2003 Retail Pipeline Holding About 4.5M SF

Richard Zigler, O'Connor's research director tells GlobeSt.com that only 10% of this year's retail pipeline is speculative product. Expansions at the Galleria and Memorial City Mall account for more than one million sf that will deliver this year. Wal-Mart has dibs on another one million sf for super center projects. Zigler says the balance is coming from new Kroger grocery stores, 11 new H-E-B stores and 250,000 sf sf in freestanding drug stores and other suburban retail centers.

Despite the onslaught of new supply, Zigler still expects overall absorption to be positive this year. Last year, 602,198 sf was absorbed although the fourth quarter absorption fell into the red by more than 500,000 sf.

That extra unfilled space coming due, though, could drive occupancy down when measured with the big box pullouts. The rate presently is hovering at 85%, Zigler says. Part of the concern is tied to H-E-B's plan to abandon some smaller stores for larger format locations and the shutdowns of Auchan Hypermarts in the southwest and southeast submarkets plus 17 Kmart stores ticketed to go in Houston and Beaumont.

Zigler says two hot areas for retail growth this year will be Pearland and Clear Lake. He adds Houston consumers, particularly in the suburbs, drove a 1.4% growth in retail sales figures at the end of 2002, the third highest sales per sf in the nation.