Houston retail sector posts strong third quarter

Third quarter activity saw Houston’s retail sector continue to thrive as vacancy rates remained below 6 percent for the 18th consecutive quarter, according to Transwestern.

The market’s stability can be attributed to a combination of strong population growth, the phasing of large developments and the utilization of prelease commitments prior to construction. As population growth pushes market boundaries further, retail will continue to follow rooftops, particularly with grocery-anchored and selectively located mixed-use/

lifestyle centers. Recently, McNair announced plans to break ground on a 1.2 million-square-foot mixed-use project in the Galleria in early 2019. The project will include 350,000 square feet of office space, 30,000 square feet of luxury retail, green space and a 150-room hotel.

In the third quarter, the retail sector saw a slight uptick in direct vacancy, recording 5.4 percent, up from 5.3 percent at both midyear and year-over-year. Vacancy rates for core retail holdings (mixed-use/lifestyle, grocery-anchored and power centers) continue to perform well as noncore holdings struggle to find their footing in an evolving market. Vacancy for mixed-use/lifestyle centers was 4.6 percent at the end of the quarter, an increase of 10 basis points quarter-over-quarter and an increase of 120 basis points over the year. Grocery-anchored direct vacancy remained unchanged over the quarter at 3.6 percent and is up from 3.3 percent year-over-year. Power center vacancy increased 40 basis points over the quarter and 120 basis points over the year to 4.9 percent.

Investment sales activity increased significantly this quarter totaling $1.4 billion, bringing the year-to-date total to $2.1 billion. Sales activity was highlighted by Brookfield’s acquisition

of GGP for $15 billion.