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Houston's Retail Vacancy Rate Drops to 6.1%
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www.colliers.com/houston
Q3 2014 | RETAIL MARKET
HOUSTON RETAIL MARKET INDICATORS
Q3 2013 Q3 2014
CITYWIDE NET
ABSORPTION (SF) 406K 998K
CITYWIDE AVERAGE
VACANCY 6.9% 6.1%
CITYWIDE AVERAGE
RENTAL RATE $14.67 $15.12
DELIVERIES (SF) 196K 454K
UNDER
CONSTRUCTION (SF) 870K 1.8M
Houston’s retail market posted 1.0M SF of positive net absorption in the third quarter. Some of the tenants who opened new locations during the quarter include Wal-Mart, Floor & Décor Outlets of America, Altitude, Bravo Ranch Supermarket, Petco Unleashed, Robyn’s Nest Boutique, and Best Friends Total Pet Care.
The average citywide vacancy rate fell 10 basis points between quarters from 6.2% to 6.1%, and by 80 basis points over the year from 6.9%. Currently, there is 1.8M SF in Houston’s retail construction pipeline, which includes a 124,000-SF Kroger Marketplace located at the corner of Spring Green Boulevard and FM 1463 and a 63,000-SF Fiesta Mart located at FM 529 and Fry Road.
The citywide average quoted rental rate for all property types decreased 0.1% from $15.14 to $15.12 per SF between quarters and increased 3.1% from $14.67 in Q3 2013. Class A retail rental rates vary widely from $20.00 to $85.00 per SF, depending on location, property type, and building class. New construction rates start in the low $40.00’s per SF, driven by higher land and construction costs.
The Houston metropolitan area created 107,400 jobs between August 2013 and August 2014, an annual increase of 3.9% over the prior year’s job growth. Sectors creating the most jobs included professional, scientific, and technical services, health care and social assistance, and accommodation and food services. Houston’s unemployment rate fell to 5.4% from 6.3% one year ago.
ABSORPTION, NEW SUPPLY & VACANCY RATES
0%
2%
4%
6%
8%
10%
12%
-500,000
0
500,000
1,000,000
1,500,000
2,000,000
Absorption New Supply Vacancy
Houston’s Retail Vacancy Rate Drops to 6.1%
HOUSTON RETAIL MARKET RESEARCH & FORECAST REPORT
Houston
UNEMPLOYMENT 8/13 8/14 HOUSTON 6.3% 5.4%
TEXAS 6.4% 5.5%
U.S. 7.3% 6.3%
JOB GROWTH ANNUAL CHANGE
# OF JOBS ADDED
HOUSTON 3.9% 107.4K
TEXAS 3.4% 381.6K
U.S. 1.8% 2.5M
JOB GROWTH & UNEMPLOYMENT (Not Seasonally Adjusted)
RESEARCH & FORECAST REPORT | Q3 2014 | HOUSTON RETAIL MARKET
SALES ACTIVITY
Houston’s third quarter retail investment sales activity included 47 sales transactions. Total sales transaction value totaled $178M and the average price per SF was $142. The average cap rate was 6.26%.
Several of the more significant transactions that closed during the third quarter are highlighted on the left.
LEASING ACTIVITY
Houston retail leasing activity in the third quarter reached 1.3M SF. Overall, transactions under 5,000 SF comprised the largest group of retail leases, with the market recording seven leases over 10,000 SF and only two over 20,000 SF in the third quarter.
A partial list of the leases signed during the third quarter are listed in the table below.
COLLIERS INTERNATIONAL | P. 2
Spring Cypress Village 22432-22530 SH 249, Houston, TX Northwest/Cypresswood Submarket
RBA: 97,488 SF Built: 1982/2012 Buyer: Center REIT II, inc. Seller: Delaware Life Date: July 30, 2014 Price: $21.4M or $219/SF Cap: 6.2%
Mason Village 21949-21979 Katy Fwy, Katy, TX Far Katy South Submarket
RBA: 97,473 SF Built: 1977/1992 Buyer: DNA Partners, LLC Seller: John H. Baker Interests Date: September 10, 2014 Price: $14.1M or $144/SF Cap: 6.7
Village Real Shopping Center 961 Nasa Parkway, Clear Lake, TX NASA/Clear Lake Submarket
RBA: 94,259 SF Built: 1977/2007 Buyer: Dunhill Partners, Inc. Seller: Ersa Grae Corporation Date: September 12, 2014 Price: $1.2M or $110/SF Cap: N/A
RETAIL SALE TRANSACTIONS
Dunvale Center I & II 8350 & 8366 Westheimer, Houston, TX West/Near West Submarket
RBA: 22,855 SF Built: 200 0 & 2006 Buyer: JLL Seller: Lovett Commercial Date: August 12, 2014 Price: $7.3M or $319/SF Cap: 7.0%
Building Name or Address Submarket SF Tenant Lease DateWoodforest Shopping Center Pasadena/Galena Park 30,979 Bravo Ranch Supermercado Aug-14
Fry-529 Retail Center Far Katy North 20,460 Goodwill Aug-14
Bayway Shopping Center NASA/Clear Lake 13,988 Build A Party Aug-14
Southpark at Cinco Ranch Far Katy South 12,527 Petco Supplies Aug-14
Shoppes at Memorial Villages Near NW Spring Valley 11,376 Big Yoga Aug-14
Hughes Landing on Lake Woodlands
Woodlands 11,000 Pier 1 Imports Aug-14
612 Spring Hill Drive Woodlands/Conroe Ind 10,524 Kenyon International Emergency Services
Jul-14
North 45 Plaza Near North 9,176 Fashion House Sep-14
Q3 2014 Retail Leases
RESEARCH & FORECAST REPORT | Q3 2014 | HOUSTON RETAIL MARKET
RENTAL RATES
According to our data source CoStar Property, the citywide average quoted rental rate for all property types increased 3.1% from $14.73 to $15.19 per SF between quarters and 3.0% from $14.75 in Q2 2013.
