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www.colliers.com/houstonQ1 2013 | RETAIL MARKETMARKET INDICATORSQ1 2012 Q1 2013CITYWIDE NETABSORPTION (SF) -352,000 397,000CITYWIDE AVERAGEVACANCY 7.2% 7.0%CITYWIDE AVERAGERENTAL RATE $14.60 $14.68DELIVERIES (SF) 197,000 154,000UNDER CONSTRUCTION(SF) 561,000 585,0001Houston’s Retail Market – 0.6M SF Under ConstructionHouston’s retail market posted 397,000 SF of positive net absorption in the first quarter,which is significantly less than the 1.1M SF posted in the previous quarter, but is a positivegain from the -352,000 SF posted one year ago. Some of the tenants who opened newlocations during the first quarter include Sprouts Farmers Market, Main Event, MattressFirm, and Freddy’s Frozen Custard & Steakburgers.Although 154,000 SF of new retail space delivered during the first quarter, Houston’sretail vacancy rate decreased from 7.1% to 7.0% between quarters and from 7.2% overthe year. Currently, there is 585,000 SF in Houston’s retail construction pipeline. Someof those projects include Whole Foods’ newest location in BLVD Place, Costco’s newestlocation in Sugar Land’s Telfair, and the L.A. Fitness located at 4400 N Shepherd Driveand W 43rd St.The citywide average quoted rental rate for all property types increased from $14.34 to$14.68 per square foot between quarters and from $14.60 one year ago. Houston retailrental rates vary widely from $10.00 to $70.00 per square foot, depending on locationand property type and class.The Houston metropolitan area added 118,700 jobs between February 2012 and February2013, an astounding annual increase of 4.5% over the prior year’s job growth. Further,Houston’s unemployment fell to 6.3% from 7.3% one year ago, which bolstered annualHouston area home sales by 17.1%. With continued expansion in the energy industry and astrong housing market, Houston’s economy is expected to remain healthy for both thenear and long-term.ABSORPTION, NEW SUPPLY & VACANCY RATESRESEARCH & FORECAST REPORT0%2%4%6%8%10%12%-500,0000500,0001,000,0001,500,0002,000,000Absorption New Supply VacancyUNEMPLOYMENT 2/12 2/13Houston 7.3% 6.3%Texas 7.2% 6.5%U.S. 8.7% 8.1%JOB GROWTHANNUALCHANGE# OF JOBSADDEDHouston 4.5% 118.7KTexas 3.3% 355.6KU.S. 1.7% 2.2MJOB GROWTH & UNEMPLOYMENT(Not Seasonally Adjusted)
RESEARCH & FORECAST REPORT | Q1 2013 | HOUSTON RETAIL MARKET2Rental RatesThe citywide average quoted rental rateincreased from $14.34 to $14.68 per SFNNN between quarters and increasedfrom $14.60 over the year.Class A in-line retail rental rates varywidely due to location and center type.Recent quoted rates for unanchoredstrip centers range from $20.00 -$35.00 per SF (Class B and below canrent for $12.00 to $20.00 per SF)while power centers with three ormore strong anchors range from$10.00 - $35.00 per SF. Lifestylecenters and newly constructed stripcenters in Class A locations such asHigh Street, Uptown Park and TheVintage range from $40.00 - $70.00per SF.Vacancy & AvailabilityHouston’s retail vacancy decreasedfrom 7.1% to 7.0% in the first quarter.By product type on a quarterly basis,neighborhood and community centersposted the largest vacancy ratedecreases from 10.9% to 10.6% andfrom 6.5% to 6.3%, respectively. Stripcenters, theme/entertainment, single-tenant, and mall vacancy ratesremained unchanged between quarters.Power center vacancy rates saw thelargest increase between quarters from4.7% to 5.4%.Houston’s retail construction pipelinecontains 585,000 SF, of whichapproximately 68% is pre-leased. Firstquarter deliveries totaled 153,540 SF.Absorption & DemandHouston’s retail market posted 397,000SF of positive net absorption in the firstquarter, much less than the 1.2M SFposted in the previous quarter. Theopening of the Main Event in Staffordas well as the opening of the newSprouts Farmers Market in theCypress/Spring area contributed over83,000 SF to the first quarter’s positivenet absorption.Other notable tenants that moved intotheir space during the first quarterinclude: Arhaus Furniture, ConcentraHealth Services, Mattress Firm, KineticFurniture, and Party Supply Store asseen in the table to the right.HOUSTON RETAIL MARKET STATISTICAL SUMMARYQ1 2013 ABSORPTIONTenantSFOccupiedMain Event 55,000Sprouts Farmers Market 28,027Arhaus Furniture 19,339Concentra Health Services 10,054Mattress Firm 7,500Kinetic Furniture 5,000Party Supply Store 4,800Freeway Insurance 3,800Best Friends Veterinary 3,750Freddy’s