"Houston's retail market began the year at a brisk pace, with more than 2 million sf absorbed in the first half, reducing vacancies by half a percentage point," notes McAdams. "Prior to Sept. 11, however, the sluggish national economy was eroding consumer confidence, and the trend was further exacerbated by the fallout of the national tragedy. Nevertheless, retail construction levels remain elevated as a large number of big box retailers continue to expand in the area. A strong residential housing market and solid job growth have counter-balanced the effort of the increased supply by boosting demand."

McAdams notes several trends are affecting retail performance in Houston. He says a more diversified workforce will create approximately 45,000 new jobs this year, a 2.1% increase over last year. Additionally, retail center completions have jumped to over 5 million sf this year, and the negative absorption of nearly 600,000 sf in the second quarter can be attributed to the closing of several Montgomery Ward stores and not the poor performance of the market as a whole. McAdam's report also predicts that retail center investments will be marked by a flight to quality during the economic downturn.