HOUSTON – (Realty News Report) – Thanks to positive job formations and strong single-family home sales, Houston’s retail real estate market continues on an upward trend. Sales of single-family homes increased 2.8 percent in May, according to the Houston Association of Realtors, with 8,346 homes sold. On a year-to-date basis, home sales are running 2.7 percent ahead of 2018’s record pace. One retail industry adage has always been, ‘retail follows rooftops’ but in Houston, will it always be true? Will the retail sector eventually bottom out? Is there too much retail construction planned? Where are the retail hotspots? To find out, Realty News Report spoke with Sandy P. Aron, President, Hunington Properties and one of Houston’s leading commercial real estate brokers and developers with more than 35 years of experience in all facets of the real estate industry. Aron has been developing retail centers in Texas and Colorado and a few other states for 35 years. Hunington Properties has a number of retail projects in the pipeline as well as several multifamily developments including innovative micro-unit apartments combined with street-level retail.
Realty News Report: Hunington Properties has developed a number of projects over the years. Tell us about what’s in the pipeline please.
Sandy P. Aron: Our firm has 21 multi-tenant retail centers ranging from 15,000 to 45,000 SF in various stages of development, throughout the greater Houston market. This level of retail development will continue into 2020 with an additional dozen projects. Hunington Residential; a division of Hunington Properties, entered the multifamily market in 2009. The Fairmont on San Felipe — a mixed-use multi-tenant 45,000 SF retail center with a four-story multifamily apartment complex was developed in the Tanglewood/Memorial corridor. Shortly thereafter, we developed Vargos on the Lakes — a five-story multifamily complex in the Piney Point – Memorial area. This complex was recently sold to an institutional buyer. Last month, HRI broke ground on The Vic at Southwind, a three-story garden multifamily complex in Baytown. Next month we will start work on The Interpose, a mixed-use multi-tenant retail center (with 25,000 SF) and frontage on Shepherd and Durham Drive and a four-story, micro-unit multifamily component.
Realty News Report: Your micro-unit multifamily is a new concept for Houston. Can you please tell our readers what a mixed-use micro community is and why Hunington is involved?
Sandy P. Aron: A micro-unit is an average of 450 SF. This concept has repeatedly proven to attract renters in markets comparable to the Washington/Heights area. With less than 200 units in a four story complex The Interpose will have a boutique residential setting. The efficiency of a micro-unit allows renters to retain approximately 20% of their monthly housing budget. The Interpose will have amenities including a clubroom, fitness facility, pool, dog park, summer kitchen and unobstructed views of Greater Houston. The idea of an all micro-unit complex came from researching various markets as well as observing the recently developed multifamily complexes in the Greater Houston Inner Loop market. Several new neighboring four and five story multifamily complexes have the traditional 1, 2, and 3-bedroom mix plus a limited number of studio units with 550 SF plus. These studio units were the first to pre-lease and had a waiting list of potential residents. Several Texas cities including Dallas, Fort Worth, Austin and San Antonio provided us with rent comps for the micro unit sector showing $2.75 – $3.00 per SF. These multifamily economics mixed in with more than $40 per SF retail rental rates produces a sound build-to-cost return. In addition, the all micro-unit complex differentiates us from the competition with the traditional 1, 2, and 3-bedroom multifamily projects.
Realty News Report: Vargos on the Lake, a 276-unit Class A high-end infill community off Houston’s Westheimer corridor was recently sold. Will Hunington continue to develop multifamily in Houston?
Sandy P. Aron: Our firm’s niche is in these irreplaceable, high barrier-to-entry locations that we feel will continue to provide success.
Realty News Report: Retail occupancy in Houston is around 95 percent. About 4 million SF is under development. Is there a chance that supply and demand may become unbalanced in the Houston retail market?
Sandy P. Aron: The plus or minus 4 million SF under construction is a solid number. Occupancy is around 95% for that plus or minus 4 million SF under construction. That doesn’t point towards an overbuilt market.
Realty News Report: Are there opportunities for the right retailer?
Sandy P. Aron: My understanding of opportunities means an exploitable set of circumstances. Throughout the Houston market I’m not aware of retailers benefiting from exploitable opportunities.
Realty News Report: At midyear 2019, how would you describe the state of affairs in the overall Houston real estate market?
Sandy P. Aron: It’s solid in occupancy but we have some concerns about rising NNNs being passed through to retailers; specifically real estate taxes.
Realty News Report: Speaking of the retail market, are there any particular hot spots, or pockets of strength that are notable?
Sandy P. Aron: Our firm focuses on growth throughout the Greater Houston market, specifically the master planned communities. The construction of right-of-way’s has created several “hot spots” for the retail market. Take a drive along Grand Parkway (Hwy 99) and you’ll see the retail pockets.
Realty News Report: What’s going on with retail in the Inner Loop?
Sandy P. Aron: Inner Loop retail is a coveted commodity and maintains a strong level of interest from new retailers expanding in the greater Houston market.
Realty News Report: What about land? Commercial reserves still provide the greatest retail development opportunities. Do you have any observations about land sales and pricing in Houston?
Sandy P. Aron: Inner Loop land prices have continued to break new levels per square foot; thus changing the skyline with greater density and taller structures. There doesn’t appear to be resistance to these price levels as developers continue to buy and build. The commercial reserves throughout the suburban markets continue to secure higher prices per SF but remain affordable for the multi-tenant retail center.
Realty News Report: Looking ahead as we move toward 2020, what do you see happening in Houston real estate in the next year or two?
Sandy P. Aron: 2019 is already set in place and it appears the second half will complement the first half. Short of a worldwide negative event, 2020 is expected to build on this year’s pace.
Realty News Report: Anything else you’d like to add?
Sandy P. Aron: Everyone who is qualified should vote in the November 5 mayoral race!
