Houston Brokers see potential slowdown in retail developments in 2018

Houston may see a slowdown in retail development in 2018 – but that probably isn’t a bad thing.

“Two years ago, there was no end in sight (to retail developments),” said Jason Baker of Baker Katz LLC. “That seems to have changed a bit.”

The Houston market is currently sitting on a retail vacancy rate of 5.6 percent, according to research from NAI Partners, so less development is welcome as retail tenants continue to figure out how to adapt in the age of Amazon and the rise of e-commerce.

The city’s retail occupancy rate is currently at 94.4 percent, and demand is still high, so a slowdown in retail developments means sustained rent rates and occupancy, Baker said.

A different kind of slowdown may spill over into the grocery-anchored sector, too, as grocery stores adapt to building storefronts in urban cores, said Kenneth Katz with Baker Katz.

As retailers are increasingly densifying Houston’s urban core, grocery stores such as Kroger Co. (NYSE: KR), H-E-B Grocery Co. and even the new-to-market Lidl are still figuring out how to adapt their footprints for tighter tracts of land.

A recent example of grocery stores adapting to urban demand is H-E-B’s storefront in Buffalo Heights at the intersection of South Heights Avenue and Washington Avenue. The 96,000-square-foot H-E-B will sit on the second floor of a two-level parking garage and anchor Midway’s mixed-use development that’ll include multifamily, office space and more retail.

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