As business surges, new retailers struggle to find places to build, real estate exec says

With an economy that is beginning to recover as more people become vaccinated, retail is recovering, too, in nearly all sectors.

Jason Baker, principal at Houston-based commercial real estate firm Baker Katz, said he’s seeing retail clients go from furloughs to thousands of employees, from bankruptcy to new stores. That’s in part thanks to banks and landlords, he said, which in many cases have worked with retailers for rent relief or deferrals.

“I know there are cases of this where landlords were not helpful, but I know that there’s way more examples… where landlords and tenants work together,” Baker said.

During Covid-19, many companies with in-person business models, such as full-service restaurants and gyms, did fail, but Baker said those industries have been on the upswing more recently.

“I think that’s a positive sign. The only candidate of retail right now that I’m seeing that actually doesn’t appear to be looking to expand anytime soon is movie theaters. Part of that is because of streaming and all the changes that’s made for us as consumers,” Baker said.

Retailers that invested heavily in omnichannel commerce — which aims to integrate a customer’s experience on different online and in-person platforms — are seeing a return on their investment, Baker said. Retailers that pivoted quickly to services such as curbside and delivery are also growing despite the pandemic, he added.

Where retail sector problems arise is in construction. The construction industry is seeing huge cost increases in materials like steel, concrete and copper, and it’s becoming difficult to place retail in the trendiest areas of Houston.

“You’ll continue to see a lot of leasing activity (in the future), but by the fourth quarter of this year, there’s going to be a lot of retailers who want to expand here with nowhere to go,” Baker said. “I think you’ll see record occupancy on well-thought-out space. We’re seeing space that has sat vacant for years being leased.”

A lot of leasing activity is happening around the Grand Parkway, Baker said, with 50% or more of the deals he’s seeing taking place there.

Wherever it goes in Houston, the city’s becoming a desirable place for retailers.

“There is not a more desirable place for retailers to be in — I mean across every category of retail — than in the state of Texas,” Baker said. “The next several years for Houston are going to be really, really strong… from a retail standpoint.”

By Laura Gillespie
Houston Business Journal
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