Q2 2012 Houston, Texas Retail Submarket Trends

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Q2 2012 Houston, Texas Retail Submarket Trends

Close-in West/River Oaks-Innerloop NW

  • The River Oaks-Innerloop NW submarket, which includes downtown Houston at its eastern end, saw no retail projects of any type complete construction in 2011.
  • Two, both neighborhood centers, with a combined total of 75,000 square feet, will comprise the total for 2012, as follows:
  • The 19,500-square-foot Heights Market Place completed in February at Yale and Koehler streets. Construction began in July 2011.
  • An October completion at the same intersection is scheduled for Ainbinder Company’s 56,000-square-foot Washington Heights center. It also started last July.
  • The 78,000 square feet of retail at the High Street development, a joint venture by Dinerstein Companies and Coventry Real Estate Advisors at 4410 Westheimer, is underway with completion scheduled for December 2013.
  • A new start. A December groundbreaking is scheduled for 400,000 square feet of retail at the Regent Square mixed-use development at Allen Parkway and Dunlavy Street. The completion date was not specified. GID Urban Development is the developer of the $1 billion, 24-acre, 4.2-million-square-foot development.
  • More. Sovereign, a 21-story apartment high-rise at Regent Square, broke ground in August 2012, as reported by the Houston Business Journal.
  • According to Weitzman-Cencor’s 2012 report and a July 2012 report by Swamplot, Walmart is developing a 152,000-square-foot store “urban location” at I-10 and Yale in the Heights area.
  • Midway Cos. and “a New York partner” are under contract to acquire the 556,000-square-foot mixed-use Houston Pavilions at 1201 Fannin Street downtown, the Journal reported in May citing “an unnamed source.” The project was taken over by a receiver in late 2011.
  • More—below cost. According to a recent report by Swamplot, the “troubled downtown office-retail complex may sell from $50 to $75 million below the cost of its construction.”
  • More. “More than half of the retail tenants haven’t been paying full rent because the overall retail occupancy rate remains below the prescribed threshold cited in their leases,” this source reported at the time. “A buyer could convert about 42,000 square feet of vacant retail space into offices to exploit downtown Houston’s booming office market.”
  • Community-neighborhood center space net absorption through the first half of 2012 was positive at 35,000 square feet.
  • Second quarter vacancy rates were 7.3% and 8.1% for anchor and non-anchor space, up and down from 6.8% and 8.6% the quarter before. Overall community and neighborhood sector vacancy was 7.8%, down 10 basis points for the quarter, up 80 year-over-year.
  • Respective average lease rates were $15.21 psf and $22.69 psf for anchor and non-anchor space, up from $15.18 psf and $22.47 psf a quarter earlier.
  • Outlook. The small excess of demand over new supply expected for 2012 for the community-neighborhood sector market should produce a 70 basis-point year-to-year decline in vacancy along with rent growth at about 3.0%.

Close-in West/Westwood-Bellaire

  • A 160,000-square-foot project completed in the second quarter of 2011.
  • BLVD Place, one of Houston’s large mixed-use developments, is located at 1800 Post Oak Boulevard (at San Felipe) within this submarket. Wolfe & Co. is the developer. Plans for the retail segment include a Whole Foods market.
  • More—a jump start. Energy giant Apache Corporation has acquired nearly a third of the land in the BLVD Place project, The Houston Chronicle reported in June. “It’s a jump-start for the project and really allows us to move forward,” stated a Wulfe & Co. executive.
  • More. Reis reports 462,500 square feet of retail space planned all told for phases II and III. The 70,000-square-foot Phase I, with office and retail space 100% leased, opened in 2010.
  • Reis reports 350,000 square feet of retail currently planned for The River Oaks District at Westheimer and Loop 610. A construction schedule was not available per the date of this report. OliverMcMillan is the developer.
  • More. A brochure from the developer cites a total retail component planned at
  • “650,000 square feet of leisure, luxury retail space, and unique upscale restaurants” including “270,000 square feet of “of luxury retail shopping, fine dining restaurants, street-side cafes, and entertainment.”
  • Alongside no new space deliveries, first half 2012 community and neighborhood center net absorption in the Westwood-Bellaire submarket was 9,000 square feet. The second quarter total alone was negative 30,000 square feet.
  • Second quarter vacancy rates were 12.4% and 9.0% for anchor and non-anchor space, up and down from 11.5% and 9.1% a quarter earlier. Overall vacancy in this sector was 10.1%, up 20 basis points for the quarter, up 40 year-over-year.
  • Respective average lease rates for anchor and non-anchor space were $14.64 psf and $18.76 psf, down and up from first quarter’s $14.72 psf and $18.73 psf.
  • Outlook. No community-neighborhood center supply additions will deliver through the remainder of the year as moderate positive net absorption lowers the vacancy rate to 10.0% by year-end. Rent growth for the year all told is projected at slightly above 1.0%.

