It seems like a match made in urban planning heaven. Most metro areas have an abundance of underperforming retail property, such as half-vacant shopping centers, and a shortage of housing that average Texans can afford. Turn that retail into housing, and voila, two problems solved at once.

But no complicated problem has such an easy fix. The North Texas growth juggernaut means that burgeoning exurbs need additional retail space even as dilapidated strip centers plague core cities and older suburbs. Some homeowners may fear and fight plans for new, higher-density housing near them, even when it replaces obsolete shopping centers.

Yet reinvigorating or repurposing underused commercial property can improve a neighborhood’s quality of life while also adding value to a city’s property tax base. That new revenue is especially important because state lawmakers have been keen to limit homeowners’ property taxes. Responsible city leaders need to grow other parts of the tax base just to keep up with the increasing cost of providing public services and maintaining aging infrastructure.

What North Texas needs is a variety of tactics to address these related issues: streamlined rezoning, public incentives to redevelop infrastructure, increased public education about budget issues, and a greater tolerance for change. Fading retail centers can be revitalized in ways that preserve their original use or transform them into something totally different, such as housing. It just takes determination, money and imagination.

Retail abundance

Dallas-Fort Worth has about 200 million square feet of retail space, and it’s about 95% to 97% occupied, said Steve Zimmerman, managing director of the brokerage group at The Retail Connection. Colliers, a real estate services and investment management firm, reported in August that retail rents here have been rising about 4% annually. Those statistics suggest that retail space isn’t severely overbuilt.

But not all retail centers are full of high-performing, high-value businesses. Aging strip centers tend to attract vape shops, nail salons, pay-day lenders, check-cashers, doughnut shops and vacancies; their capacious parking lots remain mostly empty. Those underutilized properties don’t enhance nearby neighborhoods or the tax base as much as busy, attractive retail centers would.

Last year, the Texas Legislature created a new tool to help redevelop commercial properties. Known as Senate Bill 840, the law forces large cities in urban counties to allow multifamily and mixed-use residential development on commercial, office, warehouse or retail property without a zoning change.

SB 840 is meant to encourage developers to transform bleak, underperforming retail spaces into badly needed housing. For example, it might have prevented the fight over Pepper Square in Far North Dallas.

That shopping center languished while the developer and nearby residents sparred in a bitter and protracted rezoning dispute. It is a prime example of how local government processes and NIMBYism make it hard to redevelop in Dallas.

But implementing the new law has been more complicated than we’d hoped. For starters, some North Texas suburbs reworked their zoning code to try to sidestep the new rules.

Irving, for example, set an eight-story minimum height requirement for new multifamily or mixed-use residential development — much taller than what’s typical in the area. Frisco pulled a different trick. Senate Bill 840 exempts industrial areas, so Frisco changed its zoning code to permit heavy industry in commercial zones.

Market conditions also may be slowing commercial-to-residential redevelopment. Our newsroom colleague, Nick Wooten, reported in November that there is a temporary over-supply of apartments in Dallas, fueled by a construction boom and a stream of remote workers in the post-COVID years.

(Unfortunately, that oversupply hasn’t made rent much cheaper. Even if a lease is relatively inexpensive, there are plenty of added costs, like electricity and Wi-Fi. Plus, building managers often nickel-and-dime residents with mandatory fees for trash collection, parking lot security gates, parcel lockers, pets and on and on.)

The temporary situation doesn’t erase the region’s long-term shortage of lower-cost homes. We need SB 840 to work because we need a larger, more diverse stock of housing, including multifamily and townhomes, across the entire region. With a more generous supply of all types of homes, both rental and owned, housing costs should eventually decline.

More options for faded retail

Senate Bill 840 is only one strategy for remaking forlorn retail properties into something more useful and valuable. Some creative owners, managers and public officials have found ways to maintain a property’s retail orientation while adding unique experiences and features.

Carrollton updated design standards and established a “Retail Rehabilitation Performance Grant Program” to encourage property owners to reinvest in underutilized retail centers. One notable success: Carrollton Town Center, where occupancy had dipped to 20% more than a decade ago, according to a story in PM Magazine. Now it is a bustling, walkable, Asian-focused retail and restaurant destination.

Hillcrest Village in Far North Dallas is part of an entire block of aging retail along Arapaho Road. A public-private partnership transformed a parking lot into the “Hillcrest Village Green,” a 1.5-acre expanse of turf with a playground at one end. Restaurants with oversize patios overlook the city-owned greenspace.

Local developer Monte Anderson, a champion of “incremental redevelopment,” is remaking the Wheatland Plaza shopping center in Duncanville. He’s reworking interior spaces and reclaiming some of the parking lot for food trucks, new landscaping, and eventually, a dozen for-sale townhomes built with Dallas Area Habitat for Humanity.

Cities can speed retail redevelopment with small and large incentive programs. Retail properties typically don’t have the utility infrastructure needed for housing; grants and revolving, low-interest loan funds can help residential developers keep costs down so their end product is more affordable. Elected officials need to help constituents understand why most cities need denser, higher-value redevelopment to keep tax rates lower.

D-FW has matured into a metropolis with a vibrant, diversified economy. To accommodate population growth, cities can’t ignore languishing commercial property, or allow only one type of new housing, or permit property tax bases to stagnate. By tackling all three issues at once, they can lay the foundation for a more prosperous future.

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