Houston Retail Market and the Pandemic: Q&A with Weitzman’s Kyle Knight

Weitzman’s analysis of the greater Houston retail market shows the COVID-19 pandemic’s impact on occupancy. Kyle Knight, SVP with Weitzman’s Houston office, discussed the market outlook.

Q. What’s the current state of the market?

A: Houston’s retail market remains fairly stable, considering the difficulties that retailers and restaurants are experiencing with pandemic-related traffic and capacity issues. The market did report a number of announced chain closings during the first half of the year, with the most notable being Sears, Stage Stores, Pier 1 and 24 Hour Fitness. Together, these concepts put 2.2 million square feet of vacant space on the market.

But Houston entered the current pandemic from a position of strength, reflected in high occupancy, limited construction and a balance of supply and demand. In every previous downturn, the market just prior reported overbuilding and rising vacancy.

Q: With the pandemic, where does occupancy stand at mid-year 2020?

A: The limited number of large anchor closings has enabled Houston’s retail occupancy to remain fairly stable as of mid-year 2020. The market hasn’t any department store closings outside of Sears, for example.

Occupancy at mid-year is 93.6%, compared to 95.0% at year-end 2019. We’re hopeful that the various forms of assistance and ongoing initiatives will get the majority of retailers and restaurants to the other side of this pandemic. These programs include PPP loans, lease workouts/rent deferrals from landlords and initiatives such as curbside, takeout, delivery, meal kits and the newly legal alcohol (including mixed drinks!) to go.

Q: What about new construction?

A: In terms of newly developed space in 2020, Weitzman projects the Houston-area retail market is on track to add approximately 866,000 square feet in projects of 25,000 square feet or more.

This total would represent a big decline from 2019’s construction of 1,645,500 square feet.

New space this year includes two new H-E-B stores, as well as limited junior anchor and mixed-use retail additions. By keeping the development of new space in check, the Houston area retail market is entering the current pandemic-induced slump without the oversupply that has occurred in most previous market downturns.

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