Tuesday , 27 September 2016
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Houston Retail Center Market Hot – And There’s Gobs of New Grocery Stores Coming

HOUSTON—Houston’s retail market posted its best overall occupancy rate in a decade as retailers continued to expand to secure locations in one of country’s economically healthiest metropolitan areas.

As of mid-year 2014, the market posted an occupancy rate of 96 percent, the highest level to be reached in more than a decade, according to a study by the Weitzman Group and Cencor Realty Services.

The occupancy rate shows the retail market is benefitting from the strength of the overall Houston metro economy, which ranks as the No. 1 job generator in the country and one of the country’s strongest residential markets.

The Weitzman Group and Cencor Realty Services annually review a Houston-area retail market inventory of  148,280,000 square feet in multi-tenant retail centers with 25,000 square feet or more.

As the market tightens, new projects are being planned to meet the retailer demand. Space coming out of the ground is dominated by grocery-anchored projects, as well as a number of mixed-use projects. Houston also has the distinction of seeing two major mall expansions in the works at a time when enclosed-mall construction nationwide is all but dormant.

For calendar year 2014, based on actual and projected openings, the Houston-area retail market is on track to add approximately 1.6 million square feet of new retail space.  The new construction, while low by historic standards for a market with strong occupancy and high demand, is still more than double that seen in 2013. Last year, the retail market added approximately 679,000 square feet in new and expanded projects.

New projects for 2014 or later include:

·      Kroger, with multiple locations including:

o   A 124,000-square-foot Marketplace store that opened in August in the master-planned Towne Lake community in Cypress;

o   A 123,000-square-foot Kroger Marketplace that opened at Kuykendahl and West Rayford in Spring as the anchor for Spring Marketplace;

o   A 100,000-square-foot store at Highway 59 and FM 1960 in Humble. The store is designed to replace a smaller location in Humble.

·      Vintage Marketplace, an approximately 71,000-square-foot center anchored by a 40,443-square-foot Whole Foods that opened in June. The project is at the southeast corner of Louetta and Cutten roads in North Houston;

·      Whole Foods, which this fall is set to open an approximately 48,500-square-foot store in the newest phase of mixed-use project BLVD Place in the Uptown/Galleria area;

·      H-E-B, which opened an 80,000-square-foot store at 2710 Pearland Parkway in April. The location is the second for H-E-B in the Pearland market;

·      Walmart Supercenter, with an 185,000-square-foot store near the intersection of I-45 and Wayside Drive set to open in the second half of 2014;

·      LaCenterra at Cinco Ranch Phase III in Katy, which broke ground in late 2013. The retail space in the mixed-use phase will total 37,000 square feet to be anchored by a 12,500-square-foot Trader Joe’s set to open later this year;

·      Fiesta, a grocery store that will open a 63,000-square-foot location at FM 529 and Fry Road in Katy in late 2014. In addition to Fiesta, the center will have approximately 33,000 square feet of small-shop retail;

·      Academy Sports & Outdoors, with a 2014 store in the Village at West Oaks at Westheimer and Highway 6;

·       A 150,000-square-foot center under construction at the intersection of Interstate 10 and Yale near the close-in Heights neighborhood. The center’s line-up will include Sprouts Farmers Market, LA Fitness and Guitar Center;

·      TopGolf, a golf-focused entertainment center, set to open in 2014 at 560 Spring Park Boulevard;

·      Nordstrom, which in August 2014 will open a two-level, 138,000-square-foot store at  The Woodlands Mall;

·      Nordstrom Rack, which in the second half of the year is scheduled to open a new 38,000-square-foot store at an exterior entrance to Willowbrook;

·      Costco, which in February opened a 152,000-square-foot store at I-10 and Grand Parkway in the Katy area;

·      In late 2014, Costco is also scheduled to open a 153,000-square-foot store at the northeast corner of Highway 242 and I-45 in The Woodlands;

·      Buc-ee’s, a supersized convenience store and travel stop with a 60,000-square-foot location at I-45 South and Holland Road in Texas City;

·      Sprouts, with a new-construction 28,000-square-foot store at 20708 Kuykendahl that is set to open in the second half of the year.

