www.colliers.com/houston Q2 2014 | RETAIL MARKET HOUSTON RETAIL MARKET INDICATORS Q2 2013 Q2 2014 CITYWIDE NET ABSORPTION (SF) 560K 1.2M CITYWIDE AVERAGE VACANCY 6.8% 6.3% CITYWIDE AVERAGE RENTAL RATE $14.75 $15.19 DELIVERIES (SF) 276K 612K UNDER CONSTRUCTION (SF) 632K 1.2M Houston’s retail market posted 1.2M SF of positive net absorption in the second quarter. Some of the tenants who opened new locations during the quarter include Whole Foods Market, Kroger Marketplace, Conn’s Appliances, Horse & Rider, Vineyard Vines, Trina Turks, Brucettes Shoes, and Harbor Freight Tools. The average citywide vacancy rate fell 30 basis points between quarters to 6.3% from 6.6%, and by 50 basis points over the year from 6.8%. Currently, there is 1.2M SF in Houston’s retail construction pipeline, which includes a 136,000-SF Sam’s Club located at the NEC of Bellaire and West Grand Parkway, and a 90,900-SF HEB located on the southeast corner of San Felipe and Fountainview. 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 retail rental rates vary widely from $10.00 to $85.00 per SF, depending on location, property type, and building class. The Houston metropolitan area added 93,300 jobs between May 2013 and May 2014, an annual increase of 3.3% over the prior year’s job growth. Local economists have forecast 2014 job growth to remain strong, expecting between 68,000 and 72,000 new jobs. Houston’s unemployment rate fell to 5.0% from 6.1% one year ago. Houston area home sales were down by 7.3% between May 2013 and May 2014, the first decline in the past 34 months. The reduction was due almost primarily to a lack of inventory. ABSORPTION, NEW SUPPLY & VACANCY RATES Houston’s 6.3% Retail Vacancy Rate at a Record Low HOUSTON RETAIL MARKET RESEARCH & FORECAST REPORT Houston UNEMPLOYMENT 5/13 5/14 HOUSTON 6.1% 5.0% TEXAS 6.3% 5.1% U.S. 7.3% 6.1% JOB GROWTH ANNUAL CHANGE # OF JOBS ADDED HOUSTON 3.3% 93.3K TEXAS 3.4% 375.3K U.S. 1.8% 2.4M JOB GROWTH & UNEMPLOYMENT (Not Seasonally Adjusted) 0% 2% 4% 6% 8% 10% 12% -500,000 0 500,000 1,000,000 1,500,000 2,000,000 A bsorption N ew Supply Vacancy
Q2 2014 Retail Market Research Report
May 29, 2015
Q2 2014 Retail Market Research Report
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www.colliers.com/houston
Q2 2014 | RETAIL MARKET
HOUSTON RETAILMARKET INDICATORS
Q2 2013 Q2 2014
CITYWIDE NET
ABSORPTION (SF) 560K 1.2M
CITYWIDE AVERAGE
VACANCY 6.8% 6.3%
CITYWIDE AVERAGE
RENTAL RATE $14.75 $15.19
DELIVERIES (SF) 276K 612K
UNDER
CONSTRUCTION (SF) 632K 1.2M
Houston’s retail market posted 1.2M SF of positive net absorption in the second quarter. Some of the tenants who opened new locations during the quarter include Whole Foods Market, Kroger Marketplace, Conn’s Appliances, Horse & Rider, Vineyard Vines, Trina Turks, Brucettes Shoes, and Harbor Freight Tools.
The average citywide vacancy rate fell 30 basis points between quarters to 6.3% from 6.6%, and by 50 basis points over the year from 6.8%. Currently, there is 1.2M SF in Houston’s retail construction pipeline, which includes a 136,000-SF Sam’s Club located at the NEC of Bellaire and West Grand Parkway, and a 90,900-SF HEB located on the southeast corner of San Felipe and Fountainview.
