Houston Retail Market Backslides 345,700 SF

HOUSTON-The second-quarter count has the region down 345,748 sf as big box shutdowns finally take root in the retail sector.

Idaho-based Albertsons closed 43 Houston-area stores earlier this year. That along with closings from several other national chains, including Kmart and Service Merchandise, account for the backslide. “This is what we were waiting for,” Richard Zigler, director of research at Houston’s O’Connor & Associates tells GlobeSt.com.

Zigler believes the impact of the closings is “not that bad” and expects the retail market to post positive absorption numbers by next quarter. “We anticipate that the months ahead will bring ahead better times,” he said in the latest Houston Retail Performance Update. “While some of these abandoned locations may stay dark for a prolonged period, the big-box players appear relatively healthy. After all, it is this strength that rendered many of the outgoing stores superfluous.”

Zigler is quick to point out the closings were not indicative of a soft Houston retail market. Albertsons was driven out by its local competitors, he says. Of the 43 stores that closed, nearly 30 were scooped up by the remaining giants of the Houston grocery business, Randall’s, Kroger and H-E-B. He’s also quick to point out that the Kmart and Service Merchandise closings were due to national not local problems.

The overall negative absorption was primarily confined to the neighborhood centers and regional malls. The region’s strip centers showed 11,626 sf of positive absorption. Community centers or power centers between 150,000 sf and 600,000 sf racked up 131,692 sf of positive absorption.

Obviously with absorption in the negative, occupancy levels also dropped. Overall occupancy is about 86%, down from 87% a year ago.