Houston’s economy, largely dependent on oil, is seeing dips as the primary source of revenue drops and countless energy jobs are eliminated, according to the Colliers International Q1 Houston Retail report.
While the expanding retail market continues to add more space with 3.7 million square feet under construction (81.5 percent of which is pre-leased) big brand tenants are relocating.
Sports Authority, Aeropostale and Fresh Market have announced their departures, causing Houston to reach negative absorption of 200,000 square feet. Although not a major impact in a vacuum, Houston hasn’t hit negative absorption rates since 2009.
According to CoStar, Houston’s average retail rent rate fell 3.6 percent, from $15.19 to $13.65 per square foot NNN — or triple net, which means property tax, insurance and maintenance are covered by tenant. On an annual level, rents dipped 2.1 percent from a prior $14.95 per square foot NNN.
New construction still in the pipeline
At the end of the first quarter, Houston had 3.7 million square feet of construction underway. The biggest project is The Shoppes at Parkwest in the Far Katy North neighborhood, which spans 450,000 square feet.
The Shoppes at Parkwest will be completed in two phases and preleasing has already begun for both sites. Phase I, completely filled, includes buybuyBaby, Bed Bath & Beyond, DSW, Kirkland’s and DXL. The second phase is 78 percent pre-leased to Dick’s Sporting Goods, Golf Galaxy, Field & Stream, Mattress Firm and Chipotle.
Big stores exit the Houston market
Colliers International
Vacancies in the Houston retail space increased to 5.9 percent last quarter as compared to 5.7 percent in the last quarter of 2015. However, the vacancy rate remains below the 6 percent posted in the first quarter of 2015.
Currently, Houston holds 16.6 million square feet of vacant retail space, with the lowest rates in single tenant retail at 2.1 percent. Theme/entertainment held 3.6 percent vacancy, while power centers hit 4 percent vacancy. Outlet centers have the highest vacancy rate at 9.9 percent.
Leasing activity in the retail sector dropped 6.2 percent between the final quarter of 2015 and first quarter of 2016, including renewals. Houston showed 1,162,200 square feet of leased space in the first quarter.
