1. Q4 2012 | RETAIL MARKET
RESEARCH & FORECAST REPORT
Houston’s Retail Market Absorption Boosted by
Year-End Push
Houston’s retail market posted 1.1M square feet of positive net absorption in Q4,
bringing the year-end 2012 total to 1.2M SF. The opening of Phase 1 of the Tanger
Outlet Center in Texas City, as well as the opening of the new HEB in Cypress,
contributed over 534,000 SF to the fourth quarter’s positive net absorption. Other
MARKET INDICATORS
tenants that moved during the fourth quarter include American Girl, Wellborne
YE 2011 YE 2012 Cinema, Bone Daddy’s and Serious Cigars.
CITYWIDE NET
ABSORPTION (SF) 1.8M 1.2M
Houston’s retail vacancy rate decreased from 7.2% to 7.0% between quarters as
CITYWIDE AVERAGE
well as over-the-year. Due to the large amount of new inventory deliveries,
VACANCY 7.2% 7.0% Houston’s retail vacancy only decreased 2% between quarters, despite the
significant positive absorption.
CITYWIDE AVERAGE
RENTAL RATE $15.13 $14.34 The citywide average quoted rental rate for all property types is $14.34 per square
foot; however, rental rates vary widely from $10.00 to $70.00 per square foot
DELIVERIES (SF) 625K 1.1M
depending on location and property type and class.
UNDER CONSTRUCTION
(SF) 617K 451K The Houston metropolitan area added 85,000 jobs between November 2011 and
November 2012, an annual increase of 3.1% over the years prior job growth.
Further, Houston’s unemployment rate fell to 5.8% from 7.3% one year ago which
has bolstered annual home sales in the Houston area. With continued expansion in
the energy industry and a strong housing market, Houston’s economy is expected
to remain healthy for both the near and long-term.
JOB GROWTH & UNEMPLOYMENT
(Not Seasonally Adjusted)
ABSORPTION, NEW SUPPLY & VACANCY RATES
UNEMPLOYMENT 11/11 11/12
2,000,000 12%
Houston 7.3% 5.8%
1,500,000 10%
Texas 7.2% 5.8%
8%
U.S. 8.2% 7.4% 1,000,000
6%
500,000
ANNUAL # OF JOBS 4%
JOB GROWTH CHANGE ADDED
0 2%
Houston 3.2% 85K
Texas 2.6% 274K -500,000 0%
U.S. 1.4% 1.9M
Absorption New Supp ly Vacancy
www.colliers.com/houston 1

2. RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON RETAIL MARKET
Rental Rates Houston’s retail construction pipeline Q4 2012 ABSORPTION
contains 451,000 SF, of which
The citywide average quoted rental rate approximately 31% is pre-leased. SF
increased from $14.30 to $14.34 per Tenant
Fourth quarter deliveries totaled Occupied
SF NNN between quarters and 756,000 SF.
decreased from $15.13 over the year. Tanger Outlet Center – Ph1 350,000
Absorption & Demand
Class A in-line retail rental rates vary
Houston’s retail market posted 1.1M SF HEB 184,083
widely due to location and center type.
of positive net absorption in the fourth
Recent quoted rates for unanchored
quarter bringing the year-end total to Academy Sports 72,979
strip centers range from $20.00 -
1.2M SF. The opening of Phase 1 of the
$35.00 per SF (Class B and below can Kroger 48,501
Tanger Outlet Center in Texas City as
rent for $12.00 to $20.00 per SF)
well as the opening of the new HEB in
while power centers with three or LA Fitness 45,000
Cypress contributed over 534,000 SF
more strong anchors range from
to the fourth quarters positive net
$10.00 - $35.00 per SF. Lifestyle Thrift Outlet 26,402
absorption.
centers and newly constructed strip
centers in Class A locations such as Other notable tenants that moved into 99¢ Store 18,119
High Street, Uptown Park and The their space during the fourth quarter
Vintage range from $40.00 - $70.00 include: Academy Sports, Kroger, LA
American Girl 17,685
per SF. Fitness, and Thrift Outlet as seen in the
table to the right.