West/Katy Freeway

  • Farther west, the town of Katy and surrounding areas are divided by Reis into two submarkets—West-Katy Freeway and Southwest-Ft. Bend County (the latter, which includes the Cinco Ranch master- planned community, is reviewed in the section following).
  • The opening a few years ago of Mills Corporation’s 1.3-million-square-foot Katy Mills Mall in Katy proved to be a magnet for retail development. Residential development is expected to be a long-term factor.
  • “The new Grand Parkway loop beyond Beltway 8 has been forecast to draw development of all types,” the Houston Chronicle has observed.
  • No new space delivered to the West-Katy Freeway submarket in 2011 or year-to-date in 2012.
  • Discount grocer Aldi, with substantial expansion plans for the Houston area, has plans for a store at Mason Road at Oak Park Trails near and north of Cinco Ranch, the Chronicle reported in May. The land was acquired in February, according to the Journal.
  • Alongside no new supply, first half 2012 net absorption of community-neighborhood sector space was 90,000 square feet.
  • Second quarter vacancy rates were 13.3% and 12.2%, anchor and non-anchor, up and down from the previous quarter’s 12.7% and 12.9%. Overall community-neighborhood vacancy was 12.7%, down 10 basis points for the quarter, down 180 year-over-year.
  • Respective anchor and non-anchor average lease rates were $11.06 psf and $15.59 psf, up from $11.02 psf and $15.46 psf the quarter before.
  • Outlook. The 134,000 square feet of positive community-neighborhood space net absorption projected for the year 2012, in combination with no new supply, should lower the vacancy rate to 12.0% by year-end. Rent growth in the vicinity of 3.0% is anticipated.

Southwest/Fort Bend County

  • Fort Bend County in the suburban southwest, bisected by Highway 59, has been one of Houston’s prime population growth areas over the years. Development has been particularly active in the Richmond-Rosenberg and Sugar Land areas.
  • The submarket includes areas of Katy, the Cinco Ranch master- planned development and the cities of Rosenberg, Richmond, Sugar Land and Missouri City.
  • The Houston Business Journal cites resurgence in economic growth” for this area.
  • This submarket led all others in active construction per the date of this report.
  • A total of 652,100 square feet are underway in four projects, two of which, with a combined total of 249,000 square feet, will complete in 2012.
  • The 160,000 square feet of retail in the second phase of the La Centerra at Cinco Ranch mixed-use development, which broke ground in March at Cinco Ranch Boulevard and Grand Parkway, is scheduled to complete this September.
  • The 89,000-square-foot fifth phase of the Shops at Bella Terra power center at W. Grand Parkway and FM 1093, Katy, is scheduled for an October finish. Construction began in August 2011.
  • The 203,100-square-foot first phase of Regency Centers Corporation’s Southpark at Cinco Ranch neighborhood center off Westpark Parkway/FM 1093 and Spring Green Boulevard broke ground in March. Completion is scheduled for March 2013.
  • More. Kroger has leased 101,000 square feet at the project and Academy Sports and Outdoors has leased 72,000 square feet, the Journal reported in July. For the second phase, a total of 57,000 square feet of retail are planned.
  • A new start. Construction began in July on 200,000 square feet of retail in the first phase of 129-acre the Katy Ranch Crossing mixed-use development at I-10 and Katy Fort Bend Road near Katy Mills Mall. Mike Baker is the developer. A 550,000 square feet second phase of retail space is planned.
  • The 700-acre Imperial master planned community in Sugar Land from Johnson Development eventually will host more than 1 million square feet of retail along with large office, residential and other components, the Journal reported in July.
  • More. The project, in the works “for at least five years,” is a redevelopment of the old Imperial Sugar site. “We have removed about 1 million square feet of old warehouse space that was not able to be preserved,” the developer informed the source.
  • A total of 380,000 square feet in phases II and III are planned and proposed for the Crossing at Telfair mixed-use center at highways 6 and 90A within for the Telfair master-planned community in Sugar Land. An H-E-B grocery store will serve as anchor, as reported by Weitzman-Cencor.
  • Also planned are 200,000 square feet of retail for the second phase of the Katy Main Street mixed-use project at I-10 and Pin Oak Road, Reis reports. The first phase delivered its 111,500 square feet in 2010.
  • With no new community-neighborhood supply arriving on line, net absorption through the first half of 2012 was 152,000 square feet.
  • Second quarter anchor and non-anchor space community-neighborhood center vacancies were at 10.7% and 14.2%, up and down from 10.2% and 15.2% a quarter earlier. Sector vacancy overall was 12.8%, down 40 basis points for the quarter and down 80 year-over-year.
  • Respective average anchor and non-anchor space lease rates were $9.53 psf and $14.23 psf, up and down from the first quarter’s $9.49 psf and $14.26 psf.
  • Outlook. Additional substantial positive net absorption over the remainder of the year will bring the 2012 total to about 250,000 square feet. Vacancy should decline to 12.0% by year-end. Rent growth at about 0.5% is forecast for the year all told.

