As e-commerce continues to challenge the growth, evolution and resilience of retail, brokers in Houston have reason to be optimistic about leasing velocity and absorption in the coming months, even as new construction floods the market. There’s no denying that in the past several years, the retail industry has experienced a shakeup. The move to online shopping has spared very few retailers, and Houston is no exception. The Houston MSA has seen its fair share of big box store closures, but tenants and developers alike appear ready to face the challenges head-on.
The collective mood among retail professionals in Houston is one of acceptance of a new, tech-heavy retail landscape. The retail community has evolved into embracing the likes of pop-up shops, online platforms, curbside pickup options and a service-based shopping experience.
Ultimately, however, it’s the consumers who decide the fate of certain retailers. The professionals who develop and lease retail properties are integrating more psychological analysis into their daily work than ever before. In today’s environment, even the slightest of nuances in consumer behavior can mold critical aspects of real estate strategies. The evolution of retail follows the evolution of human behavior.
Market Fundamentals: Houston is one of the most active retail development markets in the country. Whether oil is trading at $50 per barrel or $100 per barrel, the metro area is a national leader in population growth, year over year.
According to the U.S. Department of Housing & Urban Development, the metro’s population has grown by about 134,000 new residents per year during the current decade. The U.S. Census Bureau currently ranks the Houston MSA as the 5th largest in the country, with over 6.7 million residents. This steady population growth has made Houston a prime market for single-family and multifamily development over the last 10 years, and retail construction will have to keep up with new concepts that boast consumer experience and convenience.
Overall, the market has added more than 15 million square feet of new product over the past five years. According to CoStar Group, the metro area added more than 6 million square feet of new retail space during 2016 and 2017. Total retail inventory is expected to have increased by 1.5 percent by year’s end. According to J. Beard Real Estate’s research, the current development pipeline includes 1.2 million square feet of shopping centers already under construction. In addition, another 4.7 million square feet of new retail space has been proposed.
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