Robert Kramp, regional services manager in Houston for Grubb & Ellis Co., tells GlobeSt.com that the city's high median household income coupled with compressed cap rates and low interest rates have created "increased demand for retail investment products." Houston's average is $56,011 annually in comparison to the national average of $47,532.

Private and institutional investors are counting on that average and penchant for spending to deliver solid returns as they eye existing product rather than new development. And the target product is still the grocery-anchored staple in prime locations even though the category is meeting stiff competition from new "bigger box" concepts by Wal-Mart and Target, he adds.

"The most cut-throat part of the retail market continues to be the supermarket business and the battle between winners and losers is going to get even wider in 2003," Simmi Jaggi Basra, vice president with CB Richard Ellis Inc.'s Houston office, said in her retail forecast.

The winners in the Houston market are planning expansions this year, said the Dallas-based Weitzman Group's research team. Watch for more anchor flags to go up from H-E-B, Wal-Mart Neighborhood Market, Wal-Mart Supercenter, Super Target and Randall's.

Last year ended on a note of relative stability despite the delivery of three million sf as well as the shuttering of 79 existing stores by Albertsons, Kmart and Weiners. At yearend, occupancy was 86% in comparison to 86.8% at the 2001 close, according to Weitzman.

Rent, like occupancy, held its own in 2002 and is forecast to do the same this year. Weitzman says class A inline space is bringing in $18 per sf to $20 per sf while well-located outparcels are fetching $25 per sf. Second-generation space is delivering $15 per sf to $16 per sf and class C is getting $9 per sf to $12 per sf.