IRR-Houston Mid-Year Viewpoint 2015 Local Market Report - Retail
The population immigration to Houston increased 2.5% in 2014. Although estimates for 2015 are significantly lower, there is still a positive influx of people to the Houston MSA. Consequently, residential construction is still ongoing at a rapid pace in the suburban areas; therefore, retail support in these areas is still necessary.
Some 900,000 square feet of retail space of all types completed construction in 2014, some 3.1 million, led by mixed-use and power center projects are under construction now in the Houston MSA. Even though construction is still powering forward, the main drawback of retail development is the price of oil. The potential effects on retail real estate due to the oil price are expected to be modest in comparison to the office real estate. This can be seen in the fact that investors are turning their sights to Houston’s retail industry in comparison to the other industries. According to HFF, Houston’s retail sales more than doubled in 2015 as compared to 2014. In the first quarter of 2014, $340 million traded across the Houston metro. In the first quarter of 2015 sales reached $715 million. This boost is largely thanks to higher price points in sales.
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IRR Mid-Year Viewpoint 2015 comprises a National Overview report and 300+ two-page Local Market Reports for all key property types as well as additional resources, including metrics methodology, graphs, and tables; these free reports may be downloaded from IRR’s site here.
Transactions in the Houston MSA for the first quarter only increased by 10 deals in comparison to the first quarter in 2014. Some of the best deals seen are those that have a grocery anchors. One of the largest deals over the last six months was between an unnamed buyer and The Marcel Group. A total of $31.1 million was paid for the 120,000 square foot Villagio Center at Cinco Ranch neighborhood center in Katy. The sale closed at a 5.6% cap.
While strong economic and demographic fundamentals have been anticipated for the Houston MSA, the drop in oil prices has put a slight damper on the forecasts. Although the matrix seems good, there has been a slight upward tick in cap rates in the first quarter of 2015.