When Ed Wulfe, chairman & CEO of Wulfe & Co., started out in the real estate business, a barrel of oil cost $1.50. A lot has changed since 1963 in energy and retail. Considered the dean of retail real estate in Houston, Ed is the ‘go to guy’ for local, national and international retailers wanting to know about the Houston market. Over the years Wulfe & Co has leased, developed and managed some of Houston’s most dynamic shopping centers including Meyerland Plaza, Gulfgate Center, Shepherd Square, Pinecroft Center, The Park Shoppes, The Center at River Oaks, and Deerbrook MarketPlace. The company’s annual Retail Survey is eagerly anticipated – this year it showed 3.71 million square feet of new retail shopping center space will be built and opened in the greater Houston area in 2015, a 56 percent increase over the previous year. Realty News Report interviewed Ed to find out where the retail real estate sector has been and where it is going.
Realty News Report: Occupancy rates are at record highs – over 95 percent – across Houston’s shopping center scene. What’s going on with Houston retail real estate?
Wulfe: Retail space occupancy is in the 90s and retailers moving into Houston because of its continued growth are having a tougher time finding locations. Because of the moderate amount of new retail construction in Houston over the past 6-7 years, there is now a shortage of retail space. New construction has been dominated by supermarkets, discount stores and the big boxes. What little shop space that was built has filled up at most properties. Many retailers want locations in key areas and it’s difficult to find locations for the expanding conventional retailer or restaurant. Limited space availability means increased competition for space and rising rents. Retail rents in Houston have increased at least 5% this year.
Realty News Report: What’s new with BLVD Place? Is that project complete or is there another phase coming?
Wulfe: BLVD Place is a long-term, mixed-use complex of many parts. Our goal when we first started BLVD Place about eight years ago was that we wanted to raise the development bar along Post Oak and help lead the area to the next level and into the 21st century. We envisioned that there was a strong need and opportunity to create in Uptown a whole city where people can live, work and shop and show Houston’s urbanization process was underway. We’ve finished the first and second phases of BLVD Place, which are about 95 percent leased. The third phase — retail integrated with office — is scheduled begin sometime next year. It will be similar to the first and second phases — two levels of retail and four levels of office. The fourth phase, which will be multifamily residential with some offices, is still in the planning stages. Apache Corp. also owns a large site in BLVD Place with plans to build its corporate headquarters. The Uptown/Post Oak area is a super strong and substantial urban marketplace, a city within a city.
Realty News Report: Mayor Parker appointed you to a downtown retail task force following the closing of Macy’s. What needs to be done to enhance downtown retail? Or is it a hopeless cause?
Wulfe: Downtown Houston has always been challenging because there has not been a residential base or enough residential growth and activities. But that’s changing, particularly with the new (Downtown Living Initiative) program that has brought and will bring more residential units to downtown. Midtown is being densely populated by residential activities and mixed-use developments attracting young professionals and millennials. Today, more people are living in or close to downtown and that is demonstrating the need for additional restaurants and stores and driving interest in downtown for retail. Construction is going on along almost every street downtown and there is an effort to make Dallas Street “the” retail street downtown with improvements made on sidewalks and storefronts. Anchored by the George R. Brown on the east, Dallas connects downtown east and west and will become a key thoroughfare for downtown retail.
Realty News Report: Your firm is working on finding restaurants for the George R. Brown Convention Center redevelopment. Has your team secured any commitments?
Wulfe: The expansion of the George R. Brown, the second major convention hotel under construction and the energy created by Discovery Green and the major sports complexes supports and adds to the strength of downtown. We have strong prospects from local, regional and national restaurateurs. We will be adding five to six new restaurants across the front of the George R. Brown and the interest level has been very strong from proven operators. We’re not ready to announce any names, but there are an impressive and exciting lineup of restaurants in the works.
Realty News Report: High-end retail is emerging in Houston. The River Oaks District mixed-use development has brought in some upscale brands. What’s your opinion on this trend?
Wulfe: Luxury and high-end retailers, many of whom did not have stores in Houston, are coming to the District and will cater to the upper end customer. By opening stores in Houston, they are taking retail to a whole new level. Houston gets a lot of upper-end visitors from Latin America and Asia who are prime customers for the luxury market. Hermes is building its largest store in the country in the River Oaks District and the Galleria is focusing on energizing the mall with additional high-end retailing. The concentration of luxury retailers will be impressive and the market will be well served and very strong. Of course, the softness in the energy market will have an effect, but overall in retail we’re not seeing much of a downturn in retail activity. The biggest effect the collapse in oil prices is having is on the office and residential markets. Jobs drive growth and our low unemployment rate indicates we will continue to see growth just at a slower rate.
Realty News Report: Houston will be getting a new mayor shortly. What’s the biggest challenge facing the city’s new leader?
Wulfe: The city must get its financial house in order and address satisfactorily its infrastructure needs. The problems with the city’s pension funds have to be addressed and we must continue to focus on the great opportunities here – jobs, entrepreneurial spirit, low cost of living and abundant and reasonably priced housing. We must continue to focus on our excellent quality of life and increasing our parks and green space. We created the Bayou Greenway Initiative where our 10 major bayous are being transformed into linear parks. Because of Houston’s diversified economy, a lot of millennials are moving here because of opportunities and our welcoming and open environment. I think we’re densifying and urbanizing to make it one of the great cities of America. It is very exciting to see the effectiveness of the Tax Increment Redevelopment Zones that have been created across our City including Downtown, Midtown, Uptown and many others and the role that they are playing in making things happen to revitalize areas and neighborhoods.
Realty News Report: BLVD Place is still a work in progress, but otherwise what would you consider your biggest achievement? Your biggest regret?
Wulfe: My biggest achievement? Forming Wulfe & Co. I’ve been in real estate since 1963, and Wulfe & Co. has enabled us to be creative in all sectors of commercial retail real estate from developing to leasing from revitalization to reimagining from property management to tenant representation simultaneously transforming neighborhoods, creating jobs and improving our quality of life. It’s been very rewarding and I have been very lucky to be a part of the growth of Houston. My biggest regret? After serving as Chairman of the city-wide referendum in 2003 to build the Main Street light rail line, I regret that we were unable to expand it across the City and build a comprehensive public transit system. Houston is years behind on addressing our mobility needs.
Realty News Report: Where do you see the future of retail heading?
Wulfe: Retail will continue to grow, but it will experience substantial changes here in Houston and throughout the world. The era of the mall will be limited to super regional malls and outlet malls. Retail in general will continue to play a major role in the city’s development but in different formats, particularly with a much greater focus on mixed-use developments of various sizes and make-up. Retailers are facing multifaceted changes, increasing competition from evolving sources and a more knowledgeable and informed customer. We’ll see more impact as a result of our electronic age, amazing innovative new delivery systems and social media. All aspects of retail will continue to change at an ever-increasing rate. It’s inevitable, but filled with opportunity.
Realty News Report: What’s ahead for the future of Houston?
Wulfe: I am very bullish and extremely optimistic about the future of Houston. The opportunities in Houston are limitless because of our geography, the expanding Port of Houston, our phenomenal Medical Center, our continuously enlarging airport system, our dominant role in energy, our low cost of living, our constantly improving quality of life and our diverse and welcoming citizens. We’ll always have ups and downs. But Houston has a lot going for it including a strong entrepreneurial spirit and can-do attitude that no other city has.
Realty News Report is a Texas-based publication edited by veteran journalist Ralph Bivins.