HOUSTON – (Realty News Report) – Lilly Golden is the principal and founder of Evergreen Commercial Realty, which specializes in shopping centers and retail real estate. She leases some of the most high-profile retail and mixed-use properties in the Galleria and Katy areas of Houston.
Lilly Golden was a guest on THE RALPH BIVINS PROJECT, a new podcast published by Realty News Report.
Ralph Bivins: We are here today to talk about retail, malls and shopping centers. With COVID, so much retail has moved online. We’re beginning to come out of the COVID pandemic and want to find out what’s new with retailing and shopping centers. We are pleased to have with us Lilly Golden of Evergreen Commercial Realty, a company she founded in 2005. She has been associated with the Ed Wulfe organization, Moody Rambin, Trammell Crow and JLL. Let’s start with the big question. What is the current state of affairs in the retail industry right now, in America and in Houston?
Lilly Golden: Well, I’m very thankful to be finished with writing (pandemic-related) rent deferral agreements; very glad that this stage is over. We are working on some new deals and I’m very thankful to be doing that. We are going to receive $1.9 trillion from the government and will also have $1.9 trillion in annual savings that everyone has accrued because there is nothing to do and nowhere to spend the money. Now, the brick-and-mortar people will be able to pay off the rental deferrals and be able to whip the shopping centers back into shape. Things will be done by the start of 2022. In Houston we’ve been open longer and stayed open longer. We have already encountered two positive quarters of absorption, and we only lost 100 basis points on vacancies, placing us at a 6.9% vacancy level. We should have positive absorption this year and be in good shape by the fourth quarter.
Ralph Bivins: There has been a huge home-buying spree, and also this work-from-home situation that developed with the pandemic. Considering the old adage, “Retail follows Rooftops,” what is your take on the changing landscape in the outer suburbs?
Lilly Golden: We have already seen developmentt all the way from Willis to Manvel. I expect development to continue along Grand Parkway and all along the outer loop, like Baytown. We’re seeing it everywhere, like Webster. I feel this will continue, though most of it is tied to grocery-anchored developments or retail spots located near supermarkets. Most of these are already in the works because construction costs are so high, and leverage is low. Unless this changes, it will be hard to get more construction announced. As this changes with all the new home growth, we will see if the situation reflects construction following rooftops.
Ralph Bivins: Willis is really amazing. Woodland Hills, about 2,000 acres, they are building and selling like crazy. Fidelis [one of Texas’ largest commercial real estate companies] is up there, too.
Lilly Golden: And that Kroger up there. Everyone was surprised that the Kroger was doing so well back in the day. Sales proved that it was strong. That has really brought on a lot of development in that area.
Ralph Bivins: What are these developers looking for?
Lilly Golden: For retailers, they are looking for their demographics. If you are a high-end retailer, you have to have the right number of people with a certain income level. You have to have the traffic counts. Whatever retailer it is, they have to have the number of people with the incomes they are looking for and the traffic counts to make sure they will have enough consumers of that type to make it work. They can’t pay their rent if they don’t make enough of a profit to be able to afford it.
Ralph Bivins:And grocery-anchored seems to be a high priority. Why is that?
Lilly Golden: It’s for the daily needs. For grocery stores, people know they will be going to the store two or three times a week. People who go will always be in that parking lot. You used to go to the grocery store to buy your items, though in recent times, more and more people are doing click-and-collect or having groceries delivered. The majority of people are going to the store two or three times a week. There’s a flight to quality and a flight to safety. The grocery anchors know people will still make the trip to the market at least once or twice a week.
Ralph Bivins:What about the big box stores, for appliances and TVs and things from big, huge stories?
Lilly Golden: You know, Target is still doing extremely well, and people like going to Target. Now, the discounters, the Ross’s and the Burlington’s and the TJ’s, people still enjoy the treasure-hunting experience and that’s something you don’t get online. The deals you get at these stores are as good or sometimes better than online. People are still traveling to the discounters. Everything that is inherently resistant to online will continue to be there in big box developments.
Ralph Bivins: A lot has happened with regional malls. We were told five or six years ago that “Retail Armageddon” was not going to happen, but a lot of the regional mall cracked under pandemic pressure. What is going to happen to these regional malls?
Lilly Golden: Well, the A quality malls are still doing OK. The Galleria is not going anywhere soon. But some of the malls are feeling pressure. Some high-end developments are experiencing leakage. Legacy West, for example, plans to add Gucci and Chanel Beauty. These are a lot of the retailers that would normally go to malls, but they are going to Legacy West [in Plano]. You can see that some malls are losing some of their traditional tenants. The B and C quality malls are going to have to reinvent themselves. They are turning inside out and adding new uses. C quality malls are being torn down and being turned over to new uses. Greenspoint in Houston is becoming a brand-new investor project. You have to deal with them on a case-by-case basis to see what will happen to each project. Luckily, most of them are located on good pieces of property. You can put other uses on them.
Ralph Bivins: Do you see anything in the way of new concepts growth starting to happen?
Lilly Golden:This is not the best time to do it. What we are seeing are tried-and-true brands coming up with new prototypes. Starbucks is adding drive-up windows. Walgreens is developing a 2,500 SF prototype. Dollar General is adding a pop-shelf directed at suburban women looking for items under $5. Restaurant Depot is selling to the public rather than business to business. Costco is trying a new, 154,000 SF business-oriented model. A lot of Sam’s Club stores are becoming fulfillment centers. We will probably not see new types of growth until the pandemic is over – 2022 before there will be any announcements.
May 11, 2021 Realty News Report Copyright 2021
For more about Texas real estate, check out the book Houston 2020: America’s Boom Town – An Extreme Close Up by Ralph Bivins. Available on Amazon http://tiny.cc/4a2g6y . This book includes an extended account of how Woody Mann of Vista put together the La Centerra development in Cinco Ranch.