Has Houston's hot retail run hit a Harvey speed bump? Hardly. A dwindling pipeline, increased demand and the fast-approaching holiday season will keep Houston's retail in tight conditions for the foreseeable future. But with slipping consumer spending, will the market keep up?
Demand
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Leasing demand continues to decline — almost all of the 311K SF of new absorption was taken up by newly delivered centers, including the Grand Parkway Marketplace in the Far North submarket, JLL reports. Over 2M SF was absorbed in new development year to date, counterbalancing national closures and bankruptcies.
While absorption volume has slowed across the city, demand for space is still high, as evidenced by 94.1% overall occupancy and Class-A occupancy at 97.3% and rising. Tightening availability is hindering large expansions, and thus deal flow is heaviest in small shop and restaurant segments.
Since 2013, net absorption has outpaced deliveries by nearly 3M SF annually as tenant appetite for new Houston retail has been tremendous. The second quarter saw a blip in this trend as moderating demand failed to measure up to the volume of newly completed product and a pipeline of 4.1M SF.
Because of the massive amount of new construction, the retail landscape is in the midst of a rebalancing act, though indicators point to a very healthy market moving forward.
Impact Of Harvey
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While the damage to retail product was minimal, effects will not be visible in Q3 statistics but could influence Q4 data. The largest hurdle for the Houston retail market post-Harvey is the continuing lack of space, according to CBRE. Heading into the storm, availability was very tight — even with large-scale national retail closures/bankruptcies disrupting big-box and small shop demand.
The Grand Parkway
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The ongoing expansion of the Grand Parkway has provided not only an improved means of circulation through the region, but a unique opportunity for retail growth and development. Nearly 40% of Houston's total retail construction, about 1.5M SF, can be found within 1.5 miles of the toll road. Notable construction projects along this corridor include Target’s 124K SF location set for the intersection of the Grand Parkway and Harlem Road in Richmond and The Market at Springwoods Village with 168K SF, JLL reports.
Fast-Casual's Continued Growth
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There has been growing demand for fast-casual dining options, and quite a few Houston eateries are more than happy to accommodate. Mod Pizza is slated to open another six locations to add to 17 existing restaurants. Zoës Kitchen, which has 15 locations in the metro, has recently announced plans to double its Houston footprint.
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