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 retail rental rates vary widely from $10.00 to $85.00 per SF, depending on location, property type, and building class.
The Houston metropolitan area added 93,300 jobs between May 2013 and May 2014, an annual increase of 3.3% over the prior year’s job growth. Local economists have forecast 2014 job growth to remain strong, expecting between 68,000 and 72,000 new jobs. Houston’s unemployment rate fell to 5.0% from 6.1% one year ago. Houston area home sales were down by 7.3% between May 2013 and May 2014, the first decline in the past 34 months. The reduction was due almost primarily to a lack of inventory.
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 6.3% Retail Vacancy Rate at a Record Low
HOUSTON RETAIL MARKET
RESEARCH & FORECAST REPORT
Houston
UNEMPLOYMENT 5/13 5/14
HOUSTON 6.1% 5.0%
TEXAS 6.3% 5.1%
U.S. 7.3% 6.1%
JOB GROWTHANNUAL CHANGE
# OF JOBS ADDED
HOUSTON 3.3% 93.3K
TEXAS 3.4% 375.3K
U.S. 1.8% 2.4M
JOB GROWTH & UNEMPLOYMENT(Not Seasonally Adjusted)
RESEARCH & FORECAST REPORT | Q2 2014 | HOUSTON RETAIL MARKET
SALES ACTIVITY
Houston’s second quarter retail investment sales activity included 51 sales transactions. Total sales transaction value totaled $376M and the average price per SF was $163. The average cap rate was 7.2%.
Several of the more significant transactions that closed during the second quarter are high-lighted on the left.
LEASING ACTIVITY
Houston retail leasing activity in the second quarter reached 1.2M SF. Overall, transactions under 10,000 SF comprised the largest group of retail leases, with the market recording eleven leases over 10,000 SF and five over 20,000 SF in the second quarter.
A partial list of the leases signed during the second quarter are listed in the table below.
COLLIERS INTERNATIONAL | P. 2
Southway Shopping Center8006-8230 S Gessner Dr, Houston, TXSouthwest Submarket
RBA: 178,768 SF
Built: 1976/2003
Buyer: American Realty Capital
Seller: RPD Catalyst LLC
Date: June 6, 2014
Price: $27.5M or $161/SF
Cap: N/A
Kirkwood Shopping Center11920-11990 Westheimer, Houston, TXFar West Submarket
RBA: 81,607 SF
Built: 1979/2008
Buyer: Private REIT
Seller: Revesco Properties
Date: May 23, 2014
Price: $17.1M or $210/SF
Cap: N/A
Marq*E Entertainment CenterI-10 and SilberNear NW Spring Valley Submarket
RBA: 351,811 SF
Built: 1999
Buyer: Levcor, Inc.
Seller: Canyon Capital Realty Advisors
Date: June, 2014
Price: Undisclosed
Cap: N/A
RETAIL SALE TRANSACTIONS
Cinco-Westheimer Shopping Center20680 Westheimer Pky, TXFar Katy South Submarket
RBA: 17,500 SF
Built: 2006
Buyer: Hass Holdings, LLC
Seller: Prime Property Center MGNT
Date: June, 2014
Price: $3.8M or $214/SF
Cap: 9.8%
Building Name/Address Submarket SF Tenant Lease Date
Tanglewood Court Near West 90,945 HEB Apr-14
Market at First Colony Stafford 64,169 Floor & Décor Outlets of America Apr-14
Fiesta Mart - FM 529 Far Katy North 60,000 Fiesta Mart May-14
Fairmont Junction Plaza Southeast Ret 42,130 Bravo Ranch Supermarket Mar-14
Fondren Road Plaza Southwest Ret 46,133 Fitness Connection May-14
River Oaks District Inner Loop River Oaks 10,117 Hermès May-14
Q2 2014 Retail Leases
RESEARCH & FORECAST REPORT | Q2 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 $10.00 to $85.00 per SF depending on location and center type. Recent quoted rates for community centers and power centers range from $20.00 - $40.00 per SF and theme/entertainment centers range from $25.00 - $35.00 per SF. Lifestyle centers in Class A locations such as High Street, Uptown Park and The Vintage range from $40.00 - $85.00 per SF. Strip centers range from $30.00 - $50.00 per SF and neighborhood centers range from $25.00 - $45.00 per SF.