The market is also seeing strong demand for space in existing centers. Leasing highlights include:

·      Discounter Five Below, with eight new locations

·      Floor and Décor, which backfilled a former Kroger in Sugar Land

·      World Gym and Palais Royal, which leased the majority of space in vacant former Macy’s in Texas City;

·      Bravo Ranch Supermercado, which backfilled a 42,000-square-foot former Kroger in Pasadena;

·      H&M, with an approximately 23,000-square-foot store opening in mid-August in Katy Mills Mall;

·      Toby Keith’s I Love This Bar & Grill, which opened a 28,000-square-foot location at West Oaks Mall;

·      Golfsmith, with a 26,000-square-foot store at 5319 FM 1960 West;

·      Pet Club, which leased approximately 6,000 square feet in Cullen Crossing Shopping Center in Pearland for its first area location. Pet Club is just one of several pet-focused retailers expanding in Houston.

For 2015, several retail projects are already in the works. These include:

·      The 555,000-square-foot expansion of Baybrook Mall, which will be anchored by a 42,000-square-foot Star Cinema Grill. (The cinema is relocating). The expansion brings the mall to a total of 1.7 million square feet and is set to open by the end of 2015;

·      The expansion and renovation of leading mall The Galleria, which is adding new retail space and a newly renovated 198,000-square-foot Saks store adjacent to its existing store. The Saks’ relocation creates 110,000 square feet that will be subdivided for restaurants and retail space. The mall also will add a new multi-family tower;

·      Creekside Park Village Center, a new center under way on Kuykendahl road at Creekside Forest Drive in The Woodlands. The center will be anchored by leading grocer H-E-B and also include more than 50,000 square feet of retail space;

·      H-E-B, with an approximately 95,000-square-foot store for the intersection of Grant and Spring Cypress Roads in the Cy-Fair area;

·      H-E-B, which is also opening a store at the southeast corner of San Felipe and Fountainview in the Galleria area. The new store represents the redevelopment of a former multi-family complex;

·      Kroger Marketplace, which will open a 124,000-square-foot location in 2015 at Spring Green Boulevard and FM 1463 in the Cinco Ranch community of Katy;

·      Kroger Marketplace, which will open in the master-planned Fairfield community in Cypress in late 2015 at a site near Cypresswood and Fairfield Meadow Drive. In addition to the 123,000-square-foot grocery store, the project will feature an additional 30,000 square feet of shop space;

·      Nordstrom Rack, which announced a 31,000-square-foot store to open in spring 2015 at Baybrook Square at I-45 and West Bay Area Boulevard in Webster. The store will replace a current DSW, which will relocate within the center;

·      Whole Foods, which plans a 40,000-square-foot store at 1407 S. Voss Road, between Woodway and San Felipe, for a 2015 opening. The store, a relocation of the Whole Foods Woodway location, is at the site of a Randalls Flagship store that closed in mid-2013;

·      Also for 2015, Whole Foods plans a 40,000-square-foot store as anchor to the Hughes Landing mixed-use complex located near the intersection of Lake Front Circle and Lake Woodlands Drive in The Woodlands. Dallas-based Whiskey Cake Kitchen & Bar also will open its first Houston-area location in the project;

·      H-E-B, with 2015 stores planned for Lake Jackson and Cypress;

·      Walmart Neighborhood Market, with a new 41,000-square-foot store for the northeast corner of Barker Cypress Road and Longenbaugh Drive;

·      Gallery Furniture, with a new 165,000-square-foot store set to open in 2015 on West Grand Parkway South in Richmond;

·      CityPlace, a north Houston mixed-use project on I-45 at Grand Parkway near the new ExxonMobil corporate campus. CityPlace is designed to have 400,000 square feet of retail upon completion. The first mixed-use building, with 27,000 square feet of retail space, is set for completion in late 2015, with the next phase coming online in 2016.

In terms of rent, the Houston retail market is seeing average quoted rents show gains. For the best-located properties, the market is seeing the most notable increases in recent memory. These increases have boosted Class A rates to their highest levels ever in terms of asking rents.

For small-shop in-line space in a well-located, anchored project:

·      Class A rates ranged from approximately $30 to $40 on a per-square-foot-per-year basis.

·      Class B small-shop space average rates ranged from approximately $22 per square foot to $28 per square foot.

·      Class C small-shop average rates typically were in the $15-20-per-square-foot-per-year range.

These rates are average small-shop asking rates, and rates at specific centers can be notably higher or lower depending on location, anchors, type of tenant, specific-space sizes and demographics.

Houston’s retail market continues to benefit from an economy that ranks among the top-performing markets in the country.

 

 

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