The absorption count does not factor in Albertsons' planned shutdown of all 40 Houston-area stores and Kmart's 11-store closure. That, says Richard Zigler, O'Connor's research director, is sure to push down occupancy rates starting in the second and third quarter.

Zigler blames Albertsons' Houston failure on its generic format in a highly competitive local market. "The Idaho-based grocer never found its niche," he says. "The stores lacked the panache and selection of Randall's or Kroger, the specialty appeal of Whole Foods or Fiesta, or the low prices found at H-E-B or Wal-Mart." Overall, Zigler sees Albertsons' exit as a good thing because it shows the strength of the local players.

Kroger is offering some hope, however, for the retail market's future since it has announced plans to acquire 16 Albertsons. Zigler is somewhat confident many of the Albertsons locations will be quickly absorbed by other chains, but believes the Kmart stores will probably lay empty for some time. The Kmart shutdowns, he says, are not the fault of the region's marketplace but rather national-level management problems that even Martha Stewart couldn't salvage.

Zigler was undecided as to how Kohl's will fare as it opens 12 stores in the region and a market that's "notoriously difficult to penetrate." He readily admits that Kohl's, with nearly 400 stores nationwide, "is obviously doing something right. Kohl's just hopes Houston thinks so too.