sale of the Long Beach Town Center out in California. That’s an 870,000 square foot center. It sold for $145 million. And the money is specifically tagged for a complete overhaul reinvestment to, revamp the whole guest experience. And maybe the most dramatic example was Walmart buying the Monroeville Mall in Pennsylvania.

That’s a 1.2 million square foot mall, but they didn’t buy it to run it as a mall. They bought it for demolition. The plan is to tear it down and build a modern, open air mixed use project featuring new retail and a Sam’s Club. Yeah, that sends a clear signal. Capital is definitely willing to completely scrap failing formats and rebuild something that meets today’s demand for experience driven retail.

Basically, if a property isn’t working, they’re significant capital ready to step in, acquire it, and fundamentally reconstruct it into something that does work. Shifting gears slightly, let’s talk about the broader financial picture, because while DFW has this really powerful growth story, we are hearing about rising financial stress nationally in CRE.

So the question is DFW just an outlier, masking deeper systemic stress? We should worry about. Or is this distress really contained to older, maybe weaker assets? You can’t ignore the surge in commercial real estate loan modifications. They’re up 66% year over year. That totaled what, $27.7 billion as of June.

That definitely shows real financial pain for a lot of property owners, especially those grappling with higher interest rates on maybe older assets. You’ve hit the crucial point there. The distress seems to be very localized and very asset specific. Yes, we are seeing specific distress signals in Texas.

Foreclosure auctions scheduled for October, targeted over $575 million in debt across the state. That’s actually down a bit from September, but still significant. But look closely at the DFW examples. We saw foreclosure notices on a multifamily property per oak lawn with a $25.5 million loan and the three four Plaza office tower.

That’s a $57.75 million loan facing notice. These often tend to be older properties or perhaps projects that we’re over leveraged and are now struggling to adapt to current market conditions or interest rates, which of course presents opportunities for buyers with cash ready to deploy opportunistic acquisitions, right?

And just outta line that the capital markets don’t seem worried about the fundamental Texas growth story. We had that huge positive news this week too. The merger of Cincinnati based Fifth Third Bank with Dallas based Comerica. That’s a massive $10.9 billion deal. What’s really significant for Real Estate Watchers is Fifth Third Stated plan.

They’re gonna use this merger to build 150 new bank branches right here in Texas. Their goal is apparently a top five market share position in Dallas, Houston, and Austin, building 150 new physical bank branches today in this age of digital banking. Wow. That might be. The strongest real estate signal of confidence in a market we’ve seen all quarter.

Yeah, it tells you that major financial institutions look at the physical economic foundation and the demographic trajectory of Texas and see something fundamental and superior. Superior enough to warrant deploying massive long-term capital into bricks and mortar. So putting it all together, this tension you have the big capital markets driving.

Major bank expansions and funding these high-end DFW retail projects because they believe in the long-term growth story. And at the exact same time, you have this localized distress cropping up. Maybe in older office buildings, maybe over leveraged multi-family, maybe even smaller retail trips like that.

Galleria Oaks building to an Austin with $16 million in debt heading to auction. That distress creates these specific ripe acquisition targets for rescue capital or value add players, but it doesn’t seem to undermine the broader. Positive DFW narrative. Okay, so let’s try to summarize the key takeaways then specifically for the DFW retail market base.

On all this, it seems we’re seeing really exceptional demand fueled mainly by that y’all street finance boom, that boom is supporting brand new, high quality mixed use developments like Preston Center, and it’s also attracting strong national retailers expanding aggressively like Sprouts and Uniqlo.

Exactly. But the success story really hinges on having the right strategy for the right property. Those legacy closures like Rite Aid, they’re creating opportunities that space will likely get absorbed pretty quickly, but probably by those e-commerce resistant service tenants or the value oriented chains.

So if you’re investing or developing success, really depends on picking your lane. Are you catering to that premium end, the wealth driving the new office and residential markets, or are you tapping into that relentless consumer hunt for value? Both can work, but they require very different properties and approaches.

Okay. That’s a great summary. Now as we wrap up this deep dive, I wanted to leave you with one final thought to consider something maybe overlooked when we talk retail logistics. Specifically the impact of the absolutely massive planned expansion of data center capacity across the us. You read about open AI contracting for something like 16 gigawatts of power meta signing, a $14 billion cloud deal.

This stuff eats up huge amounts of power and critically industrial land. So the question is. How long until DFW is available industrial land, which is already getting pricey in places like McKinney, partly due to data center demand becomes so prohibitively expensive that it starts to significantly drive up.

Logistics costs, the supply chain costs for the entire regional retail market, that potential squeeze on industrial space and what it means for the cost of actually stocking retail shelves. That feels like the next big tension point. We really ought to be watching closely here in DFW.