VACANCY & AVAILABILITY
The average citywide vacancy rate fell 30 basis points between quarters to 6.3% from 6.6%, and
by 50 basis points over the year from 6.8%. 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, 2,060 basis points, from 30.5% in the first quarter to 9.9% in the second quarter 2014. Lifestyle centers recorded the largest increase in vacancy between quarters increasing 90 basis points from 4.9% to 5.8%. Houston’s retail construction pipeline contains 1.2M SF and second quarter deliveries totaled 612,000 SF.
ABSORPTION & DEMAND
Houston’s retail market posted 1.2M SF of positive net absorption in the second quarter. Some of the tenants that moved into space during the second quarter are listed in the table at right.
HOUSTON RETAIL MARKET STATISTICAL SUMMARY
COLLIERS INTERNATIONAL | P. 3
Q2 2014 ABSORPTION
Tenant/Submarket
SF Occupied
Kroger MarketplaceFar North 31,622
Whole FoodsGalleria 52,000
Anthem CollegeFar North 31,622
Conn’s AppliancesMontgomery County 22,500
Harbor Freight ToolsNASA/Clear Lake 15,040
Chulas Sports CantinaPasadena/Galena Park 13,775
King DollarStafford 12,779
Dollar TreeNASA/Clear Lake 12,500
Brucettes ShoesGalleria 9,122
Horse & RiderMontgomery County 8,460Prudential Gary Green RealtorsNASA/Clear Lake 8,300
RENTABLE AREA
DIRECT VACANT SF
DIRECT VACANCY
RATE
SUBLET VACANCY
SF
SUBLET VACANCY
RATE TOTAL
VACANCY SF
TOTAL VACANCY
RATE Q2 2014 NET ABSORPTION
Q1 2014 NET ABSORPTION
CLASS A RENTAL RATES
(in-line)*
Strip Centers (unanchored) 32,630,810 2,976,361 9.1% 6,505 0.0% 2,982,866 9.1% 236,187 151,434 $30.00-$50.00
Neighborhood Centers (one anchor) 68,350,477 6,529,679 9.6% 24,192 0.0% 6,553,871 9.6% 521,534 94,018 $25.00-$45.00
Community Centers (two anchors) 43,407,750 2,875,256 6.6% 79,387 0.2% 2,954,643 6.8% (16,076) (133,012) $20.00-$40.00
Power Centers (three or > anchors) 22,956,259 789,134 3.4% - 0.0% 789,134 3.4% 84,491 40,414 $20.00-$40.00
Lifestyle Centers 3,782,009 185,635 4.9% 33,789 0.9% 219,424 5.8% (1,029) 33,490 $40.00-$85.00
Outlet Centers 1,899,333 250,203 13.2% - 0.0% 250,203 13.2% (10,215) 34,231 $20.00-$40.00
Theme/Entertainment 553,786 54,849 9.9% - 0.0% 54,849 9.9% 1,028 15,200 $25.00-$35.00
Single-Tenant 68,370,776 1,498,122 2.2% 64,554 0.1% 1,562,676 2.3% 257,105 273,749 N/A
Malls 26,219,981 1,398,588 5.3% 54,750 0.2% 1,453,338 5.5% 144,177 37,219 N/A
Greater Houston 268,171,181 16,557,827 6.2% 263,177 0.1% 16,821,004 6.3% 1,217,202 572,609
RESEARCH & FORECAST REPORT | Q2 2014 | HOUSTON RETAIL MARKET
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COLLIERS INTERNATIONAL | P. 4
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