Q4 2014 Houston Retail Market Research & Forecast Report
Houston’s retail market vacancy hits a record low, 6.1%
Houston’s retail market posted 3.2M SF of positive net absorption in 2014. Many of the tenants that expanded in 2014 included grocers such as Kroger, HEB, Whole Foods, Sprouts, and Aldi, which in turn helped boost neighborhood center occupancy.
The average citywide vacancy rate remained steady at 6.1% between quarters and fell by 50 basis points over the year from 6.6%. Currently, there is 2.2M SF in Houston’s retail construction pipeline, which includes the 425,000-SF Center at Pearland Parkway, the 252,000-SF River Oaks District, a 177,514-SF Walmart Supercenter on S Rice Avenue, and a 90,945-SF HEB located at 5885 San Felipe Street.
Due to the lack of available Class A space, the citywide average quoted rental rate for all property types decreased 1.2% from $15.05 to $14.87 per SF between quarters and increased 1.0% from $14.73 in Q4 2013. Class A retail rental rates vary widely from $25.00 to $85.00 per SF, depending on location and property type.
Houston’s retail investment sales market is benefiting from the foreign capital that is pouring into the U.S. According to a recent survey by the Association of Foreign Investors in Real Estate (AFIRE), Houston ranked #3 in the top five U.S. cities for foreign investors.
The Houston metropolitan area created 120,600 jobs between October 2013 and October 2014, an annual increase of 4.3% over the prior year’s job growth. Sectors creating most of the jobs contributing to the annual increase include mining and logging, construction, transportation, warehousing and utilities, and health care and social assistance. Houston’s unemployment rate fell to 4.7% from 5.9% one year ago.