HOUSTON – (By Dale King, Realty News Report) –Some 3 million SF of Houston retail space went dark in 2020 as a number of retailers and restaurants went bankrupt or abandoned their weak outlets.
“Biggest Retail Disruption in 30 years.”
The COVID-19 pandemic of 2020, which continues to rage into the new year, caused “the biggest disruption in retail in 30 years,” said Bob Young, executive managing director of Weitzman, a Texas-based commercial real estate services firm. Young was speaking at a Weitzman retail webinar Thursday, presenting Weitzman’s findings on year-end results and 2021 predictions.
The growing digital marketplace combined with people staying at-home and not going out to shop at brick-and-mortar stores were only some factors in the regional downward spiral. Peter Linneman, principal of Linneman Associates, said two-thirds of the companies that filed for Chapter 11 bankruptcy in the past year or so “were going to go out of business anyway.”
He said the most unfortunate victims were the restaurants and small stores that would not have folded were it not for COVID-19.
Houston’s retail sector ended the year at 93% occupancy, down from 95% at year-end 2019, according to a new Weitzman report.
Weitzman said that “even with the decline, Houston’s market occupancy remains stable, and occupancy above 90% for a major retail market is considered healthy.”
The Houston occupancy rate used in the report is based on a retail market inventory of 162,595,000 SF of retail projects with 25,000 SF or more.
Retailers announcing closures for 2020 included those that already had reported struggles prior to the pandemic. These include department store Sears, with two area closings; Randalls grocery store, with five area closings; and Stage Stores (Gordman’s, Bealls, Palais Royal), which began going-out-of-business sales during the second half of 2020 at 30 area stores.
Closings from smaller-format retailers included Pier 1, with 13 closings, and Tuesday Morning, with three closings. Also, 24 Hour Fitness closed 12 of its Houston-area locations as part of its Chapter 11 bankruptcy, and the AMC Studio 30 cinema at 2949 Dunvale closed permanently.
Closed in 2020: 3 Million SF
All together, these closings account for approximately 3.1 million SF.
“Additional 2021 closings include Kroger, whose 3300 Montrose Blvd. store is going dark in early 2021, and Randalls, which will close its store at 5130 Bellaire,” says the report.
Retailers leasing in existing space are helping counter new vacancies such as those created by the above-mentioned retailers. According to Weitzman these backfilled spaces in Houston shopping centers and freestanding boxes include:
- Target, which opened in a 63,000 SF former Randalls store location inside the loop at 2075 Westheimer in the Shepherd Square Shopping Center;
- Ross Dress for Less, which opened in backfilled junior-anchor space in a Fidelis center at 9728 Katy Freeway in Houston;
- iTile, which opened in 26,584 SF in Baybrook Gateway, an Ashley Furniture-anchored center at IH-45 and Bay Area Boulevard in Webster;
- dd’s Discounts, which leased 23,146 SF at 10-Federal Shopping Center, a grocery-anchored center at Interstate 10 and Federal Road in east Houston.
Continuing on the bright side, the Weitzman report says Kids Empire, a children’s activity site, will open three new locations in 2021, including one in 26,152 SF of retail space in Corum Station, at Kuykendahl and Louetta roads in Spring. The other locations are in the Maplewood and Willowbrook retail districts.
Among others helping bring life to closed outlets:
- West Elm, a home furnishings retailer, which leased approximately 11,500 SF formerly occupied by Urban Outfitters in Rice Village at 2501 University Blvd.
- Texans Fit, with two approximately 36,000 SF fitness facilities in Katy and Rosenberg, and
- World Gym International, which will open its second area location in 40,000 SF formerly occupied by a YMCA at 7904 South Loop East near IH-45.
The report says construction does not always equate to increased occupancy. It noted that from 2016 to 2020, the Houston market added 11.1 million SF and occupancy remained in the mid-90% range.
From 2006 to 2010, the market added 16.3 million SF and occupancy never climbed higher than 88.5 percent.
Retail rental rates, of course, have been impacted by the COVID-19 crisis. However, the impact has been limited to a flattening in asking rents for lease space. Effective rates, however, are typically lower due to concessions such as free rent and generous finish-out allowances.
Weitzman wrapped up its report on Houston with the following: “The outlook for Houston’s retail market for 2021 is cautiously optimistic, especially in light of the COVID-19 vaccine. Based on a return to positive job growth, as well as a strong housing market, we expect to see the market continue to grow through 2021 and into 2022.”
New Projects in the Pipeline
401 Franklin St, Houston – The mixed-use project represents the redevelopment of downtown’s Barbara Jordan Post Office. The project’s mix of uses will incorporate approximately 60,000 square feet of retail space. A large food hall will house concepts like Salt + Time Butcher Shop, Lea Jane’s Hot Chicken and Taco Fuego. Opening is set for late 2021.
Manvel Town Center
SH-288 & SH-6, Manvel – Manvel Town Center is designed to incorporate as much as 1 million square feet of retail space to be developed in phases. The anchor for the first phase is H-E-B, which plans a 90,000-square-foot store. Other concepts in the first phase include pad users such as Whataburger, McDonald’s and Heartland Dental.
Regent Square Phase II
West Dallas & Dunlavy Streets, Houston – This mixed-use apartment-and-retail development is on track to open with approximately 50,000 square feet of retail space.
Katy Grand new phase
Grand Pkwy & Katy Freeway, Katy – Katy Grand is expanding in 2020 with two buildings totaling approximately 29,000 square feet. Concepts include Gloria’s Latin Cuisine, a Dallas-based concept that will open its third Houston-area location at the project. The new phase joins a restaurant-focused 2019 phase and a Cinemark movie theater.
NEQ FM 1093 & FM 359, Fulshear – This lifestyle center is to include approximately 70,000 square feet of retail, restaurant and other space.
The Grand at Aliana
NEC W Grand Pkwy S & W Airport Blvd, Richmond – This 200,000-square-foot project features a line-up that includes Michaels, Burlington and others.
Allen Parkway, Houston – The Allen, an upscale mixed-use project near Buffalo Bayou Park, will include high-rise residential, hotel, office and other uses. The project, with its first phases under construction, is designed to feature 86,000 square feet of retail upon completion.
Jan. 15, 2021 Realty News Report Copyright 2021
File: Three Million SF Went Dark in Houston retail. Weitzman. 1-15-21
Caption: Sugar Land Town Square redo underway. Imagine: Courtesy Lionstone.