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The Numbers Behind Houston Retail Don't Always Add Up

Houston Retail

From a capital market perspective, Houston retail isn't all sunshine and lollipops. Experts at Bisnow's Houston Retail Wave shared their concerns.

Waterman Steele's Lance Gilliam says there's a disconnect. The retail sector is strong, but in most cases, consumer spending is down. Rising rents and slowing sales are changing rent as percent of sales. That's throwing retailers' numbers in a loop, which could reverberate throughout the sector.  

Marcus & Millichap's David Luther (speaking above) sees the price growth per square foot Lance is talking about in many areas. In Katy, the cost of dirt demands rents in the high 20s, low 30s per square foot. Some areas around the Grand Parkway are going for $35/SF, demanding even higher rents. Prices like that box out small retailers. David says the good news is that when rents go up, it benefits existing owners; their rents are below market so they can draft behind new development. 

Weingarten CEO Drew Alexander says another concern is e-commerce moving into brick-and-mortar. Data shows e-commerce retailers do better when they have a physical store. Customers can get better customer service and return things much easier. But this is all uncharted territory. The stores' primary purpose isn't moving product, so how do you translate that into what they can pay in rent? Right now capital market guys are having a hard time adding up the numbers on these deals. 

Pictured: moderator Stantec's Jason Atkinson, Drew, Dave and Gilliam at our event last week.