Drew Alexander, president of Houston-based Weingarten Realty Investors also says that much of the vacant retail space in Houston may remain without tenants because of poor location and layout. Houston is also seeing a rapid expansion of the grocery sector, he adds, but a shake out is looming in that sector too.

"Overall, Houston retail seems to be in pretty good shape," says Alexander, a past president of the International Council of Shopping Centers. "Overall retail occupancy is only about 88%, but when you take out the properties that were built in the early 1990s, retail occupancy is around 92%. Those centers that should never have been built skew the occupancy statistics."

Most of the Houston shopping centers that have remained vacant over the years lack tenants because of fundamental flaws, Alexander said in an interview with GlobeSt.com. "There are still a number of poorly conceived properties that were built in early 80s - some perpendicular to the street, many in the middle of the block, a few with nightmarish architecture - and those centers are naturally harder to lease, so they remain vacant."

An analysis by an independent real estate consulting firm in Houston, agrees with Alexander. O'Connor & Associates, a Houston-based firm, publisher of the monthly Houston Real Estate Trends report, says the rate for occupied retail space in Houston is about $1.52 per sf. The rate for vacant space is significantly lower - $1.14 per sf.

"This dramatic disparity underscores the overall health of the local retail market," says Richard Zigler, director of research at O'Connor. "The reason most of this space sits vacant is due to poor location, unappealing design or other similar factors."

Construction of retail space is very brisk in Houston this year, according to the Weitzman Group, a Texas-based real estate firm specializing in shopping centers. Weitzman is predicting that 2.5 million to 3 million sf of new multi-tenant retail space will be built in the 118 million-sf Houston retail market in 2000. Construction this year is concentrated in grocery-anchored community centers, as well as a number of specialty and power centers. The expanding grocers include Albertsons, Kroger and H-E-B, as well as specialty grocer Whole Foods Market. During 1999, the market added more than 3 million sf of multi-tenant space - a majority of which was in the 1.6 million-sf Katy Mills Mall.

Alexander remains bullish on the Houston retail market, where Weingarten is a major player. Weingarten boasts 248 operating properties totaling over 28 million sf with some 3,300 different tenants. Some two thirds of the company's centers are in Houston.

"The Houston retail market is good," says Alexander. "The economy is strong. From a lifestyle point of view, Houston is a good place to live and the city continues to attract more people. Houston is a good place to live."

All in all, Alexander says, the outlook for retail real estate in Houston is good. "Houston has learned from the past," says Alexander. "We continue to be sensitive to over building and ever watchful of overall economy.

Instant Insights /

Houston Retail Market Should Top Out at Nearly 3 Million New SF

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