Jan. 10, 2018
By: Mark Raines, senior vice president, JLL Houston
Houston’s retail sector closed 2017 with approximately 1.6 million square feet of positive net absorption, setting up the sector for another solid year in 2018. Driven in large part by occupied deliveries, net absorption was 23.1 percent above the 10-year quarterly average.
Overall, retail conditions were healthy in the fourth quarter, as the sector continues to moderate following the furious pace of 2015 and 2016.
As part of this moderation, leasing activity and construction continued their decreases to more sustainable levels.
Leasing activity in the fourth quarter totaled 1.6 million square feet, down from 2.3 million square feet in the fourth quarter of 2016. While this is a notable decline from the previous year, when the retail market saw more than 2 million square feet of leasing activity during each quarter, it is still strong when compared to other markets nationally.
Similarly, the construction pipeline settled at 3.3 million square feet, down from 4.5 million square feet in the fourth quarter of 2016.
E-commerce continues to disrupt the retail landscape, changing shopping center mixes from predominantly soft goods to entertainment-concept focused. This is true from both a leasing and investment perspective, as buyers are wary of soft-goods-heavy centers.
Looking forward, landlord-favorable conditions may begin shifting to a more neutral playing field with recent new supply additions creating more balance between landlords and tenants. Houston remains a top destination in retailers’ growth strategies, which will be a key component of the sector’s future success.
Get our full Q4 2017 retail market report here.
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).