HOUSTON – The Houston shopping center market shows “no noticeable effect” from the oil price downturn and city’s retail occupancy rate stands at 96 percent at midyear, according to a report by the Weitzman Group and Cencor Realty Services.
“When the oil price slump began in the second half of 2014, some market watchers predicted that the retail market would reflect the weaker energy economy due to Houston’s position as one of the leading energy economies in the country,” the Dallas-based company said. “However, thanks to a diverse job market, the oil price downturn has had no noticeable effect on the retail market, unlike the office market.”
As of mid-year 2015, the market is maintaining its strong occupancy rate of 96 percent, with the outlook for continued strong occupancy throughout 2015.
The retail market is benefitting from the continued strength of the Houston metro economy, which despite a slowdown still is seeing an unemployment rate of only 4.2 percent as of May 2015, an improvement over the rate of 4.9 percent posted in May 2014.
The Weitzman Group and Cencor Realty Services review a Houston-area retail market inventory of 152 million square feet in multi-tenant retail centers with 25,000 square feet or more.
For calendar year 2015, the Houston-area retail market is on track to see retail in new and expanded projects total approximately 2.6 million square feet, Weitzman said. That represents an increase of nearly 1 million square feet over the 1.7 million square feet of new space that came online in 2014.
Even with the increase, the total remains relatively low for a huge retail market with high occupancy and notable retail demand.
Weitzman said in terms of rent, the Houston retail market is seeing average quoted rents remain steady and are maintaining the levels they achieved in 2013 and 2014. Demand for the best-located space, however, can result in Class A small-shop rates in the best-located and newly constructed projects going as high at $60 per square foot per year.
For small-shop in-line space in well-located, anchored projects:
- Class A rates ranged from the mid-$20s to high $30s on a per-square-foot-per-year basis, with rates for space inside the Loop often rising above $40 per square foot.
- Class B small-shop space average rates are posted from the low to the mid $20-per-square-foot-per-year range.
- Class C small-shop average rates typically were in the $15 to $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.