Four Things You Need to Know About Retail

Houston’s enjoying our strongest retail market in recent memory. The Weitzman Group SVP James Namken (pictured far right with Kyle Knight and Randy Hopper) broke down the four things you need to know about the sector. (Shoot him a congrats—last night, James was honored as one of Weitzman’s top 10 producers of 2014!)

1. 4% Vacancy

With practically nothing available, especially in key submarkets, it’s no surprise that rents are strong. $40/SF for Class-A is no longer unusual, and the best-located newly constructed small-shop spaces are sometimes reaching $60/SF.

2. Development Won’t Just Be Grocers…

Admittedly, grocery stores will continue to dominate new construction, with Kroger, HEB and Walmart still leading the pack. But this year we’ll also see mall expansions (there are two under construction—Baybrook’s is rendered above) and new power retail come online. Multi-tenant projects underway include Yale Market (125k SF), Fry-529 Retail Center (115k SF in Phase 1) and CityPlace (27k SF delivering this year of a total 400k SF planned). There’s also some retail being built as part of office or multifamily development. Below is one example—2929 Weslayan has 12k SF of retail.

3. …But it Still Won’t Help Availability

First of all, 1.7M SF delivered last year, which was extremely constrained when you consider how large (149M SF) and tight the market is. Secondly, there’s almost no spec small-shop space in conjunction with anchors being built, so new construction is adding to occupancy, not vacancy.

4. The Oil Market is Both Concerning and Helpful

Dropping oil prices is bad for Houston pretty much across industries, but retail gets a little boost, too. Lower prices at the gas pump are increasing consumer spending.

We wanted to clear up some confusion from yesterday's pub--our top Dealmakers are the top producers within their respective firms. We did not compare across companies.