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HOUSTON-While other commercial real estate sectors remain in a slump, the local retail market will enter the holiday season with the backing of strong performance indicators, O’Connor & Associates’ research director says in a newly released report.

Retail absorption in the third quarter reached 608,932 sf, according to the local market watcher. Over the past four quarters, the market absorbed a healthy 2.3 million sf. Retail product of all type is posting to the positive, with neighborhood centers alone absorbing in excess of one million sf.

The latest occupancy reading is 85.3% versus about 85.6% at the end of the second quarter. Richard Zigler, O’Connor’s research director, tells GlobeSt.com that the slight setback is primarily due to the closing of the 180,000-sf Dillard’s at Town & Country Mall and two pre-planned Kmart shutdowns.

Though it hasn’t hit the market yet, Zigler says retailer Lord & Taylor announced the closings of three stores in the metro area. The 394,000 sf are located in the Willowbrook, Memorial City and Galleria malls. Zigler says Lord & Taylor first plans to try to find one buyer for the trio, before allowing them to be cherry-picked. The retailer’s plan, he says, is to wait until the locations are sold or committed before they are closed. “They don’t want to let them go dark,” he adds.

Rents rose an average of a penny to $1.50 per sf in the quarter. Regional malls like the Galleria have the highest rents, commanding an average $3.06 per sf. Strip centers are getting 92 cents per sf, up four cents from last year at this time.

Zigler expects the retail market to continue to hum along. “With the best time of the year for retailers approaching, the good times in the Houston retail market should only get better,” he says in the report.

Zigler predict bustling retail construction will begin to slow as major projects like the expansions of the Galleria and Memorial City wrap up. Additionally, should rising interest rates hamper development of single-family housing construction, retail development naturally will slow, he points out.

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