HOUSTON - Houston’s retail market as of year-end 2017 reports an occupancy rate of 95.0 percent, a healthy rate that remains in line with the year-end 2016 rate of 95.6 percent rate, evidence that the third-quarter economic disruption caused by Hurricane Harvey proved to be of relatively short duration.
The occupancy rate remains near the highest ever recorded for the market, thanks to a stable retailing environment, a healthy economy and few major closures (other than a handful of anchor stores, which together accounted for nearly 1 million square feet).
The retail market is benefitting from the continued strength of the Houston economy, which even in the months following the significant flooding caused by Hurricane Harvey, continues to see a pace of job growth that exceeds the national average. As noted in a recent report from Federal Reserve, the current situation and forward-looking outlook for Houston’s job market is ranked positive.
Additionally, the Houston metro area enjoys one of the strongest housing markets in the country, as well as notable job and population growth.
Weitzman reviews a Houston-area retail market inventory of approximately 158.1 million square feet in multi-tenant retail centers with 25,000 square feet or more.
To illustrate exactly how healthy the current market is, we compared it to a decade ago, when the Houston economy also enjoyed a positive economic cycle. In 2007, the overall occupancy of 88.5 percent was 6.5 percent lower than the market’s current 95.0 percent. Yet construction added 4.6 million square feet of new space to the market. The current combination of conservative construction and healthy occupancy is helping the market maintain strength and stability.
Hurricane’s Harvey’s flooding did cause some retail closures, from concepts like the H-E-B at Kingwood and Lake Houston Parkway, but much of the space has been rebuilt and reopened.
In terms of new space, the Houston-area retail market in 2017 added approximately 2.8 million square feet of retail space in new and expanded projects, bringing the total inventory to approximately 158.1 million square feet.
The 2017 construction is a decline from space deliveries during 2016 that totaled 3.4 million square feet of retail space, a recent construction high point for the market.
GRAND PARKWAY DRIVES NEW DEVELOPMENT
The majority of recent major new retail developments have largely been located along new retail intersections created by the newest phase of the massive Grand Parkway. The major thoroughfare’s completion opened access and visibility to suburban markets such as Katy and The Woodlands. As a result, the Grand Parkway corridor is seeing new retail districts created almost overnight to serve existing residential and commercial density.
Houston’s denser close-in neighborhoods also are seeing a large amount of activity, including several projects in The Heights, EaDo (East Downtown), Bellaire and similar dense, built-out districts where redevelopments often are the best option for new space.
For our full report on Houston retail, including details on new shopping center developments, visit http://www.weitzmangroup.com/report