Q2 2014 Retail Market Research Report

1. www.colliers.com/houston
Q2 2014 | RETAIL MARKET
HOUSTON RETAIL
MARKET INDICATORS
Q2 2013 Q2 2014
CITYWIDE NET
ABSORPTION (SF) 560K 1.2M
CITYWIDE AVERAGE
VACANCY 6.8% 6.3%
CITYWIDE AVERAGE
RENTAL RATE $14.75 $15.19
DELIVERIES (SF) 276K 612K
UNDER
CONSTRUCTION (SF) 632K 1.2M
Houston’s retail market posted 1.2M SF of positive net absorption in
the second quarter. Some of the tenants who opened new locations
during the quarter include Whole Foods Market, Kroger Marketplace,
Conn’s Appliances, Horse & Rider, Vineyard Vines, Trina Turks,
Brucettes Shoes, and Harbor Freight Tools.
The average citywide vacancy rate fell 30 basis points between
quarters to 6.3% from 6.6%, and by 50 basis points over the year from
6.8%. Currently, there is 1.2M SF in Houston’s retail construction
pipeline, which includes a 136,000-SF Sam’s Club located at the NEC
of Bellaire and West Grand Parkway, and a 90,900-SF HEB located on
the southeast corner of San Felipe and Fountainview.
The citywide average quoted rental rate for all property types
increased 3.1% from $14.73 to $15.19 per SF between quarters and
3.0% from $14.75 in Q2 2013. Houston retail rental rates vary widely
from $10.00 to $85.00 per SF, depending on location, property type,
and building class.
The Houston metropolitan area added 93,300 jobs between May 2013
and May 2014, an annual increase of 3.3% over the prior year’s job
growth. Local economists have forecast 2014 job growth to remain
strong, expecting between 68,000 and 72,000 new jobs. Houston’s
unemployment rate fell to 5.0% from 6.1% one year ago. Houston
area home sales were down by 7.3% between May 2013 and May
2014, the first decline in the past 34 months. The reduction was due
almost primarily to a lack of inventory.
ABSORPTION, NEW SUPPLY & VACANCY RATES
0%
2%
4%
6%
8%
10%
12%
-500,000
0
500,000
1,000,000
1,500,000
2,000,000
Absorption New Supply Vacancy
Houston’s 6.3% Retail Vacancy Rate at a
Record Low
HOUSTON RETAIL MARKET
RESEARCH & FORECAST REPORT
Houston
UNEMPLOYMEN
T 5/13 5/14
HOUSTON 6.1% 5.0%
TEXAS 6.3% 5.1%
U.S. 7.3% 6.1%
JOB GROWTH
ANNUAL
CHANGE
# OF
JOBS
ADDED
HOUSTON 3.3% 93.3K
TEXAS 3.4% 375.3K
U.S. 1.8% 2.4M
JOB GROWTH & UNEMPLOYMENT
(Not Seasonally Adjusted)

2. RESEARCH & FORECAST REPORT | Q2 2014 | HOUSTON RETAIL MARKET
SALES ACTIVITY
Houston’s second quarter retail
investment sales activity included
51 sales transactions. Total sales
transaction value totaled $376M
and the average price per SF
was $163. The average cap rate
was 7.2%.
Several of the more significant
transactions that closed during
the second quarter are high-
lighted on the left.
LEASING ACTIVITY
Houston retail leasing activity in
the second quarter reached 1.2M
SF. Overall, transactions under
10,000 SF comprised the largest
group of retail leases, with the
market recording eleven leases
over 10,000 SF and five over
20,000 SF in the second quarter.
A partial list of the leases signed
during the second quarter are
listed in the table below.
COLLIERS INTERNATIONAL | P. 2
Southway Shopping Center
8006-8230 S Gessner Dr, Houston, TX
Southwest Submarket
RBA: 178,768 SF
Built: 1976/2003
Buyer: American Realty Capital
Seller: RPD Catalyst LLC
Date: June 6, 2014
Price: $27.5M or $161/SF
Cap: N/A
Kirkwood Shopping Center
11920-11990 Westheimer, Houston, TX
Far West Submarket
RBA: 81,607 SF
Built: 1979/2008
Buyer: Private REIT
Seller: Revesco Properties
Date: May 23, 2014
Price: $17.1M or $210/SF
Cap: N/A
Marq*E Entertainment Center
I-10 and Silber
Near NW Spring Valley Submarket
RBA: 351,811 SF
Built: 1999
Buyer: Levcor, Inc.
Seller: Canyon Capital Realty Advisors
Date: June, 2014
Price: Undisclosed
Cap: N/A
RETAIL SALE TRANSACTIONS
Cinco-Westheimer Shopping Center
20680 Westheimer Pky, TX
Far Katy South Submarket
RBA: 17,500 SF
Built: 2006
Buyer: Hass Holdings, LLC
Seller: Prime Property Center MGNT
Date: June, 2014
Price: $3.8M or $214/SF
Cap: 9.8%
Building Name/Address Submarket SF Tenant Lease Date
Tanglewood Court Near West 90,945 HEB Apr-14
Market at First Colony Stafford 64,169 Floor & Décor Outlets of America Apr-14
Fiesta Mart - FM529 Far Katy North 60,000 Fiesta Mart May-14
Fairmont Junction Plaza Southeast Ret 42,130 Bravo Ranch Supermarket Mar-14
Fondren Road Plaza Southwest Ret 46,133 Fitness Connection May-14
River Oaks District Inner Loop River Oaks 10,117 Hermès May-14
Q2 2014 Retail Leases