Frozen Custard &Steakburgers 3,077RentableAreaDirectVacant SFDirectVacancyRateSubletVacant SFSubletVacancyRateTotal VacantSFTotalVacancyRateQ1 2013 NetAbsorptionQ4 2012 NetAbsorptionClass A RentalRates (in-line)*Strip Centers (unanchored) 31,660,706 3,247,064 10.3% 14,888 0.0% 3,261,952 10.3% 17,913 34,865 $20.00-$35.00Neighborhood Centers (one anchor) 68,661,126 7,111,141 10.4% 163,650 0.2% 7,274,791 10.6% 223,963 152,716 $20.00-$32.00Community Centers (two anchors) 41,037,321 2,446,997 6.0% 113,311 0.3% 2,560,308 6.2% 111,506 128,330 $15.00-$30.00Power Centers (3 or more anchors) 20,486,964 1,043,622 5.1% 71,190 0.3% 1,114,812 5.4% 2,657 113,299 $10.00-$35.00Lifestyle Centers 4,022,334 266,852 6.6% - 0.0% 266,852 6.6% (8,899) 10,009 $40.00-$70.00Outlet Centers 1,572,021 124,006 7.9% - 0.0% 124,006 7.9% (2,000) 351,115 N/ATheme/Entertainment 653,840 224,804 34.4% - 0.0% 224,804 34.4% - - $25.00-$35.00Single-Tenant 64,367,262 1,531,251 2.4% 33,660 0.1% 1,564,911 2.4% 39,524 341,406 N/AMalls 29,481,876 1,756,850 6.0% 58,539 0.2% 1,815,389 6.2% 12,101 31,304 N/AGreater Houston 261,943,450 17,752,587 6.8% 455,238 0.2% 18,207,825 7.0% 396,765 1,127,074
RESEARCH & FORECAST REPORT | Q1 2013 | HOUSTON RETAIL MARKETSALES ACTIVITYHouston retail investment sales activityincreased between quarters. In thefirst quarter 180 transactions wererecorded, with a total dollar volume ofapproximately $3.2B, averaging $149per SF with an average capitalizationrate of 8.13%.Some of the more significanttransactions that closed during the firstquarter include:Phillips Edison & Company purchasedthe 148,963-SF Kleinwood Center fromCharter Hall Real Estate, Inc. in Marchfor $34.5M. The lifestyle center,located in the Northwest submarket,was 100% leased at the time of saleand was purchased as an investment.HEB and LA Fitness are the center’sanchor tenants.Fry Road Plaza, LLC purchased the19,950-SF Fry Road Plaza, located inthe Far Katy North submarket, fromTexret, Inc. in March for $2M.Fidelis Realty Partners purchased the273,274-SF Willowchase ShoppingCenter from Wheeler Real EstateInvestment Trust in March for $14M.The community center, located in theFairfield submarket, was purchased asan investment. Some of the center’smajor tenants include Fiesta Mart,Tuesday Morning, Jo-Ann Fabrics, andMattress Firm.LEASING ACTIVITYHouston retail leasing activity for firstquarter 2013 totaled 943,426 SF,compared to 841,061 SF one year ago.Overall, transactions under 10,000 SFcomprised the largest group of retailleases, with the market recording onlyfourteen leases over 10,000 SF andfive over 20,000 SF in the first quarter.A list of some of the leases signedduring the first quarter are listed in thetable below.3RETAIL SALE TRANSACTIONSKleinwood Center7306-7310 Louetta Rd, Spring, TXNorthwest Ret SubmarketRBA: 148,963 SFBuilt: 2003Buyer: Phillips Edison & CompanySeller: Charter Hall Real Estate, Inc.Sale Date: March 21, 2013Sales Price: $34.5MSales Price PSF: $232Fry Road Plaza3616 Fry Road, Katy, TXFar Katy North Ret SubmarketRBA: 19,950 SFBuilt: 2006Buyer: Fry Road Plaza, LLCSeller: Texret, Inc.Sale Date: March 13, 2013Sales Price: $2MSales Price PSF: $175Building name/address Submarket SF Tenant Lease dateSugar Creek Village SC Stafford Ret 40,324 Fiesta Mart Jan-13Belt West Center Westchase Ret 30,687 Project Cure & Med Benevolence Feb-1311120 N I-45 Near North Ret 25,000 SuitMart Feb-13Northwood Village Center North Belt/Greenspoint Ret 10,054 Concentra Health Services Mar-13Belt West Center Westchase Ret 8,520 Golf Warehouse Feb-1317685 SH 249 Jersey Village Ret 7,500 Mattress Firm Jan-13Cypress Plaza Fairfield Ret 5,000 Kinetic Furniture Feb-13Rose-Rich Shopping Center Far Southwest Ret 4,800 Party Supply Store Jan-1316606 Stuebner Airline Rd Far North Ret 4,137 Spring Auto Glass Feb-13Mason One Plaza Far Katy South Ret 4,000 Las Tarascas Mar-13Golden Plaza Near West Ret 3,800 Freeway Insurance Jan-13Allendale Shopping Center Near Southeast Ret 3,600 Zumba Fitness Jan-13Clear Lake Shopping Center NASA/Clear Lake Ret 3,500 Market Seafood Jan-13Q1 2013 Top Retail Leases
RESEARCH & FORECAST REPORT | Q1 2013 | HOUSTON RETAIL MARKETCOLLIERS INTERNATIONAL | P.Accelerating success.COLLIERS INTERNATIONAL | HOUSTON1300 Post Oak BoulevardSuite 200Houston, Texas 77056Main +1 713 222 21114LISA R. BRIDGESDirector of Market Research HoustonDirect +1 713 830 2125Fax +1 713 830 email@example.com