HOUSTON – (By Dale King, Realty News Report) – In 2020 roughly 3 million square feet of retail space in Houston went dark as a number of retailers and restaurants closed locations or filed for bankruptcy, leaving weaker outlets vacant.
“Biggest Retail Disruption in 30 Years.”
The COVID-19 pandemic produced what Bob Young, executive managing director of Weitzman, called “the biggest disruption in retail in 30 years.” Young discussed Weitzman’s year-end findings and 2021 projections during a company retail webinar, noting that the pandemic accelerated trends already reshaping the sector.
The expansion of the digital marketplace combined with extended periods of people staying home reduced foot traffic to traditional brick-and-mortar stores. Peter Linneman, principal of Linneman Associates, commented that about two-thirds of companies that sought Chapter 11 protection in the last year were already on unstable footing prior to the pandemic, while many independent restaurants and small retailers suffered primarily because of COVID-19.
Despite these pressures, Houston’s retail sector closed the year at about 93% occupancy, down from 95% at the end of 2019, according to Weitzman. The firm noted that an occupancy rate above 90% remains healthy for a major retail market.
Weitzman’s occupancy calculation is based on a retail inventory of 162,595,000 square feet, counting retail projects of 25,000 square feet or more.
Several major chains with known struggles prior to the pandemic announced further closures in 2020. Department store Sears closed two area locations; Randalls closed five stores; and Stage Stores (operating under banners such as Gordmans, Bealls and Palais Royal) began liquidation sales at 30 area locations in the second half of the year.
Smaller-format chains also cut Houston footprints: Pier 1 shut 13 locations locally, Tuesday Morning closed three, and 24 Hour Fitness shuttered 12 Houston-area gyms as part of its Chapter 11 restructuring. The AMC Studio 30 cinema at 2949 Dunvale Road closed permanently during the year.
Closed in 2020: 3 Million SF
Combined, these announced closures equal roughly 3.1 million square feet of retail space. Additional closures were expected in early 2021, including Kroger’s store at 3300 Montrose Blvd. and a Randalls at 5130 Bellaire.
At the same time, many closed spaces were backfilled by new or expanding tenants, helping limit the net increase in vacancies. Notable backfill leases and openings included:
- Target opening a 63,000-square-foot store in a former Randalls location at 2075 Westheimer in Shepherd Square Shopping Center;
- Ross Dress for Less occupying junior-anchor space at a Fidelis center located at 9728 Katy Freeway;
- iTile leasing 26,584 square feet at Baybrook Gateway, an Ashley Furniture–anchored center near IH-45 and Bay Area Boulevard in Webster;
- dd’s Discounts leasing 23,146 square feet at 10-Federal Shopping Center, a grocery-anchored center at Interstate 10 and Federal Road in east Houston.
Weitzman also highlighted new concepts opening in 2021 that signal demand for experiential and family-oriented retail. Kids Empire, a children’s activity venue, planned three new locations—including a 26,152-square-foot site at Corum Station in Spring—and additional locations in the Maplewood and Willowbrook retail districts.
Other retailers and service providers contributing to occupancy gains included West Elm leasing roughly 11,500 square feet formerly occupied by Urban Outfitters in Rice Village; Texans Fit developing two approximately 36,000-square-foot fitness facilities in Katy and Rosenberg; and World Gym International converting a former YMCA at 7904 South Loop East into a 40,000-square-foot club.
Weitzman’s analysis cautions that new construction does not automatically raise occupancy. From 2016 to 2020 Houston added 11.1 million square feet of retail inventory while occupancy stayed in the mid-90% range. Similarly, between 2006 and 2010 the market added 16.3 million square feet but occupancy never exceeded 88.5% during that period.
Rents have been affected by the crisis, though the primary impact has been a flattening of asking rents rather than steep declines. Effective rental rates are often lower than asking rates because of incentives such as free rent periods and more generous tenant finish allowances.
Overall, Weitzman summarized its outlook as cautiously optimistic: the availability of COVID-19 vaccines, a projected return to positive job growth and a resilient housing market support expectations that Houston’s retail market will stabilize and gradually grow through 2021 and into 2022.
New Projects in the Pipeline
POST Houston
401 Franklin St, Houston – The redevelopment of the downtown Barbara Jordan Post Office into a mixed-use project will include about 60,000 square feet of retail. A large food hall is planned with concepts such as Salt + Time Butcher Shop, Lea Jane’s Hot Chicken and Taco Fuego. Opening is targeted for late 2021.
Manvel Town Center
SH-288 & SH-6, Manvel – Manvel Town Center is a phased development planned to contain up to 1 million square feet of retail. The first phase is anchored by H-E-B, which will occupy a roughly 90,000-square-foot store, with pad users including Whataburger, McDonald’s and Heartland Dental.
Regent Square Phase II
West Dallas & Dunlavy Streets, Houston – This mixed-use apartment and retail project is expected to open with about 50,000 square feet of retail space.
Katy Grand new phase
Grand Pkwy & Katy Freeway, Katy – Katy Grand expanded with two new buildings totaling approximately 29,000 square feet. The phase includes Gloria’s Latin Cuisine, marking its third Houston-area location, and complements a restaurant-focused 2019 phase and an on-site Cinemark theater.
Fulshear Marketplace
NEQ FM 1093 & FM 359, Fulshear – This lifestyle center is planned to deliver about 70,000 square feet of retail, restaurant and service space.
The Grand at Aliana
NEC W Grand Pkwy S & W Airport Blvd, Richmond – This 200,000-square-foot project is slated to include anchors such as Michaels and Burlington among other tenants.
The Allen
Allen Parkway, Houston – The Allen is an upscale mixed-use development near Buffalo Bayou Park featuring high-rise residential, hotel, office and retail components. The project’s planned retail offering totals approximately 86,000 square feet when completed.
Source: Weitzman
Jan. 15, 2021 Realty News Report Copyright 2021
File: Three Million SF Went Dark in Houston retail. Weitzman. 1-15-21
Caption: Sugar Land Town Square redo underway. Imagine: Courtesy Lionstone.