LAS VEGAS — Despite earlier concerns that falling energy prices might weaken the local economy, both national and international retailers remain eager to expand into the Houston market.
“We’re seeing renewed interest from national retailers wanting to be in Houston—particularly in neighborhoods like the Inner Loop and East Houston,” says Crystal Allen, Senior Vice President on Transwestern’s Houston retail team. “The area around the Grand Parkway is also generating significant interest from national retailers.”
Allen was among the approximately 37,000 attendees at this year’s ICSC RECon, the world’s largest retail real estate convention. More than 1,200 exhibitors occupied nearly a million square feet on the Las Vegas convention grounds, making deal-making and continuous networking the event’s focus.
Conversation at RECon centered on millennials, the future of malls, omnichannel retailing, and the overall health of the U.S. economy. Speakers emphasized that the retail industry is undergoing substantial change driven by shifting consumer preferences. E-commerce is a major factor, but not the only challenge: many consumers—especially millennials—find the typical mall and shopping center experience dull and uninspiring.
Hessam Nadji, CEO of Marcus & Millichap in Calabasas, California, summed up the moment: “Massive retail opportunities ahead, with a chance of disaster if you are not careful.”
Trends highlighted by retail entrepreneurs at RECon included food, wellness, and fitness concepts—many of which are already beginning to appear in markets nationwide.
New concepts headed for Houston include more dining options in cinemas, expanded bowling-entertainment venues, and focused retail experiences such as MOD Pizza—a Seattle-based fast-casual pizza chain that bakes artisan-style pies in an 800-degree oven—and Zoës Kitchen, a Plano, Texas–based Mediterranean fast-casual chain known for pitas, salads, and grilled chicken sandwiches. Zoës Kitchen has recently retained Transwestern to help double its footprint in the Houston area.
Retailers new to Houston are not overly concerned that restaurant sales dipped 5–10 percent last year amid the energy downturn, Allen adds. “We have high-volume restaurant sales in Houston, and it’s a dominant market,” she says. “Many fast-casual concepts are circling Houston looking for multiple locations. Despite Houston’s size, some retailers think they can reach market coverage with only 10 locations at launch, when in reality they may need 20 to 40 sites to achieve full coverage over time.”
Houston’s East Side remains attractive to national and international retailers because the local economy—supported by the Port of Houston and a growing petrochemical sector—stays resilient, Allen explains. “There is a lot of development on the East Side, with strong housing growth and rising incomes that draw new retailers.”
Allen also expects to see more boutique fitness options in Houston, including new yoga, spinning, and Pilates studios. “Many of the new fitness operators entering Houston are coming from California,” she notes.
However, RECon participants heard repeatedly that many current mall tenants fail to offer a compelling in-person experience or sufficiently differentiate their brands. That gap pushes shoppers to shop online instead.
“Online buying is growing,” says Anjee Solanki, national director of retail services at Colliers International. “For the first time, online retail was forecast to account for more than $1 out of every $10 spent in 2017. In five years’ time, physical stores will still represent the majority of retail spending, but omnichannel behavior will continue to reshape how consumers shop.”
Shoppers who have cut back on in-person visits often describe stores as dull, uninspiring, hard to navigate, and lacking fresh merchandise and a strong customer experience. Physical retailers that succeed will be those that deliver engaging, memorable experiences that draw customers in.
From a broader perspective, U.S. retail performance remains solid, with spending across major sectors projected to rise over the next five years, although growth rates will vary by sector. “Today, many consumers shop seamlessly across multiple touchpoints, combining visits to physical stores with online channels,” says Andrew Nelson, Colliers’ U.S. Chief Economist. “As a result, physical stores influence far more consumer spending than the $3.2 trillion that flowed through them directly in 2016.”
June 1, 2017 Realty News Report Copyright 2017