Shopping Centers Facing Retail Collapse: Q&A with Jason Gaines, NAI Partners
Jason Gaines
HOUSTON – (Realty News Report) – With the surge in online shopping, many predicted the downfall of traditional retail: brick-and-mortar stores would disappear while e-commerce took over. That widespread prediction has yet to materialize. To better understand why—and to assess the current health of Houston’s retail real estate market—Realty News Report spoke with Jason Gaines, Senior Vice President and Retail Division Leader with NAI Partners. Gaines has spent 15 years in retail fee brokerage in the Houston area, focusing mainly on landlord representation and leasing. He has repeatedly been recognized as a leading retail producer in the Houston market, earning “Top Producer” and “Power Broker” honors. Over his career, Jason has completed more than 800 retail leases totaling over 4 million square feet, sold 13 shopping centers, and transacted multiple land parcels.
Realty News Report: What is Houston’s retail environment like today? Is the market under-stored or overbuilt?
Jason Gaines: Many people have been waiting for a so-called retail apocalypse, but currently Houston’s retail market remains stable. The “Amazon narrative” has changed shopping patterns, yet the prediction of retail’s collapse was overstated. Some brick-and-mortar retailers are struggling, but not to the catastrophic extent some expected. Since 2008 the industry has largely self-corrected: developers and retailers are more cautious, and there has been far less speculative development at the scale seen in 2005–2007. Back then, large speculative retail projects were often built with the expectation they would be absorbed quickly. Today, developers are more restrained, building less speculative square footage. Many struggling properties from 2009–2011 were reworked and stabilized, and with limited new supply entering the market recently, those projects have had the opportunity to fill vacancies.
Realty News Report: Which areas are currently the hottest for retail development?
Jason Gaines: For ground-up development, the Grand Parkway corridor stands out. New projects are springing up from the northeast and along Highway 59, pushing into Cypress, Katy and Richmond. There will likely be millions of square feet of new retail along the Grand Parkway. Grocery retailers, in particular, are expanding aggressively—often opening stores every few exits. In infill neighborhoods, demand favors smaller-scale projects—around 10,000 square feet—in select locations inside the Loop and inside the Beltway. Those infill sites focus less on massive footprints and more on projects that can command higher rents. We’re also seeing retail growth along I-10 due to major employment expansion farther west of the Energy Corridor. Large employers and distribution centers—Amazon, Rooms To Go and others—have moved jobs farther west, which will drive housing and then retail demand over the next five to ten years.
Realty News Report: How has the Grand Parkway changed Houston’s retail landscape?
Jason Gaines: The Grand Parkway is the principal area for new development. In Texas, retailers prefer freeway-facing locations, and the Grand Parkway provides that visibility and access. Major category killers—Walmart, Target, Costco—are anchoring much of the development, and developers are responding accordingly with supporting retail projects nearby.
Realty News Report: What do you foresee for Houston’s retail sector in the coming year?
Jason Gaines: I don’t expect major shifts from the trends of the past five years. Since about 2012, Houston’s retail market has been steady and healthy. New construction hasn’t overwhelmed existing centers, and vacancy levels have remained manageable. Rents have climbed significantly over the last decade, and while that has pushed some retailers to the limit—Class A retail rents are roughly 25% higher than ten years ago—retailers’ sales haven’t necessarily risen in proportion. Unlike many office tenants, retail tenants’ rents are tightly correlated with their sales, so rising rents can create stress for operators.
Realty News Report: What is the latest trend in retail development design?
Jason Gaines: Project design is becoming much more tenant-centric. Developers now build with specific tenant needs in mind rather than offering generic shell spaces and expecting tenants to adapt. Instead of dropping a standard 75,000-square-foot box and asking an anchor to fit, developers are delivering tenant-specific access, custom common area features, and built-in infrastructure that retailers require. Examples include dedicated ambulance access for urgent care facilities, drive-thru lane configurations for national quick-service restaurants, and pre-installed grease interceptors in spaces intended for full-service dining. This approach reduces costly retrofits, helps secure tenant commitments faster, and ultimately benefits both landlords and retailers.
Realty News Report: Will rising interest rates affect retail development?
Jason Gaines: To date, cap rates haven’t jumped dramatically despite gradual increases in interest rates. However, further rate increases from the Fed could raise borrowing costs and prompt adjustments in cap rate expectations versus financing costs. That could temper some development or investment activity depending on how quickly rates move and how lenders respond.
Realty News Report: Are investors more confident in Houston’s market now?
Jason Gaines: Yes. Houston’s market is stable and attractive, consistent with other major Texas markets. High occupancy and steady fundamentals have made buyers comfortable investing here. While some investors were once hesitant due to Houston’s lack of zoning and lighter regulation, many national and international investors now view Houston as a top-tier market for retail projects and are actively acquiring assets.
