Houston is not only the 4th largest city in the United States and growing, but also the company headquarters for Weingarten Realty. Our company started here 65 years ago, and we continue to see great opportunities in our “original” market.
The strong performance of Houston’s economy has proven its viability for business growth. The energy sector is a significant driving force for the demand of jobs and office space. We are seeing the migration of businesses and people to The Woodlands and the Energy Corridor by the enticing, simplified lifestyle with the ability to live, work and play in the same area.
There has been a strong urban push for retail, especially with the developments of new mixed-use, multifamily projects concentrated inside the 610 Loop; in the Galleria area; and on the West side of town, from Westheimer Rd., north to I-10 and then out west to the Beltway. Other hot retail areas include Katy, Woodlands and the northwest, Cypress 290 corridor.
Retailers leasing space in Houston are changing their search criteria. Typically, tenants looking for “Class A” space are having to settle for “Class B” because occupancy is so high. There is little new space coming available and most of what is developing is leasing well. The majority of the transactions we are seeing are regional and national retailers. We are seeing a shift from pure entrepreneurial start-ups, to mom and pops taking more established franchised opportunities like Papa Murphy’s, Fresh Yogurt, Jersey Mike’s, and Carl’s Jr.
The big box activity has generally slowed down given lack of larger vacancy and no real power center new development. Several big-box retailers are downsizing, creating some new opportunities for smaller to mid-size retailers who have not been able to find space. Tenants such as dd’s Discounts and many fitness type uses have been seeking the remaining big-box vacancies or spaces where some of the grocers, office, and electronics retailers are downsizing, repositioning stores or closing for efficiencies. Very few box tenants are expanding store sizes except for tenants such as Conn’s or grocers who are undersized, looking for more of a prototypical unit.
Niche grocers are entering and expanding in the market. Recently, Houston has seen new retailers: Fresh Market, Aldi, Sprouts and Trader Joes penetrate “The Bayou City.” Whole Foods continues to expand its footprint in the area.
HEB, Kroger and Walmart have been opportunistically taking strategic sites throughout the city and continue to increase their market share.
Currently, our portfolio in Houston is right around 96.2% leased, which is the strongest it has ever been. We have also seen great renewal growth in existing centers. Generally, our properties are among the top-tier assets in the trade area and typically have higher occupancy, which in return can command higher rents than our competitors.
Acquisition/New Development Plans
Our growth strategy goals include selective acquisitions and developments with growth potential. We are looking for top-tier grocery-anchored and necessity based centers in core areas with high barriers to entry, high incomes, and strong growth. One of our biggest challenges in 2013 will be finding the growth opportunities that meet our strategy, due to the lack of quality product for sale in the marketplace. We will remain disciplined and diligent in our search.
Given our 65 years of owning and operating in the Houston market, we look forward to many more successes in the city where it all began.