Vacancy & Availability Wellborne Cinema 15,180
Houston’s retail vacancy decreased Ogle School 11,468
from 7.2% to 7.0% in the fourth
quarter. By product type on a quarterly JB’s Multi Events 10,300
basis, outlet centers posted the largest
vacancy rate decrease from 10.1% to Velvet Restaurant 8,878
7.8%, 230 basis points. Strip centers,
neighborhood centers and theme/ Bone Daddy’s 7,000
entertainment vacancy rates remained
unchanged between quarters. Serious Cigars 7,000
HOUSTON RETAIL MARKET STATISTICAL SUMMARY
Direct Sublet Total 2012 YTD
Rentable Direct Sublet Total Vacant Q4 2012 Net Class A Rental
Vacancy Vacancy Vacancy Net
Area Vacant SF Vacant SF SF Absorption Rates (in-line)*
Rate Rate Rate Absorption
Strip Centers (unanchored) 31,381,269 3,247,523 10.3% 22,951 0.1% 3,270,474 10.4% 35,161 (89,158) $20.00-$35.00
Neighborhood Centers (one anchor) 68,820,507 7,301,626 10.6% 156,600 0.2% 7,458,226 10.8% 115,789 (335,197) $20.00-$32.00
Community Centers (two anchors) 40,772,147 2,548,743 6.3% 128,071 0.3% 2,676,814 6.6% 125,930 212,540 $15.00-$30.00
Power Centers (3 or more anchors) 20,297,712 874,797 4.3% 71,190 0.4% 945,987 4.7% 93,299 361,102 $10.00-$35.00
Lifestyle Centers 4,618,124 275,217 6.0% - 0.0% 275,217 6.0% 9,509 44,237 $40.00-$70.00
Outlet Centers 1,573,627 122,006 7.8% - 0.0% 122,006 7.8% 351,610 353,673 N/A
Theme/Entertainment 653,840 224,804 34.4% - 0.0% 224,804 34.4% - - $25.00-$35.00
Single-Tenant 63,079,142 1,491,177 2.4% 33,660 0.1% 1,524,837 2.4% 364,472 444,792 N/A
Malls 29,487,935 1,770,164 6.0% 58,539 0.2% 1,828,703 6.2% 31,304 164,400 N/A
Greater Houston 260,684,303 17,856,057 6.8% 471,011 0.2% 18,327,068 7.0% 1,127,074 1,156,389
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3. RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON RETAIL MARKET
RETAIL SALE TRANSACTIONS SALES ACTIVITY Woodlands and Montgomery County
submarket, was purchased as an
Houston retail investment sales activity investment. Some of the center’s
included 72 recorded transactions, with major tenants include Trader Joe’s, Ace
a total dollar volume of approximately Hardware, 24-Hour Fitness, and
$115.4M, averaging $116 per SF with PETCO.
an average capitalization rate of 8.7%.
West Loop Plaza1 West Houston Retail LLC purchased a
3005-3115 West Loop South, Houston, TX Some of the more significant four-property portfolio from Satya, Inc.
Inner Loop River Oaks Ret Submarket transactions that closed during the for approximately $15.8M in November.
fourth quarter include: The portfolio included four strip centers
RBA: 68,780 SF
Built: 2006 Becar Venture purchased the 68,780- totaling 71,374 SF and were located in
Buyer: Becar Venture
SF West Loop Plaza from Cathay Bank Richmond, Cypress and Houston, TX.
Seller: Cathay Bank The portfolio was purchased as an
Sale Date: December 5, 2012 in December for $9.9M. The
Sales Price: $9.9M neighborhood center, located in the investment. Some of the tenants in the
Sales Price PSF: $144 Inner Loop River Oaks submarket, was centers include Quick Weight Loss,
100% leased at the time of sale and Subway, New York Pizzeria, and State
was purchased as an investment. Farm.
Golfsmith and Mattress Giant are the LEASING ACTIVITY
center’s anchor tenants.
Houston retail leasing activity for fourth
RioCan REIT purchased the 180,000-SF
quarter 2012 totaled 841,061 SF in 323
Louetta Central Shopping Center,
transactions, compared to 346
Woodlands Crossing located in the North/Spring Creek
10864-10868 Kuykendahl Rd., The
transactions totaling 866,000 SF one
submarket, from URDANG & RCG
Woodlands, TX year ago. Overall, transactions under
Ventures in November for $26M. Major
Montgomery County Ret Submarket 10,000 SF comprised the largest group
tenants in the center include Michael’s,
of retail leases, with the market
RBA: 125,200 SF Famous Footwear, and Kohl’s.
recording only nine leases over 10,000
Built: 2012
Buyer: First Washington Realty First Washington Realty purchased the SF and two over 20,000 SF in the
Seller: Realm Realty 125,200-SF Woodlands Crossing fourth quarter.
Sale Date: December 19, 2012 Shopping Center from Realm Realty in
Sales Price: $43.2M December for $43.2M. The
Sales Price PSF: $345
neighborhood center, located in The
1Colliers International Transaction
Q4 2012 Top Retail Leases
Building name/address Submarket SF Tenant Lease date
Point Nasa Shopping Center NASA/Clear Lake 47,900 Conn's Oct-12
Cypress Landing Shopping Center NorthBelt/Greenspoint 28,193 Gold's Gym Dec-12
Pasadena Town Plaza Near Southeast 20,558 Goodwill Nov-12
Fondren Southwest Village Southwest 16,579 Palais Royal Oct-12
Westheimer Commons West/Far West 14,500 Shoe Carnival Oct-12
Meadow Park Shopping Center Southeast Outlier 14,000 Family Dollar Oct-12
Cypress Station Square Far North 13,400 Davita Dialysis Nov-12
Pasadena Town Plaza Near Southeast 8,702 Anna's Linens Nov-12
Cypress Station Shopping Center North FM 1960/I-45 7,344 The Pour House Oct-12
Village Green Shopping Center West/Far West 5,900 Snooker 147 Oct-12
908 Congress CBD 5,400 Batanga Restaurant Oct-12
West Loop Market Center Inner Loop/River Oaks 4,700 S Factor Oct-12
River Oaks Shopping Center Inner Loop/River Oaks 4,375 J. Jill Oct-12
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4. RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON RETAIL MARKET
LISA R. BRIDGES COLLIERS INTERNATIONAL | HOUSTON
Director of Market Research Houston 1300 Post Oak Boulevard
Direct +1 713 830 2125 Suite 200
Fax +1 713 830 2118 Houston, Texas 77056
lisa.bridges@colliers.com Main +1 713 222 2111 Accelerating success.
COLLIERS INTERNATIONAL | P. 4