Houston Retail Riding High

HOUSTON-According to a new third-quarter 2004 study by locally based real estate consultants O’Connor & Associates, retail is the hot property type in the Houston MSA, the tenth-largest conurbation in the country, and one of the fastest growing. Considering the lackluster state of the office market especially, that might not be a surprise, but for the fact that retail absorption is at its highest levels in four years, and occupancies are very high as well.

“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.