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January 27, 2020 Comments Off on Houston Retail, Limited Construction: Q&A with Weitzman’s Kyle Knight Views: 480 Texas - Other, Texas News

Houston Retail, Limited Construction: Q&A with Weitzman’s Kyle Knight

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Weitzman’s new report for retail in Houston shows healthy occupancy and steady demand, while the pace of new construction remains conservative. Kyle Knight, senior vice president with Weitzman’s Houston office, discussed the current market and forecast for 2020.

Q. What’s the current state of the market?
A. With a multi-tenant inventory of nearly 162 million square feet, Houston currently reports 95% occupancy, an increase compared to mid-year, 2019. The market benefitted from the backfilling of large vacancies, limited retail construction and a lack of major store closings during the past year.

Q. What do you mean by limited retail construction?
A. The Houston-area market added approximately 1,645,500 square feet during 2019, compared to 2.7 million square feet in 2018. The decline was expected, as several years of retail construction generated by the expansion of the Grand Parkway nears the end of its current cycle, as well as the limited number of new anchor stores coming online, other than H-E-B.

We also compared the total construction from 2010-2019 to the previous decade, and saw a dramatic drop in construction.

From 2000-2009, the market added approximately 39 million square feet, or an average of 3.9 million square feet a year. From 2010-2019, the total new construction dropped by more than half, to 18.6 million square feet.

New retail today is often in neighborhood or mixed-use projects, which tend to be smaller than the malls and power centers developed during the peak construction years.

Q. What do you expect for 2020?
A. Leasing demand remains healthy, the market’s best-located projects are essentially fully-leased, and new tenancy continues to backfill the large box vacancies left by Toy R US and others. Additionally, Houston remains one of the country’s most active residential markets, and the economy is creating new jobs at a steady clip.

As always, of course, vacancies in outmoded or poorly-located centers will experience difficulties finding new tenancies. But, with the outlook for positive economic growth and population growth, we expect to see a continuation of Houston’s healthy retail market for 2020 and beyond.

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