Q1 2014 Retail Market Research Report

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Q1 2014 | RETAIL MARKET

HOUSTON RETAILMARKET INDICATORS

Q1 2013 Q1 2014

CITYWIDE NET

ABSORPTION (SF) 400K 573K

CITYWIDE AVERAGE

VACANCY 7.0% 6.6%

CITYWIDE AVERAGE

RENTAL RATE $14.72 $14.73

DELIVERIES (SF) 154K 445K

UNDER

CONSTRUCTION (SF) 585K 1.3M

Houston’s retail market posted 573,000 SF of positive net absorption in the first quarter. Some of the tenants who opened new locations during the quarter include Whole Foods Market, Spec’s, Rue21, Sears Outlet Center, Jack’s Carpet, and Mattress One.

The average citywide vacancy remained unchanged from the previous quarter at 6.6%. Currently, there is 1.3M SF in Houston’s retail construction pipeline, which includes a 102,000-SF Kroger Marketplace located just south of The Woodlands on Kuykendahl Rd and W Rayford Rd, and an 80,000-SF HEB located on the north side of FM 518, just west of Pearland Parkway.

The citywide average quoted rental rate for all property types increased 0.3% from $14.69 to $14.73 per SF between quarters and 0.1% from $14.71 in Q1 2013. Houston retail rental rates vary widely from $10.00 to $70.00 per SF, depending on location, property type, and building class.

The Houston metropolitan area added 91,300 jobs between January 2013 and January 2014, an annual increase of 3.4% over the prior year’s job growth. Local economists have forecasted 2014 job growth to remain strong, adding between 68,000 and 72,000 jobs. Houston’s unemployment fell to 5.6% from 6.9% one year ago. Houston area home sales increased 8.35% between February 2013 and February 2014 and the average price of a single-family home rose 12.5% over the year.

ABSORPTION, NEW SUPPLY & VACANCY RATES

0%

2%

4%

6%

8%

10%

12%

-500,000

0

500,000

1,000,000

1,500,000

2,000,000

Absorption New Supply Vacancy

Houston’s Strong Economy Boosts Retail Construction

HOUSTON RETAIL MARKET

RESEARCH & FORECAST REPORT

Houston

UNEMPLOYMENT 1/13 1/14

HOUSTON 6.9% 5.6%

TEXAS 7.0% 5.8%

U.S. 8.5% 7.0%

JOB GROWTHANNUAL CHANGE

# OF JOBS ADDED

HOUSTON 3.4% 91.3K

TEXAS 3.0% 330.9K

U.S. 1.7% 2.3M

JOB GROWTH & UNEMPLOYMENT(Not Seasonally Adjusted)

RESEARCH & FORECAST REPORT | Q1 2014 | HOUSTON RETAIL MARKET

SALES ACTIVITY

Houston’s first quarter retail investment sales activity included 76 sales transactions. Total sales transaction volume totaled $52M and the average price per SF was $162. The average cap rate was 7.6%.

Several of the more significant transactions that closed during the first quarter are highlighted on the left.

LEASING ACTIVITY

Houston retail leasing activity in the first quarter reached 1.2M SF. Overall, transactions under 10,000 SF comprised the largest group of retail leases, with the market recording eleven leases over 10,000 SF and only two over 20,000 SF in the first quarter.

A partial list of the leases signed during the first quarter are listed in the table below.

COLLIERS INTERNATIONAL | P. 2

Colony Plaza4811 SH 6 S, Missouri City, TXStafford Submarket

RBA: 55,022 SF

Built: 1996

Buyer: Texas Colony Plaza, LLC

Seller: Everest Fund Ventures I, Ltd.

Date: March 3, 2014

Price: $8.0M or $145/SF

Cap: 9.5%

Waterside Commons9102-9825 S Mason Rd, Richmond, TXFar Southwest Submarket

RBA: 39,779 SF

Built: 2008

Buyer: Zenda Waterside Commons U.S.

Seller: Mason Grand, Ltd.

Date: March 18, 2014


Cap: N/A

Windrose Plaza20423 Kuykendahl Rd, Spring, TXFar North Submarket

RBA: 28,715 SF

Built: 2005

Buyer: Summit Dental

Seller: American Spectrum Realty, Inc.

