Q1 2016 Houston Retail Market Research & Forecast Report
Houston’s retail market continues to expand adding another 1M SF to its construction pipeline
Houston’s retail market continues to expand even while the local economy is wavering due to lower oil prices. Approximately 3.7M SF of retail space is under construction and 81.5% of this space is pre-leased. Over 1M SF of new inventory delivered during the first quarter and most of the new product is pre-leased. A large majority of the new construction is located in suburban submarkets near new housing developments.
Several large tenants have recently announced plans to close and exit the Houston market, such as Sports Authority, Aeropostale, and Fresh Market, which has resulted in negative net absorption during the first quarter. Although 0.2MSF of negative absorption isn’t a significant amount, it is the first time the market has posted negative absorption since 2009. Retail leasing activity decreased 6.2% between quarters, recording 1.2M SF in Q1 2016 and the citywide average quoted retail rental rate fell 3.6% between quarters from $15.19 to $14.65 per SF NNN and annually by 2.1% from $14.95 per SF NNN.
Houston’s average retail vacancy rate remained under 6.0%, increasing to 5.9% over the quarter from 5.7% in Q4 2015, but it is still 10 basis points lower than the 6.0% recorded one year ago.
Over the last year and a half, thousands of energy jobs have been eliminated, but industries such as hospitality and healthcare added jobs helping to balance the job cuts which has resulted in little to no job growth for Houston.
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