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HOUSTON-A top-ranked housing market and positive economic fundamentals due to the energy industry have boosted Greater Houston’s retail market to 88.5% occupancy. Local experts caution overbuilding might result, but occupancy is expected to remain fairly level.

According to a yearend report by Dallas-based Weitzman Group, the region’s inventory has hit 132 million sf, with 4.6 million sf under construction. In 2006, four million sf was added. Researchers say this year’s construction pipeline is due to regional projects and shopping center expansions.

Lyle Cowand, senior vice president with Weitzman’s Houston office, says local brokers are bracing for construction to reach nearly five million sf before the year is done. He says much of the new product will be grocery-anchored neighborhood centers, big-box retailers and junior anchors.

Cowand predicts the extra space will mean occupancy won’t budge too much from it current figure. “With five million sf of space coming on line, I don’t anticipate rents up-ticking much, if at all,” he says. The region’s average rent isn’t available.

Lance Gilliam, managing director with Moody Rambin Interests in Houston, says overbuilding could come from unanchored strip centers in the 10,000-sf to 40,000-sf range. “It’s remarkable to me how we continue to see these strip centers, in many cases, mid-block, being built,” he says. “Those are what concern me. There’s a real potential for overbuilding there if we haven’t already entered that.”

Gilliam also acknowledges that retailers are pulling back a little from committing to new projects although Houston fundamentals are far better than those in other parts of the nation. “Across the board, we’re seeing retailers becoming more thoughtful and deliberate in their decisions. And in many cases, pulling back,” he tells GlobeSt.com. “It’s affecting us as owners as well–projects that were 2008 projects are now going to 2009, those scheduled to come up in 2009 are delayed until 2010.”

Both brokers believe the continued strong housing market will help to protect Houston’s retail market from suffering the same fate as other areas of the country. “When you look at our economy, housing market and job market compared to other major markets in the US, we’re doing very well,” Cowand says. “The housing market is a big driver of retail demand and retail sales.”

While Gilliand also is optimistic about the continued strong fundamentals, he says things are slowing down somewhat. “Like the rest of the country, we built at a rapid pace over the past several years so we’re slowing down a little,” he adds, “but a little bit of cooling off isn’t necessarily bad.”

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