Beyond Loop 610: Northwest

  • The suburban northwest, a large area that includes The Woodlands master planned community (treated separately in the section following) and the towns of Conroe, Spring and Tomball as well as areas of northwest Houston, was very busy with residential and retail development in recent years.
  • Much of the population growth occurs in master planned communities in outlying high-growth areas, such as Montgomery County.
  • Construction has been limited. Only 50,000 square feet in a single community center completed in the Northwest submarket all told last year. No projects have delivered since.
  • A new start. Midway Companies broke ground in late July for a six-story, mixed-use building in the CityCentre complex (within the southeast quadrant of the I-10/Beltway 8 interchange), the Journal reported at the time. “CityCentre Four… will be nestled next to CityCentre Three, also under construction. The first floor of the 132,500-square-foot building will be reserved for retail.”
  • With no space delivered, total first half 2012 community-neighborhood sector net absorption in the Northwest was negative 28,000 square feet.
  • Second quarter vacancies in anchor and non-anchor community-neighborhood center space were 6.0% and 11.4%, down and up from the previous quarter’s 6.3% and 10.4%. Overall sector vacancy was 9.1%, up 40 and 140 basis points for the quarter and year-over-year.
  • Average anchor and non-anchor lease rates were $12.20 psf and $17.49 psf, up from $12.14 psf and $17.34 psf a quarter earlier.
  • Outlook. Additional moderate negative absorption is expected for the remainder of the year. The vacancy rate should close 2012 at 9.4%. Growth rates of 1.7% and 1.6% are projected for the asking and effective average rents for the year.

North of Loop 610: Woodlands-Far North

  • The Woodlands master planned community has been one of Houston’s major growth areas. Residential and other forms of development were very active here prior to the downturn and are likely to be active again once firm recovery is in place. Other northern areas such as Spring and Cypress also have been active.
  • While construction recently has been slow, new activity is on the way. Reis reports 2.9 million square feet in projects in the planned-proposed pipeline.
  • The Howard Hughes Corporation announced in July that The Woodlands Development Company, a wholly-owned subsidiary, will begin construction of the 66-acre mixed-use Hughes Landing at Lake Woodlands, Business Wire reported at the time. “Numerous retail and entertainment venues” will be included in the mixed-use development.
  • The Journal reports a July opening for a Trader Joe’s store at The Woodlands Crossing Shopping Center.
  • Exxon-Mobil. The massive corporate campus under development for Exxon-Mobil in north Houston, south of The Woodlands, is expected to have a profound impact on commercial and residential development in the area.
  • More. The 1,800-acre Springwoods Village multi-use master-planned development, now getting underway, is a direct result. Up to 5,000 residences and 1.2 million square feet of retail are expected at build-out. Coventry Development Corporation is master developer.
  • Planning elsewhere in the submarket includes the 1.4-million-square- foot Waller Town
  • Center regional center in Waller from Cullinan Properties Ltd. The developer has cited a 2013 opening for the first phase.
  • Reis reports 500,000 square feet planned for the Fairfield Town Center regional center at Cypresswood Drive and Fairfield Falls, Cypress. A start date was not specified.
  • First half 2012 community-neighborhood center net absorption in The Woodlands/Far North submarket alongside no new supply was 46,000 square feet.
  • Second quarter-end vacancy rates were 7.5% and 17.9% for anchor and non-anchor space, down from 7.6% and 18.3% a quarter earlier. Overall second quarter sector vacancy was 12.7%, down 30 and 180 basis points for the quarter and year-over-year.
  • Average second quarter anchor and non-anchor lease rates were $9.31 psf and $17.89 psf, unchanged and up three cents, respectively, from the quarter before.
  • Outlook. Community-neighborhood net absorption in Woodlands-Far North should run positive over the remainder of the year as the vacancy rate continues to decline. Rent growth in the neighborhood of 2.0% is expected for the year.
  • Expansion related to the Exxon-Mobil campus and the related Springwoods development bears watching. So does the Generation Park development in the Northeast/Humble submarket.