Date: January 6, 2014


Cap: 8.15%

RETAIL SALE TRANSACTIONS

Tuscan Village Plaza7214 FM 1488, Magnolia, TXMontgomery County Submarket

RBA: 15,318 SF

Built: 2007

Buyer: Private Investor

Seller: 1488 Del Sul Investments LP

Date: March, 2014


Cap: N/A

Building Name/Address Submarket SF Tenant Lease Date

Fairmont Junction Plaza Near Southeast 42,130 Bravo Ranch Supermarket Mar-14

Cypress Station Square Far North 31,622 Anthem College Jan-14

Portofino Center Montgomery County 22,500 Conn's Appliances Feb-14

Woodforest Shopping Center Pasadena/Galena Park 13,775 Chulas Jan-14

Quail Corner Stafford 12,779 King Dollar Feb-14

Pecan Park Plaza NASA/Clear Lake 12,500 Dollar Tree Feb-14

Uptown Park Uptown 11,384 Champps Americana1 Feb-14

Greenbriar Square Sugar Land 9,629 Pennywise Jan-14

E-1 - Sunrise Lake Village Far South 7,981 Title Boxing Club Feb-14

Tomball Marketplace Far Northwest 7,700 Five Below Jan-14

E-1 - Sunrise Lake Village Far South 6,736 Blue Lion Salon Studios Feb-14

Q1 2014 RETAIL LEASES

1Renewal


RENTAL RATES

The citywide average quoted rental rate for all property types increased 0.3% from $14.69 to $14.73 per SF between quarters and 0.1% from $14.71 in Q1 2013.

Class A retail rental rates vary widely due to location and center type. Recent quoted rates for community centers and power centers range from $18.00 - $35.00 per SF while theme/ entertainment centers range from $25.00 - $35.00 per SF. Lifestyle centers in Class A locations such as High Street, Uptown Park and The Vintage range from $40.00 - $70.00 per SF. Strip centers range from $24.00 - $45.00 per SF and neighborhood centers range from $20.00 - $50.00 per SF.

VACANCY & AVAILABILITY

Houston’s retail vacancy remained at 6.6% over the quarter and fell 40 basis points from 7.0% in Q1 2013. By product type on a quarterly basis,

theme/entertainment centers posted the largest decrease in vacancy, 540 basis points, followed by outlet centers decreasing 180 basis points and power centers decreasing 80 basis points. Strip center vacancy dropped 60 basis points and neighborhood center vacancy remained unchanged. Single-tenant, malls, community centers, and lifestyle center vacancy rose 10, 20, 70 and 170 basis points, respectively.

Houston’s retail construction pipeline contains 1.3M SF and first quarter deliveries totaled 445,000 SF.

ABSORPTION & DEMAND

Houston’s retail market posted 573,000 SF of positive net absorption in the first quarter. Some of the tenants that moved into space during the first quarter are listed in the table at right.

HOUSTON RETAIL MARKET STATISTICAL SUMMARY


Q1 2014 ABSORPTION

Tenant/Submarket

SF Occupied

Sears Outlet CenterSoutheast Outlier 33,494

Forgotten AngelsSoutheast Outlier 15,300

Spec’s Montgomery County 14,532

Rue21Southeast Outlier 10,000

PennywiseSugar Land 9,629

Bee Busy Wellness CenterSouthwest 8,640

Five BelowFar Northwest 7,700

Adventure Kids PlaycareFar New Territory 5,886

Urgent CareSoutheast Outlier 4,800

Rentable Area

Direct Vacant SF

Direct Vacancy

Rate

Sublet Vacant SF

Sublet Vacancy

Rate

Total Vacant SF

Total Vacancy

Rate

Q1 2014 Net

Absorption

Q4 2013 Net

Absorption

Class A Rental Rates

(in-line)*

Strip Centers (unanchored) 32,506,790 3,104,212 9.5% 6,305 0.0% 3,110,517 9.6% 143,978 169,170 $25.00-$45.00

Neighborhood Centers (one anchor) 68,150,367 6,813,371 10.0% 98,296 0.1% 6,911,667 10.1% 92,464 525,305 $20.00-$50.00

Community Centers (two anchors) 43,531,464 2,864,950 6.6% 49,357 0.1% 2,914,307 6.7% (133,012) 144,775 $18.00-$35.00

Power Centers (3 or more anchors) 22,515,243 846,614 3.8% 23,483 0.1% 870,097 3.9% 40,847 99,229 $18.00-$35.00

Lifestyle Centers 3,692,644 180,013 4.9% 33,789 0.9% 213,802 5.8% 33,490 4,758 $40.00-$70.00

Outlet Centers 1,899,333 239,988 12.6% - 0.0% 239,988 12.6% 34,231 (8,728) $20.00-$40.00

Theme/Entertainment 752,640 229,731 30.5% - 0.0% 229,731 30.5% 40,200 (41,118) $25.00-$35.00

Single-Tenant 67,722,661 1,482,070 2.2% 64,554 0.1% 1,546,624 2.3% 283,192 174,343 N/A

Malls 26,141,121 1,483,765 5.7% 54,750 0.2% 1,538,515 5.9% 37,219 54,882 N/A

Greater Houston 266,912,263 17,244,714 6.5% 330,534 0.1% 17,575,248 6.6% 572,609 1,122,616


Accelerating success.

COLLIERS INTERNATIONAL1233 W. Loop SouthSuite 900Houston, Texas 77027Main +1 713 222 2111

LISA R. BRIDGESDirector of Market Research | HoustonDirect +1 713 830 2125Fax +1 713 830 [email protected]

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*Information herein has been obtained from sources deemed reliable, however its accuracy cannot be guaranteed.


Q1 2014 Retail Market Research Report

Real Estate

Transcript of Q1 2014 Retail Market Research Report