In a retail landscape where challenges loom larger than the crowd at a Buc-ee’s on a Memorial Day road trip, JLL’s latest retail report strikes a note of optimism. The rise of experiential retail continues to be a beacon of hope amid inflationary pressures and a chorus of bankruptcy announcements.

JLL’s Q1 2023 Retail Outlook, coupled with the commercial real estate firm’s recent Food & Beverage report, paints a picture of a retail world that’s not just surviving, but transforming.

The “experience economy” in action

Experiential retailers are rewriting the retail playbook, transforming traditional shopping venues into imaginative destinations that share more in common with theme parks than department stores, JLL reports.

A wave of innovators are injecting a new lease on life into malls and other large vacant spaces with a gamut of attractions, from sports venues to interactive displays.

Take pickleball, for instance. The rapidly growing sport is sweeping across the region faster than a tumbleweed in a Texas windstorm.

Chicken N Pickle first roosted in North Texas at Grand Prairie’s Epic Central development with more locations on the way. At the 77,000-square-foot venue, you’ll find pickleball courts aplenty, a chef-driven restaurant, and more yard games than you can shake a paddle at. [Image: Chicken N Pickle]

Chicken N Pickle, a burgeoning sports complex featuring a restaurant and several bars, is paving the way. With a location already in Grand Prairie, additional venues are set to sprout in Grapevine and Allen. And last week, local entrepreneur Dan Jenkins announced a partnership with Pickleball Kingdom to bring five franchised clubs to the region.

Dallas billionaire Mark Cuban describes the sport as “ping pong on a tennis court.” Last year, Cuban announced that he had become the first team owner of the new VIBE Pickleball League, which is a part of the Professional Pickleball Association. “We’re going to come in and just dominate the pickleball industry,” Cuban told an investor and entrepreneur group last year.

Rob Franks, managing director of JLL Dallas, weighed in on the trend: “Experiential retail is what countless groups are trying to achieve right now.”

Beyond the region’s seeming obsession with Pickleball, Franks is seeing sports venue concepts emerge from “fowling to Popstroke, and everything in between.”

Fowling, which combines two of America’s favorite pastimes— football and bowling—dropped into Plano last year with the 71,000-square-foot Fowling Warehouse. 

This spring, Popstroke announced that its Tiger Woods’ mini-golf concept is coming to Grandscape, the $1.5 billion, 433-acre, Warren Buffet-backed development in The Colony. (The development, which is filled with crowd-pleasing attractions, was named the “Most Innovative Retail and Entertainment Project” in 2021 at the Global RLI Awards in London.)

Tiger Wood’s PopStroke concept combines realistic outdoor putting courses with a restaurant and craft cocktails. A new location is coming to Grandscape in The Colony, with construction slated to begin this summer. [Photo: Popstroke Entertainment Group]

Invited CEO David Pillsbury calls Dallas a golf capital with “location, location, location” as a key strength. And in line with the experiential trend, Invited, the largest owner-operator of private golf and country clubs in America, is also driving innovation on the fairway.

Invited—backed by golf celeb and Dallas native Jordan Spieth—is expanding its cutting-edge concept, Bigshots, equipped with radar-based ball tracking tech. The indoor putting course and sports bar is designed as a playground for golfers and non-golfers alike, driving and putting games sit alongside non-skill-based fun like Pinball and Knockout.

A new 12-acre BigShots venue, DFW’s second and Invited’s eighth, will be part of Grand Prairie’s EpicCentral entertainment district along SH 161 in 2024. 

North Texas is carving out its identity as America’s hub for high-tech play with an eclectic mix of innovative entertainment venues here and on the way.

Other brands to watch include Topgolf and Puttery’s advanced golf experiences, TOCA Social’s tech-enhanced soccer, and Electric Shuffle’s modern take on shuffleboard.

Rendering of exterior view of TOCA Social, a soccer-themed venue coming to the Design District this year. [Image: TOCA Social]

But sports concepts are only part of the story.

