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.
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