Houston to land a top spot for retail investments
The Houston region attracted a record amount of capital in 2018 as shopping centers remained largely full with the exception of some troubled retailers.
The Houston area closed out 2018 with the addition of 2.7 million square feet of new retail space, roughly matching the previous year, commercial real estate firm Weitzman said. The region’s occupancy rate slipped one percentage point to 94.0 percent in 2018. That compares with 95.8 percent in Austin, 92.4 percent in Dallas-Fort Worth and 94.0 percent in San Antonio.
Occupancy levels remained strong even as struggling retailers such as Toys “R” Us and Sears vacated space. For the year, Toys “R” Us closed 18 stores totaling 675,000 square feet. Sears closures included its 200,000-square-foot Memorial City Mall store, its 152,000-square-foot store at San Jacinto Mall and its Midtown location. Randalls closed seven grocery stores, some of which are being filled by tenants such as El Rancho Supermercado and Star Furniture.
New and expanding retailers included Gordmans, a discount department store operated by Stage Stores, Urban Air Adventure Park, Salons by JC, Alamo Drafthouse Cinema, Xscape Theaters, Floor & Decor and Life Time Fitness, Duluth Trading Co, PGA Tour Superstore, H-E-B, Kroger, Joe V’s Smart Shop, H Mart, Aldi, 365 by Whole Foods Market and Costco.
New retail space is projected to decline in 2019 after recently peaking at 3.4 million square feet in 2016. Weitzman tracks a total inventory of 160.5 million square feet across the Houston region.
On the investment side, it looks like Houston will hit record retail sales volumes in 2018. Houston is anticipated to rank fifth in the nation for retail deal volume in 2018, according to research firm Real Capital Analytics. The total, which reflects Brookfield’s acquisition of General Growth Properties in addition to individual property sales, would eclipse the previous record of $2.1 billion in 2007.
Dallas ranked ahead of Houston for investment in 2018, and behind top-ranked Los Angeles, Manhattan and Chicago, Real Capital Analytics said.
Brookfield added Baybrook, Deerbrook, First Colony, The Woodlands and Willowbrook malls to its retail portfolio.
Among the notable deals, Asana Partners of Charlotte, N.C., bought Heights Mercantile and three other retail redevelopments from Houston developer Radom Capital.
Investors purchased H-E-B stores in Tanglewood and Bellaire in two separate transactions last year.
In recent deals, Houston-based Williamsburg Enterprises boosted its portfolio to 1.1 million square feet across 31 retail properties, all in the Houston area, after several transactions in October.
Williamsburg purchased the 156,190-square-foot West Oaks Shopping Center, at 14409 Parkhollow Drive, from BET Investments. Simultaneously, Williamsburg sold the adjacent 96,500-square-foot Burlington Coat Factory, at 14411 Westheimer, to Alief ISD. The transaction included a $3.5 million donation to the school district, which plans to redevelop it as a multipurpose center.
It acquired two properties from Brixmor Property Group: Klein Square, an 80,836-square-foot center at 16812 Stuebner Airline at Louetta Road in Spring; and Plantation Plaza, a 98,141-square-foot center at 101 Dixie Drive at Plantation Drive in Clute, near Lake Jackson. Scott Henard of Matthews Shopping Center Division represented the seller. Williamsburg is planning to renovate both centers, which were under 50 percent leased at the time of sale.
The company purchased a 46,000-square-foot center at 9411 North Freeway at West Mount Houston Road from David F. Bolger Revocable Trust with assistance from Matthew Berry at CBRE.
In other transactions, Gessner Plaza, a 51,400-square foot center at 8703 W. Bellfort, recently changed hands. Marcus & Millichap represented a Houston-based partnership in the sale.