Q4 2018 | Houston Retail Market Report

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Houston’s retail market remains extremely healthy, but for how long?  Q4 2018 Houston Retail Market Indicators

Houston’s retail sector ended 2018 strong with increased activity and a low vacancy rate of 5.3%. Grocery-anchored centers accompanied by big boxes, in-line space, and restaurants or financial institutions on pad sites became even more prominent in the Houston area. Developers continued to build smaller spec retail centers some without pre-leasing, and occupancy levels remained healthy.

Near the end of 2018 signs of a change in the market began to appear. As an example, a recent research project was conducted by Colliers for a financial client who was looking to assess the availability of end caps in the metropolitan market. A request for space was sent out, and Colliers received so many responses that we had to quit recording new submissions. From this experience, Colliers learned that there is still a lot of available space to be leased in our market. It may not be the exact space a particular retailer is seeking, but there is a variety of available space. Colliers’ retail experts have started to observe some owners reducing asking rental rates from their recent peaks in order to keep spaces occupied, and activity levels also seem to be slowing down. At the recent Texas ICSC in Fort Worth, many brokers and owners stated that they noted a definite flattening out which would point to the retail sector peaking in its growth cycle. The consensus was that the pace of deal flow is slowing.

So, what does this say about the future? Every boom will experience a peak in activity and price. This is where Houston’s retail cycle is currently positioned, healthy but flattening. There is change on the horizon. Houston’s retail market is not in for a “bust,” but existing retail centers need to be leased before developers start new speculative projects. Pre-leased or anchored centers in quality locations will do well, but we don’t see it being a good ideal to put in smaller unanchored strip centers just because you can. Moreover, Colliers’ retail experts continue to hear that the grocery store, big boxes and restaurants are becoming much more selective in choosing their sites. It is taking longer to get corporate approvals. Online shopping, store closings, and downsizing will continue to affect the market in the near future. All of this will add up to a slower paced retail market. There are still retail users in our market looking for new locations, and it appears they still have choices. The good news is Houston has a strong, vibrant retail market and should remain healthy for the foreseeable future.

 

Q4 2018 Highlights

Q4 2018 Houston Retail Infographic

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Q4 2018 | Houston Retail Market Report

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