Houston’s Retail Market Vacancy Rate Holds Steady at 6.8%
Houston’s retail market posted 120,000 SF of positive net absorption in the third quarter, bringing the year-to-date total to 1.6M SF. Some of the tenants who opened new locations during the third quarter include Fresh Market, Woodlands Oriental Rug Gallery, Monkey Joe’s, and CVS.
Although 196,000 SF of new retail space delivered during the third quarter, Houston’s retail vacancy rate remained at 6.8%. Currently, there is 870,000 SF in Houston’s retail construction pipeline, which includes a 185,000-SF Walmart Supercenter located at I-45 and Wayside and a 59,000-SF Buc-ees located on the Gulf Freeway in Dickinson.
The citywide average quoted rental rate for all property types increased 1.0% from $14.75 to $14.89 per SF between quarters and 2.8% from $14.49 in Q3 2012. Houston retail rental rates vary widely from $10.00 to $70.00 per square foot, depending on location, property type, and building class.
The Houston metropolitan area added 80,700 jobs between August 2012 and August 2013, an annual increase of 3.0% over the prior year’s job growth. Further, Houston’s unemployment fell to 6.1% from 6.9% one year ago, and Houston area home sales increased significantly between May and August, 2013, up 16.2%.
With continued expansion in the energy industry and a strong housing market, Houston’s economy is expected to remain healthy for both the near and long-term.
The citywide average quoted rental rate for all property types increased 1.0% from $14.75 to $14.89 per SF between quarters and 2.8% from $14.49 in Q3 2012.
Class A in-line retail rental rates vary widely due to location and center type. Recent quoted rates for neighborhood centers, power centers and unanchored strip centers, range from $20.00 – $35.00 per SF (Class B and below can rent for $12.00 to $20.00 per SF) while theme/entertainment centers range from $25.00 – $35.00 per SF. Lifestyle centers and newly constructed strip centers in Class A locations such as High Street, Uptown Park and The Vintage range from $40.00 – $70.00 per SF.
VACANCY & AVAILABILITY
Houston’s retail vacancy held steady between quarters at 6.8%. By product type on a quarterly basis, power centers posted the largest decrease in vacancy, 40 basis points, followed by neighborhood centers decreasing 10 basis points. Community centers, outlet centers, and theme/ entertainment centers vacancy rates remained unchanged at 6.3%, 8.3%, and 33.8%, respectively. Strip centers vacancy rate increased 30 basis points, followed by lifestyle centers and single tenant properties, both increasing 20 basis points between quarters. Mall vacancy rates saw the smallest increase between quarters, 10 basis points.
Houston’s retail construction pipeline contains 870,000 SF and third quarter deliveries totaled 196,000 SF.
ABSORPTION & DEMAND
Houston’s retail market posted 120,000 SF of positive net absorption in the third quarter, bringing the year-to-date positive net absorption to 1.6M SF.
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