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“Resilient and creative retailers, reasonable landlords
and consumers with a great deal of liquidity have
combined to launch retail into a strong recovery mode.”
Anjee Solanki | National Director, Retail | U.S.
Key Takeaways
- Vacancy remains low and rental rates increased
- Houston’s retail sector posts negative absorption due to lack of
leases in 2020 - Developers continue seeking new and innovative opportunities
- Houston’s positive job growth and low unemployment rate
boosts economy
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Houston Highlights
Houston’s vacancy rate increased marginally from 5.9% to 6.0% over the quarter as 263,800 SF of new product delivered. Construction activity remained steady between quarters and retail foot traffic picked up as COVID restrictions in the state of Texas eased. According to Emsi, a labor market data company, Houston’s MSA population grew by 500,885 over the last five years, now at 7,172,693, and is projected to grow by 544,540 over the next five years. Total regional employment grew by 74,098 over the last five years, now at 3,350,731, and is projected to grow by 166,496 over the next five years. The top three industries in 2020 were restaurants and other eating places, education and hospitals, and general medical and surgical hospitals.
Market Indicators
Historic Comparison
Market Fundamentals
The forecast in the above graph is based on a trailing 4-quarter average.
*The average asking rents in the table to the left are an average of all property types that are currently listed with an asking rate. This average does not include properties that are fully leased or that do not list an asking rate.
Recent Transactions
Executive Summary
Commentary By Wade H. Greene IV, CCIM | Principal
The Houston retail market remained strong as restaurants and retailers conducted their first full quarter of business without a mask mandate. Like the rest of the country, Houston’s retail sector was impacted by the COVID-19 pandemic. However, the Bayou City has seen a much faster recovery while vacancy rates only peaked at 0.7% above pre-pandemic levels of Q1 2020. The combination of Houston population growth, its retail market strength pre-pandemic and the State of Texas’s approach to government mandates has accelerated the resurgence compared to other major markets across the country. Additionally, Houston ranks in the top three U.S. markets in employees returning to the office, which has been particularly helpful to the local Food and Beverage (F&B) sector.
Across the country, retail sales are starting to improve as well. June instore retail spending increased three times higher than Wall Street’s expectations. The outlook has been on the rise for F&B as well. Many restaurants in the fast-casual and quickservice space reported same-store sales increases in the second quarter, including Chipotle and Smoothie King posting over 30%. In addition, trends that accelerated from COVID-19, such as the increase in patio dining, curbside pickup and online sales, are here to stay as restaurants look to restructure existing units and new prototypes. Even the casual dining space is starting to recover, as Darden Restaurants posted same-store sales just 0.5% below Q2 2019 levels.
Restaurants and retailers evaluating their development strategies are taking notice of the recovery of Texas markets like Houston. Over the last six months, our team has noticed an overwhelming increase in demand from national and local retailers across every sector seeking new space in the city. As new to market and existing brands look to develop and infill sites in Houston, I believe we will see vacancy rates compress below 6% again by year-end.
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Idle Hands Idle Hands, currently on Rainey Street in Austin, Texas, is a partnership between Matt Wolski and Andrew Hunter. The new second location in Montrose will provide tropical craft cocktails, a full kitchen with roof deck/patio seating and live music seven days a week. They plan to open their doors this fall 2021. |
