HOUSTON-Colliers International's Retail Research & Forecast Report for Q2 2013 noted a continuing slide in vacancy rates. Specifically, the vacancy rate stands at 6.8%, a decrease from the 7% reported during Q1 2013 and from the 7.2% reported during the same time a year ago.
The market posted 560,000 square feet of positive net absorption, bringing the year-to-date total to 960,000 square feet. Overall, retail leasing activity in the second quarter reached 939,600 square feet, bringing the year-to-date total to 2 million square feet. Transactions less than 10,000 square feet comprised the largest group of retail leases, the report notes.
Lisa Bridges, Colliers' director of market research, says brokers have mentioned that quality retail space at affordable rates is becoming harder to find, especially for retailers wanting to expand into the market. "People are tearing down older buildings. They're paying a lot of money for the land and demolition," she adds.
One example she cited involves plans for a new H-E-B grocery store, planned for development at San Felipe and Fountain View in the Galleria submarket. Commercial real estate developer Fidelis Realty acquired the property – which contains the Tanglewood Court Apartments. Those apartments will soon be razed.
Added to that is a lack of new product. The retail construction pipeline has approximately 632,000 square feet (some of that build-to-suit), with 276,000 square feet delivered to market during Q2. "Developers have been good about not overbuilding," Bridges says. Lenders also don't automatically throw money at retail developments, either. "Houston's been burned so many times with overbuilding, developers have learned their lesson," Bridges observes.
However, constrained supply and continued demand mean that, during the rest of 2013, vacancy will continue in the single-digits. "The numbers continue to project population and job growth," Bridges tells GlobeSt.com. "Retail follows those. Based on that, I think it'll be a very good year for retail."
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