In Grapevine, work is in progress for a one-of-a-kind immersive experience. Meow Wolf, the Sante Fe-based arts and entertainment company known for pushing the boundaries of creativity, is busy constructing a 29,000-square-foot interactive marvel.

This summer, the permanent installation by Meow Wolf promises to transport visitors to a fantastical realm at Grapevine Mills Mall.

Clearly, the experiential trend is “everywhere and growing fast,” Franks said.

Still, he said, only “time will tell what will work long-term and if these concepts can afford to figure it out.”

Meow Wolf Denver [Image: Meow Wolf]

Entertainment + dining: Eatertainment is a recipe for success

Many of the newest concepts are an “eatertainment” mashup of entertainment and dining.

Today’s diners are ravenous for more than just food; they’re on the hunt for unforgettable experiences, JLL noted in a focused Food & Beverage report. 

Names like Punch Bowl and the aforementioned Puttshack, Topgolf, and plethora of pickleball-centered hotspots are whetting appetites with their plans, JLL reports.

New concepts continue to crop up like wildflowers after a Texas spring rain. One edgy concept coming to the Dallas Design District this fall is Ride On’s adults-only “social drink rink.” The retro skating rink will offer a fusion of tech and nostalgia—with a restaurant, craft cocktails and mocktails, an arcade, and custom-made skates.

Ride On Rendering [On Brand Hospitality]

To spice things up even more, ‘clubstaurants’ are making their mark on the scene as a hot new trend, serving up exclusive dining experiences with a side of exclusivity, JLL notes.

Or, as the New York Times put it, “the era of paywalled restaurants is upon us.”

In Dallas, The Network Bar in Trinity Groves was a frontrunner of the membership concept. Founded in 2017 by Phil Romano as a “haven” for business professionals to meet, eat, drink, and socialize now has more than 1,000 members and over 50 corporate sponsors, according to its website.

More recently, Miami nightlife staple Komodo opened in the Epic building in Deep Ellum in April. The restaurant brings South Beach swank to Dallas with Southeast Asian dishes, luxe decor, and craft cocktails to its new two-story digs. 

Komodo, the renowned Southeast Asian-inspired hotspot from Miami’s David Grutman and Groot Hospitality landed in Dallas in April. Serving up eclectic cuisine, bespoke cocktails, and social ambiance, the debut marks Groot Hospitality’s first venture outside South Florida. [Image: Ashley Estave]

F&B sizzles with QSR and fast casual restaurants leading the charge 

The restaurant scene, in general, is sizzling with activity.

In the Sunbelt dining scene, stats reveal that demand is returning. Austin, for example, saw a 23% increase in reservations compared to 2019, JLL said. (Stats weren’t available for Dallas by press time). To make matters spicier, quality restaurant space is hard to find, and restaurants are battling rising costs and staffing shortages. Over 90% of restaurant operators report that rising costs are a significant obstacle to their business, according to JLL.

Despite these hurdles, demand is steadily returning for dine-in restaurants, but quick-service restaurants (QSRs) and fast-casual concepts are leading the charge.

The term ‘aggressive expansion’ might sound like a military strategy, but that’s what’s happening in the QSR and coffee chains sector, driving the availability rate of single-tenant retail space to a record low of 2.4%.

Among planned openings, the retail sector is holding onto its Big Mac and fries. McDonald’s is dominating the F&B space game with plans to open a whopping 400 new locations across the United States, according to JLL stats. But they’re not the only ones making moves. Chipotle is among the retailers with the most announced openings in 2023 with 285 planned openings.

McDonald’s test concept location in White Settlement west of Fort Worth is McTrying something new. Considerably smaller than traditional McDonald’s restaurants, the location is designed for “take away.” [Photo: McDonald’s]

Accommodations, arcades, amusement parks are growing, too

After years when social gatherings were as scarce as hen’s teeth, there’s also a hunger for travel adventures and memorable moments is palpable, according to JLL.

Fourth-quarter sales numbers speak for themselves, with spending on accommodations soaring by a whopping 36% compared to the previous year. Theatres, arcades, and amusement parks have all enjoyed growth rates ranging between 20% and 32%, according to JLL.

