Houston’s Retail Sector Remains Resilient

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June 10, 2016

Houston's retail sectorTim Hopper, chief economist for TIAA, recently led an economic discussion hosted by JLL’s Retail Capital Markets experts in Houston, Texas. Approximately thirty retail owners from across the city gathered to hear from Hopper on economic topics that ranged from the impending ‘Brexit’ referendum in the U.K. to the reverse of capital from emerging to developed markets. The evening also included a discussion about Houston’s retail sector.

Among retail owners in attendance, the consensus was retail tenant activity continues to be strong, and national tenants remain interested in Houston despite the prolonged downturn in the price of oil.

According to a recent JLL report, factors that contribute to retail expansion in major cities include:

  • Positive market fundamentals (i.e. sheer market scale)
  • Great connectivity
  • Unparalleled diversity and vitality
  • World-class culture and heritage

As the fourth largest city in the U.S., one of the most diverse cities in the world, and with ever-increasing connectivity from projects like the Grand Parkway, it’s no wonder Houston is an attractive market for retailers.

With approximately 3.3 million square feet of retail construction currently underway, the city has more retail development than any other in the U.S. Construction has increased in recent years as Houston’s retail sector catches up with the significant population growth the city experienced from 2010 to 2014, but during which relatively little retail development occurred.

Within Houston’s retail sector, grocery-anchored shopping centers continue to dominate the landscape of development. Furthermore, many projects are taking place in suburban submarkets where population growth has caught the attention of developers. The concentration of projects near the Grand Parkway attests to the importance of connectivity for retail expansion.

Retail owners agreed the emergence and growth of e-commerce and its impact on retail is still an unknown for much of the industry.

Despite this, demand for the right physical space in the right locations is strong, both in Houston and in major retail markets around the world. Appropriate retail, often located in busy urban locations, remains resilient and physical branded retail stores continue to be at the center of the majority of international retailers’ strategy. With the advent of e-commerce, changes in the role of physical stores is inevitable and the way in which retailers value physical space is evolving, but stores remain core to retailing.

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