Weitzman’s new report for retail in Houston shows healthy occupancy and steady demand, yet the pace of new construction remains conservative. Kyle Knight, senior vice president with Weitzman’s Houston office, discussed the current market and forecast for 2020.
Q. What’s the current state of the market?
A. With a multi-tenant inventory of nearly 162 million square feet, Houston currently reports 95.0 percent occupancy, an increase compared to mid-year. The market benefitted from the backfilling of large vacancies, limited new construction that opens well leased and a lack of major store closings during the past year.
Q. What do you mean by limited retail construction?
A. The Houston-area market added approximately 1,645,500 square feet during 2019, compared to 2.7 million square feet during 2018. The decline was expected, as several years of retail construction generated by the expansion of the Grand Parkway nears the end of its current cycle, as well as the limited number of new anchor stores (other than H-E-B).
We also looked at new space built from 2000 to 2009 and compared it to the previous decade’s total. The drop in construction is dramatic.
From 2000-2009, the market added approximately 39 million square feet, or an average of 3.9 million square feet a year. From 2010-2019, the total new construction dropped by more than half, to 18.6 million square feet.
New retail today is often in neighborhood or mixed-use projects, which tend to be smaller than the malls and power centers developed during the peak construction years.
Q. What do you expect for 2020?
A. Leasing demand remains healthy, the market’s best-located projects are essentially fully leased, and new tenancy continues to backfill the large box vacancies left by Toy “R” US and others. Additionally, Houston remains one of the country's most active residential markets, and the economy is creating new jobs as a steady clip.
As always, of course, vacancies in outmoded or poorly located centers will experience difficulties finding new tenancies. But with the outlook for positive economic growth and population growth, we expect to see a continuation of Houston’s healthy retail market for 2020 and beyond.
This Q&A originally appeared in Connect Daily Texas.s