"The market is strong across the board," Richard Zigler, director of research for the firm and editor of the report, tells GSR. "New development, most of which is pre-leased, is following suburban population growth in the Houston area, which has been enormous in recent years. There are some vacancies in the lower-tier malls, and some of the former Kmarts and Service Merchandises are still empty, but on the whole, every segment of the market is strong."

The O'Conner report notes that strong quarterly absorption across all retail types has brought the demand in the first three quarters of the year to more than 5.2 million sf, the highest figure for that period since 2000. Absorption is typically stronger in suburban areas, following residential developments, and begins to soften closer to Houston proper. Only the near northwest market recorded negative quarterly absorption in Q304, with a minuscule 6,848 sf returned to the market. Six other submarkets posted gains in excess of 100,000 sf, led by the far southeast sector with 303,400 sf absorbed.

Moreover, according to the report, overall retail occupancies are at the highest levels since mid-2001, at 86.62%. All retail types except strip centers posted occupancy gains over the second quarter of 2004, and over the same quarter last year. Strip center occupancy levels are down over the last year primarily due to the large volume of new construction, but, the report adds, as long as demand for strip centers remains strong and outpaces construction, occupancy levels will catch up.