Houston’s retail market currently reports a healthy 95.1 percent occupancy, based on Weitzman’s mid-year 2023 review. Steady demand for existing space and significantly leased new construction overcame new vacancies created by the closures of legacy retailers Bed Bath & Beyond and Tuesday Morning.
The occupancy rate is based on Weitzman’s review of retail market inventory of approximately 165.2 million square feet of space in multi-tenant retail projects with 25,000 square feet or more.
Occupancy is maintaining its stability thanks to a steady influx of expanding box retail concepts as well as small-shop concepts that are backfilling the market’s available existing space.
The national failure of legacy retail chains Bed Bath & Beyond and Tuesday Morning resulted in the most significant closings in the Houston market. Bed Bath & Beyond’s bankruptcy is resulting in the closing of it all of its Houston-area stores, as well as five buybuy Baby locations. Tuesday Morning, typically with a smaller footprint than Bed Bath & Beyond, also is closing all Houston-area stores in 2023.
Additionally, specialty grocer Sprouts Farmers Market closed three of its area locations during the first half of 2023.
The total square footage going dark from these three retailers has resulted in new vacancies totaling approximately 625,000 square feet. The impact of these new vacancies is offset by significant leasing activity in existing space. Additionally, the new retail construction is largely user-driven and therefore adds to occupancy, not vacancy.
Weitzman shows that greater Houston’s new deliveries for calendar-year 2023 will total approximately 1,005,000 square feet in new and expanded retail projects consisting of 25,000 square feet or more.
This projected 2023 construction total remains conservative, especially for a tight retail market located in a robust major metropolitan area. The total, however, is enough for Houston to top the major Texas metros in terms of new space deliveries projected for calendar-year 2023.
Houston is followed by Austin, with 921,000 square feet of space on track in new and expanded centers; Dallas-Fort Worth, with 641,000 square feet; and San Antonio, with 335,000 square feet projected.