3. RESEARCH & FORECAST REPORT | Q2 2014 | HOUSTON RETAIL MARKET
RENTAL RATES
According to our data source
CoStar Property, the citywide
average quoted rental rate for all
property types increased 3.1%
from $14.73 to $15.19 per SF
between quarters and 3.0% from
$14.75 in Q2 2013.
Houston Class A retail rental
rates vary widely from $10.00 to
$85.00 per SF depending on
location and center type. Recent
quoted rates for community
centers and power centers range
from $20.00 - $40.00 per SF and
theme/entertainment centers
range from $25.00 - $35.00 per
SF. Lifestyle centers in Class A
locations such as High Street,
Uptown Park and The Vintage
range from $40.00 - $85.00 per
SF. Strip centers range from
$30.00 - $50.00 per SF and
neighborhood centers range from
$25.00 - $45.00 per SF.
VACANCY & AVAILABILITY
The average citywide vacancy
rate fell 30 basis points between
quarters to 6.3% from 6.6%, and
by 50 basis points over the year
from 6.8%. This is the lowest
Houston’s vacancy rate has been
in the last 10 years.
By product type on a quarterly
basis, theme/entertainment
centers posted the largest
decrease in vacancy, 2,060 basis
points, from 30.5% in the first
quarter to 9.9% in the second
quarter 2014. Lifestyle centers
recorded the largest increase in
vacancy between quarters
increasing 90 basis points from
4.9% to 5.8%. Houston’s retail
construction pipeline contains
1.2M SF and second quarter
deliveries totaled 612,000 SF.
ABSORPTION & DEMAND
Houston’s retail market posted
1.2M SF of positive net
absorption in the second quarter.
Some of the tenants that moved
into space during the second
quarter are listed in the table at
right.
HOUSTON RETAIL MARKET STATISTICAL SUMMARY
COLLIERS INTERNATIONAL | P. 3
Q2 2014 ABSORPTION
Tenant/
Submarket
SF
Occupied
Kroger Marketplace
Far North 31,622
Whole Foods
Galleria 52,000
Anthem College
Far North 31,622
Conn’s Appliances
Montgomery County 22,500
Harbor Freight Tools
NASA/Clear Lake 15,040
Chulas Sports Cantina
Pasadena/Galena Park 13,775
King Dollar
Stafford 12,779
Dollar Tree
NASA/Clear Lake 12,500
Brucettes Shoes
Galleria 9,122
Horse & Rider
Montgomery County 8,460
Prudential Gary Green
Realtors
NASA/Clear Lake 8,300
RENTABLE
AREA
DIRECT
VACANTSF
DIRECT
VACANCY
RATE
SUBLET
VACANCY
SF
SUBLET
VACANCY
RATE
TOTAL
VACANCYSF
TOTAL
VACANCY
RATE
Q22014NET
ABSORPTION
Q12014NET
ABSORPTION
CLASSA
RENTALRATES
(in-line)*
Strip Centers (unanchored) 32,630,810 2,976,361 9.1% 6,505 0.0% 2,982,866 9.1% 236,187 151,434 $30.00-$50.00
Neighborhood Centers (one anchor) 68,350,477 6,529,679 9.6% 24,192 0.0% 6,553,871 9.6% 521,534 94,018 $25.00-$45.00
Community Centers (two anchors) 43,407,750 2,875,256 6.6% 79,387 0.2% 2,954,643 6.8% (16,076) (133,012) $20.00-$40.00
Power Centers (three or > anchors) 22,956,259 789,134 3.4% - 0.0% 789,134 3.4% 84,491 40,414 $20.00-$40.00
Lifestyle Centers 3,782,009 185,635 4.9% 33,789 0.9% 219,424 5.8% (1,029) 33,490 $40.00-$85.00
Outlet Centers 1,899,333 250,203 13.2% - 0.0% 250,203 13.2% (10,215) 34,231 $20.00-$40.00
Theme/Entertainment 553,786 54,849 9.9% - 0.0% 54,849 9.9% 1,028 15,200 $25.00-$35.00
Single-Tenant 68,370,776 1,498,122 2.2% 64,554 0.1% 1,562,676 2.3% 257,105 273,749 N/A
Malls 26,219,981 1,398,588 5.3% 54,750 0.2% 1,453,338 5.5% 144,177 37,219 N/A
Greater Houston 268,171,181 16,557,827 6.2% 263,177 0.1% 16,821,004 6.3% 1,217,202 572,609

4. RESEARCH & FORECAST REPORT | Q2 2014 | HOUSTON RETAIL MARKET
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COLLIERS INTERNATIONAL
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Suite 900
Houston, Texas 77027
Main +1 713 222 2111
LISA R. BRIDGES
Director of Market Research | Houston
Direct +1 713 830 2125
Fax +1 713 830 2118
lisa.bridges@colliers.com
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*Information herein has been obtained from sources deemed reliable, however its accuracy cannot be guaranteed.
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