HOUSTON—During the past several months, the retail market here has been enjoying an uptick that others might envy. Various thirdquarter reports place citywide net absorption at approximately 524,000 square feet, while average vacancies across the region range from 7.6% to 12.4%—down from the 2009 high of 20% and above—depending on which report you read.

But this news has an interesting downside. "You can't really find class A space for tenants," comments Lance Gilliam, managing partner with UCR Moodyrambin Page. "Class A properties, for all intents and purposes, have a waiting list." Though the submarkets vary in terms of available class A space, those interviewed agreed that, for the most part, the area inside Interstate 610 (also known as the "Inner Loop") is seeing a dwindling supply of such space for retailers.

There are a couple of reasons for this. First is the slowdown in development. "We were consistently building seven million to nine million square feet of retail for many years, and got as high as 12 million square feet," explains Nick Hernandez, managing director of Transwestern's retail services group. "But during the past few years, we've only been building one million to two million square feet, and the majority of that has been free-standing space or box retail."

Another factor in the growing shortage in some areas is those two basic words: underlying fundamentals. "The economy is relatively healthy, compared to the rest of the country," says James Namken, senior vice president with the Weitzman Group. This in turn puts Oil City on the radar of retailers as they seek to expand. Although there's still vacancy, the empty Linens 'n Things and Circuit City big boxes have been backfilled and "there is a definite shortage of class A space."

Gilliam cautions, however, that there's huge vacancy among B and C spaces, and this applies even to lower-income areas within I-610. Two types of retail space fall into the latter category, he explains. The first is space that shouldn't have been built because the location wasn't desirable. And the second is space that might formerly have been in demand, but for various reasons (such as the anchor tenant dropping out), may have experienced some leasing malaise.

All three brokers were adamant that would-be tenants should make decisions, and quickly. Gilliam says understanding the market and the audiences being served, then waiting for the opportunities and acting on them, is the best way to take advantage of the current climate.

Adds Namken: "If you find a space you think will work for your business and it's good real estate, move fast and tie it up."