Other North/Northeast/Humble

  • “McCord Development Inc. is set to launch Generation Park—a 3,635-acre corporate park to the near southeast of George Bush Intercontinental Airport that, when completely developed, would have a total value of more than $5 billion,” the Journal recently reported. Plans call for 30 million square feet of “office, industrial, medical, retail, hospitality, and multifamily space.”
  • More. “While most of the project is geared toward corporate users, the developer plans a retail center McCord describes as ‘CityCentre on steroids.”
  • Fidelis Realty Partners is developing the 200,183-square-foot Townsen Crossing center at FM 1960 and Townsen Boulevard, Humble, the Journal reported in July. Sports and Outdoors has leased 95,000 square feet; Burlington Coat Factory has taken 73,000 square feet.
  • The 48,900-square-foot Phase IX of the Park Lakes Landing power center is under construction for completion this November at 9633 N. Sam Houston Parkway E., Humble.
  • First half 2012 net absorption in the Northeast/Eastex Freeway/Humble submarket was negative 20,000 square feet.
  • Respective second quarter anchor and non-anchor community-neighborhood sector rents averaged $8.82 psf and $12.32 psf, up from first period’s $8.88 psf and $12.31 psf.
  • Respective vacancy rates were 16.1% and 16.7%, down and up from 16.4% and 15.7%. Overall second quarter vacancy in this sector was 16.3%, up 20 and 60 basis points for the quarter and year-over-year.
  • Outlook. Additional modest negative community-neighborhood sector net absorption over the remainder of the year should add 20 additional basis points to the vacancy rate. Rent growth in the range of about 2.5% to about 3.0% is expected for the year.


  • Led by activity in Pearland (within Reis’ Southeast-Pasadena submarket), development exploded in the suburban southeast in 2007-2008. Significant completions included the 720,000-square-foot Pearland Town Center and the 640,000-square-foot Shadow Creek Ranch Town Center.
  • Retail development has since slowed. One 2,000-square-foot project delivered in 2010. No projects delivered in 2011 or thus far in 2012.
  • A 170,000-square-foot Sam’s Club is under construction at Shadow Creek Ranch in Pearland, the Journal reported in July. An October finish is expected. Sam’s Club acquired the 18-acre site in February.
  • First half 2012 community-neighborhood net absorption in the Southeast-Pasadena submarket was 50,000 square feet. The total for the second quarter was 22,000 square feet.
  • Second quarter vacancies for anchor and non-anchor center space were 6.7% and 14.9%, down and up from 7.9% and 14.5% the quarter before. Overall quarter-end vacancy in this sector was 11.3%, down 30 and 150 basis points for the quarter and year-over-year.
  • Respective second quarter mean anchor and non-anchor asking lease rates were $9.15 psf and $14.09 psf, unchanged and down two cents from the quarter prior.
  • Outlook. Amid no new supply, community-neighborhood space net absorption at 95,000 square feet is expected for 2012 all told. Vacancy should slip to 10.6%. Rent growth below 1.0% is anticipated.


  • The 350,000-square-foot Tanger Factory Outlet Center, a joint venture by Tanger and Simon Property Group, has been underway since July 2011 in Texas City in the far southeast (Galveston County, beyond current submarket boundaries). A fall opening is confirmed, the Journal reported in July 2012.
  • More. “Nothing in Houston compares to that project,” a Marcus & Millichap executive informed this source. “It is the second outlet mall with a modern profile and size in Houston.”