Dallas-Fort Worth is seeing its share of new concepts in the category, including LA-founded Two Bit Circus. The micro-amusement park officially launched at Dallas’ Shops of Park Lane earlier this year with 35,000 square feet of tech-enhanced entertainment. Attractions include arcade games; VR, AR, and “extended reality” experiences; “story rooms”; reimagined carnival games; and more.

There’s even a robot bartender named Guillermo, plus “classic carnival eats” to go with the “molecular mixology” cocktails.

Two Bit Circus, a Texas-sized micro-amusement park, was co-founded by Brent Bushnell, who carries on a family legacy of amusement innovation. His father, Nolan Bushnell, founded Atari and Chuck E. Cheese before the age of 40.  [Photo: Two Bit Circus]

Rise of discount retailers and the resilience of the retail landscape

Despite the new concepts launching, the retail sector has been kept on its toes with a string of bankruptcy announcements.

This year, the commercial real estate (CRE) sector has seen nine major retailer bankruptcies, inching closer to last year’s total of ten. The list includes retail giants like Bed Bath & Beyond, Party City, David’s Bridal, Tuesday Morning, and Loyal Companion pet store. These bankruptcies have caused more than just financial ripples; they’ve left noticeable gaps in malls and open-air shopping centers, JLL adds.

In the quest for affordability, consumers are increasingly turning to discounters and value-focused retailers. This trend is driving retailers to think creatively, delivering unique experiences to stand out in a competitive market, JLL notes.

A Tuesday Morning store. [Photo: Business Wire]

When Tuesday Morning bids adieu, the void it leaves behind in malls and shopping centers will be a force to reckon with, JLL reports. First-quarter closures from other bankrupt retailers, including Sears Hometown and Regal Cinemas, have amplified the space vacated in the first quarter.

Still, JLL sees an ongoing interest in strategic expansion and market consolidation within the retail landscape, noting that Bed Bath & Beyond is set to be acquired by discount and variety stores.

More opens than closes

Despite the wave of bankruptcy announcements, “opening announcements are running comfortably above closing announcements,” according to JLL.

In the quest for affordability, consumers are increasingly turning to discounters and value-focused retailers. Dollar stores are at the forefront of planned openings, making waves with 1,300 new locations announced so far this year. Leading the charge is Dollar General, taking the industry by storm with plans for 1,050 new stores, per JLL stats.

To help support all those stores, the chain just announced an expansion in its supply chain operations with a 1-million-square-foot distribution center in North Texas. The new Justin center is near the BNSF Railway Intermodal facility, the Dallas Business Journal reported.

Expansion plans

According to JLL’s report, retailers in Texas are showing resilience and growth in ongoing economic challenges. Several companies have chosen to expand or establish a presence in the state. For example, Dollar General’s concept pOpshelf has plans to open 1,000 stores by 2025.

Small format drive-through concepts Dutch Bros and Fort Worth-based HTeaO also have expansion plans across Texas and the U.S.  Dutch Bros. plans to open 4,000 stores over the next 10 to 15 years, and HTeaO has set a goal of opening 60-75 stores this year alone, JLL reports.

Some of HTeaO’s drinks. [Photo: HTeaO]

Dallas-Fort Worth welcomed more than 1,000 new brick-and-mortar tenants between December 2022 and March 2023, according to JLL.

The influx accounts for nearly a third of the 3,200 new retail tenants across Texas’ major metros, including Houston, Austin, San Antonio, and McAllen. Collectively, the new Texas tenants have claimed more than 10 million square feet of retail space, per JLL stats.

Small space, big rise

JLL Dallas’ managing director Rob Franks [Photo: JLL]

A notable trend in the retail landscape is the rise of smaller format stores, Franks says. Retailers are using compact spaces to target urban areas and cater to specific demographics.

Interestingly, more than 50% of new tenants have settled into spaces below 1,500 square feet, targeting urban areas and catering to specific demographics with services such as health, personal care, food, and more, per JLL stats.

“Small businesses are crucial to the retail and restaurant industry in North Texas, serving as employment centers, revenue generators, and concept incubators,” Franks said.

