Internet-resistant retailers expand while others catch their breath

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Oct. 19, 2017

By: Mark Raines, senior vice president, JLL Houston

internet-resistant

Houston retail remains healthy as it settles into a new and more sustainable normal following the frenetic game of catch-up from the last three years.

During the third quarter, leasing activity decreased to 1.5 million square feet while some retailers paused to evaluate strategies and Houston’s supply finally began satiating market demand. Vacancy and availability grew to 5.5 and 7.7 percent as a result, but both market indicators are well-below their long-term averages.

Retailers’ pause was also reflected in the third quarter’s meager net absorption of 192,911 square feet. In comparison, the third quarter of 2016 saw 1.6 million square feet of net absorption. Grocery-led development, in particular, is slowing slightly, after several years of significant expansion in Houston and across Texas.

Several categories of “internet-resistant” retailers, such as restaurants and boutique fitness concepts, continued to expand across the metro in the third quarter.

The retail market is seeing increased competition from the multifamily sector for land sites, resulting in more mixed-use projects in the development pipeline. Retailers are taking advantage of ground floor opportunities in new apartment communities in dense, urban submarkets with growing population bases. With fewer big-box tenants looking for space and more retail integrating with multifamily projects, a new frontier of retail development could be in store for the metro.

Despite a general tempering of demand in 2017, market indicators look strong for the period ahead and retailers continue to target both Houston and Texas as key components to U.S. growth strategies.

CLICK HERE to download our full Q3 retail market insight and statistics.

About the Author

Mark Raines is a Senior Vice President and the Retail Brokerage lead for JLL Houston. In his role, Mark focuses on delivering strategic and innovative real estate solutions that produce superior results and create exceptional value for clients. Mark has more than 15 years of commercial real estate experience and is a member of the International Council of Shopping Centers (ICSC).

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