Houston class A retail rental rates vary widely from $20.00 to $85.00 per SF depending on location and center type. Recent quoted rates for community and neighborhood centers range from $40.00 - $55.00 per SF, power centers range from $25.00 - $45.00 per SF and theme/ entertainment centers range from $25.00 - $40.00 per SF. Lifestyle centers in Class A locations such as High Street, Uptown Park and The Vintage range from $45.00 - $85.00 per SF. Strip centers range from $30.00 - $50.00 per SF and outlet centers rental rates range from $20.00 - $40.00 per SF.
VACANCY & AVAILABILITY
The average citywide vacancy
rate fell 10 basis points between quarters to 6.1% from 6.2%, and by 80 basis points over the year from 6.9%. This is the lowest Houston’s vacancy rate has been in the last 10 years.
By product type on a quarterly basis, theme/entertainment centers posted the largest decrease in vacancy, 970 basis points, from 13.2% in the second quarter to 1.0% in the third quarter 2014. Lifestyle centers recorded the largest increase in vacancy between quarters increasing 10 basis points from 9.7% to 9.8%. Houston’s retail construction pipeline contains 1.8M SF and third quarter deliveries totaled 454,000 SF.
ABSORPTION & DEMAND Houston’s retail market posted 1.0M SF of positive net absorption in the third quarter. Some of the tenants that moved into space during the quarter are listed in the table at right.
HOUSTON RETAIL MARKET STATISTICAL SUMMARY
COLLIERS INTERNATIONAL | P. 3
Q3 2014 ABSORPTION
Tenant/ Submarket
SF Occupied
Wal-Mart Baytown 185,989 Floor & Décor Outlets of America Southwest 64,169
Altitude Far North 45,000 Bravo Ranch Supermarket Southeast 42,130
Goodwill Northeast 19,000 Best Friends Total Pet Care Far Katy South 12,000
Rick’s Cabaret Far North 11,637
Petco Unleashed Northwest 10,200
Dollar Tree North 10,068
Five Below Southeast 7,968
RENTABLE AREA
DIRECT VACANT SF
DIRECT VACANCY
RATE
SUBLET VACANCY
SF
SUBLET VACANCY
RATE TOTAL
VACANCY SF
TOTAL VACANCY
RATE Q3 2014 NET ABSORPTION
Q2 2014 NET ABSORPTION
CLASS A RENTAL RATES
(in-line)*
Strip Centers (unanchored) 32,684,191 2,867,966 8.8% 19,569 0.1% 2,887,535 8.8% 156,906 239,373 $30.00-$50.00
Neighborhood Centers (one anchor) 68,050,550 6,647,333 9.8% 30,192 0.0% 6,677,525 9.8% (16,321) 514,281 $30.00-$55.00
Community Centers (two anchors) 43,562,929 2,628,800 6.0% 80,687 0.2% 2,709,487 6.2% 134,438 (22,761) $30.00-$40.00
Power Centers (three or > anchors) 25,737,218 839,691 3.3% 30,000 0.1% 869,691 3.4% 73,846 135,049 $25.00-$45.00
Lifestyle Centers 4,506,971 255,176 5.7% 33,789 0.7% 288,965 6.4% 200,089 (445) $45.00-$85.00
Outlet Centers 1,899,333 247,553 13.0% - 0.0% 247,553 13.0% 2,650 (10,215) $20.00-$40.00
Theme/Entertainment 513,474 5,080 1.0% - 0.0% 5,080 1.0% 49,769 1,028 $25.00-$40.00
Single-Tenant 69,182,398 1,384,739 2.0% 64,554 0.1% 1,449,293 2.1% 388,322 282,905 N/A
Malls 23,073,393 1,198,678 5.2% 24,750 0.1% 1,223,428 5.3% 8,066 93,335 N/A
Greater Houston 269,210,457 16,075,016 6.0% 283,541 0.1% 16,358,557 6.1% 997,765 1,232,550
RESEARCH & FORECAST REPORT | Q3 2014 | HOUSTON RETAIL MARKET
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COLLIERS INTERNATIONAL 1233 W. Loop South Suite 900 Houston, Texas 77027 Main +1 713 222 2111
LISA R. BRIDGES Director of Market Research | Houston Direct +1 713 830 2125 Fax +1 713 830 2118 [email protected]
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