Ultimately, he said, “the success of the market depends on small businesses and their potential to grow and flourish.”

DFW is a testing ground

DFW has long been recognized as a testing ground for retail concepts.

Now, in particular, the changing retail landscape is driving retailers to think creatively, to deliver unique experiences that stand out in a competitive market, Franks says.

Retail tenants in Dallas-Fort Worth are adapting to changing consumer behaviors, and “adopting fresh, new concepts that make shoppers feel like the store was built with them in mind.”

Franks sees some submarkets in DFW proving to be “great testing grounds for future launch points.” 

Still, that can be challenging, with “new concepts occasionally struggling to take hold,” he admits.

Neighborhood Goods at Legacy West [Image: Neighborhood Goods]

Franks notes a renewed interest in cultivating next-gen concepts such as Dallas-founded Neighborhood Goods at Legacy West. The store, a contemporary evolution of the department store model, features rotating brands, hosts events, and focuses on connection in a space that lets people relax and spend time beyond just shopping.

These kinds of experimental spaces “not only serve as testing grounds for new ideas but also offer online businesses an opportunity to venture into physical locations,” Franks said.

“Every great national concept started small somewhere,” he noted, “We hope that Dallas can be a hub for countless new concepts in the future.”

Nonetheless, transitioning from online to brick-and-mortar can be challenging thanks to the high cost per storefront, Franks said.

“To overcome this obstacle, the real estate industry in DFW must innovate and find ways to make it less risky and more accessible for entrepreneurs to launch into brick-and-mortar.”

The ongoing transformation of malls

Developers continue to see potential in vacant mall space, eyeing empty department stores and underused parking lots as prime real estate opportunities. Old mall anchor space is being earmarked for transformation, ripe for conversion into multifamily housing. It’s an undertaking as ambitious as it is intricate, with zoning obstacles as potential (and lengthy) stumbling blocks.

With Dallas-Fort Worth area mall-related projects from Redbird to Collin Creek and North Hills Mall to the Dallas International District, North Texas has its share of redevelopment projects across various stages.

Aerial rendering of proposed Dallas International District. [Image courtesy of Omniplan]

Recently, Dallas-based real estate firm Centennial, which focuses on retail solutions for “best in class” destinations built for the future, announced leading a group to invest “at least” $100 million into reimaging suburban malls as mixed-use properties, according to Co-Star.

Capital markets: Retail buoyed by M&A activity

As the retail landscape in DFW and beyond continues to morph and adapt, serving as a fertile testing ground for inventive concepts and redevelopment, the financial chessboard of the retail capital market seems to mirror the resilience seen on the shop floors.

“If the overall capital markets sector in Q1 2023 could be summarized in one word, it would be: volatile,” according to the JLL report.

Apparently, resilience isn’t a buzzword in the retail sector; it’s a reality. Despite banking challenges and a 50 basis points drop in the 10-year treasury, “retail CRE has seemingly been spared,” JLL writes. 

While overall transaction volumes may have taken a slight dip, overall the sector stood its ground.

Early transaction volumes for the quarter totaled approximately $16.5 billion, a decline of 29% compared to the previous year but only down 1% from the previous quarter, JLL reports. Grocery-anchored and small-format retail segments dominated the market, JLL said, with $1.7 billion and $1.8 billion in total volume, respectively.

The standout deal in the retail space was Singapore-based global investment firm GIC’s acquisition of STORE Capital—an internally managed net-lease real estate investment trust (REIT) that invests in single-tenant operational real estate.The $15 billion transaction, with $7.1 billion attributed to the retail portfolio, was the largest M&A deal in the sector since the Realty Income/VEREIT merger in late 2021, JLL noted.

The final take

In the face of volatility and economic challenges, the tale of retail in 2023 so far isn’t one of doom and gloom, but of resilience and reinvention, according to JLL retail reports. From the rise of experiential retail to the transformation of vacant spaces, and the growth of small-format stores, there’s an evolution in full swing. 

And according to JLL Dallas’ Franks, it’s bolstered by small businesses acting as crucial linchpins in the saga.

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