Fresh Market and Trader Joe's are two specialty grocers pushing into the Houston area.

HOUSTON-The retail story in the region during 2012 can be best summed up with two words: Grocery stores. Experts tell that overall, the retail sector was on a strong trend upward, but it was the grocery stores, specifically, the specialty grocers, that led the charge.

“It was crazy this year,” comments Shawn Ackerman, executive vice president with Henry S. Miller Brokerage. The region has seen Trader Joe’s, Sprouts and Fresh Market either entering or expanding in the market and even “old timer” Whole Foods is making a push for expansion. “It’s amazing that Randall’s (a Texas chain) has been struggling, yet you have the super high-end grocers coming into town,” Ackerman notes. “It’s a good sign that times are getting better. At least, people are eating better.”

Lance Gilliam, managing partner with UCRMoodyRambin believes that high-end grocers, and other grocers, such as the Krogers and the HEBs, for that matter, are finding Houston appealing because of residential growth. That, in turn, is succeeding because of jobs. “If you want to work in Houston, you can find work,” Gilliam notes. “It may not be your dream job, but you can find work.”

In addition to high-end grocers, other retailers have started taking space as well. Transwestern’s managing director brokerage: retail Nick Hernandez points out that more tenants have leased than in previous years.  Ackerman also says that the discounters also continue to do well, with new tenants coming into the region. Some of them include Burke’s Outlet, City Trends, DB Discount and Shoppers World.

There has, however, been a lack of new construction in the market, other than grocery-anchored projects – and even those grocery centers going north have been few and far between. Hernandez says this has led to a dearth of class A space in some markets which has, in turn, pushed rents. Gilliam says he doesn’t expect to see a whole lot of retail construction in 2013, either. “The capital is just now coming back to the market and ultimately, every project is driven by retail sales.” The retail sales are coming back, he explains, but there is uncertainty among retailers as to how long that will last.

If that confidence continues, however, construction on new projects could be underway – but again, much of that likely won’t come to fruition until 2014. Still, the experts are optimistic about what’s going on.  “A lot of projects are coming on the drawing board for later deliveries,” Hernandez says. “They’re putting together anchors or have put them together. Some are existing projects that were put on the shelf four or five years ago, but are now a reality.” Hernandez says, for example, that the mixed-use BLVD Place in the Galleria submarket, for example, is being revived, as is High Street, just inside Loop 610.

In the more immediate future, Ackerman predicts that the retail battle will be between the upscale grocers that flocked into the area in 2012. Depending on which retailer (or retailers) gain position, this could change the retail landscape as 2013 progresses.  After all, tenants in a center in which an upscale retailer has closed due to lack of sales might find this a problem, Ackerman notes. “It’ll be interesting to see how these stores fight it out for position, who will win and how it impacts the tenants in the centers they’re in,” he adds.