A tale of two sectors in a city on the rise Q2 2018 Houston Retail Market Indicators

Colliers First Quarter Retail Trends Report, stated that Houston’s strong economy and steady population growth (2nd fastest growing metropolitan area in the U.S.) are what have helped maintain healthy retail occupancy and rent growth.

The Houston retail market remains relatively stable in the second quarter, however there is a definite tale of two markets within the retail sector. Houston saw negative absorption in the second quarter and a statistically significant increase in overall vacancy for the first time in several years. The continued weakness in the “big box” retail sector, led by the bankruptcy of Toys R Us (18 closed locations in the Houston MSA), created negative absorption in Community (two anchors), Power (three or more big boxes) and Malls (both traditional and outlet). Smaller, neighborhood and unanchored strip centers on the other hand had healthy positive net absorption.

Despite this quarterly setback, Tex-X chief economist, Peter Muoio ranks the city’s retail market the third strongest in the nation, forecasting rents to rise and vacancy rates to fall across the metro area by 2020 as demand will continue to outpace supply.

Houston’s projected population and job growth are brisk tailwinds for retail real estate and are expected to fuel the expansion of Houston’s retail real estate market for years to come even as the industry continues to retrench nationwide.

What notable factors are behind this long term positive trend?

Primarily, Houston, the most diverse city in the U.S. and second fastest growing, is powered by a skilled and well-trained talent base, with an excellent quality of life and low-cost of doing business. Forbes says Houston’s “secret sauce” is lower rents, easy parking, no zoning, housing affordability, diversity, upbeat attitude and openness to outsiders has made Houston a super city. 

 
Q2 2018 Highlights

 

Houston Q2 2018 Retail Infographic32

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