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Q1 2020 | Houston Retail Market Report

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Houston’s retail sector healthy in Q1, but its future will be negatively impacted by COVID-19

Commentary By Patrick Duffy, MCR | President | Houston

Retail Trends

Colliers generally uses this space to discuss the trends we see in market data and in conversations we have with our clients, prospects and friendly competitors. We take that data and attempt to project activity going forward. The bulk of the first quarter was, for all practical purposes, pre-COVID. Net “move-in” data, as well as new leases signed, were likely unimpacted for Q1 based on the virus, or only marginally impacted. Our industry has a lead time of at least 4-6 months prior to a lease being signed or space made ready for occupancy. The real impact of this COVID crisis will not present in the data until Q2 and Q3. Retail is the sector hardest hit by the economic shutdown that came from the social distancing strategy to mitigate the impacts of the virus.

Some restaurants have tried to keep revenue generation in place through curbside service and home delivery. The bulk of the traditional dine-in concepts are reporting a drop in revenue of as much as 90%. Only food and essential supply retailers have been able to maintain anything approaching normal revenue during this lockdown. Amazon has been the big winner. Smaller “mom and pop” retailers will be the hardest hit as most lack the financial reserves to weather this shutdown. A recent survey showed that most smaller retailers had only two to six weeks of cash on hand when the shutdown started. Government programs will provide some relief in the form of low-interest loans, some of which may be forgiven. The Payroll Protection Program requires that the employer maintain 75% of their payrolls for two months after the loan is given to qualify for forgiveness. Most retailers will not be able to leverage that program.

Another issue to watch is tenants unable to make rent payments, or making reduced rent payments if possible, and the impact on the owners of retail properties. There is a potential domino scenario where rent payments are delayed or lost altogether. Owners are then unable to cover their debt, and a loss of liquidity is created that could easily translate into owners being unable to fund tenant improvements and commissions for new leases. It is a little too early to tell how significant an impact this scenario will have.


The good news for retail owners is that the market was very healthy at the end of Q1, with only 5.4% overall vacancy and only 1.7 million square feet under construction, the lowest number we have seen in a few years. The bad news is that there are predictions that as many as 40% of shuttered retailers will not be able to reopen. The big box national chains are lining up to file Chapter 11 bankruptcy as a vehicle to hold off creditors long enough to get up and running. They will use the bankruptcy filing to she underperforming locations and negate the leases associated with those locations. It is very difficult in this environment to predict where the Houston retail market will be by the end of the year. Still, our best guess is that vacancy will spike to well over 12% with the failure of the smaller retailers, restaurants and, in some cases, shuttered big box tenants. This will put downward pressure on rents. How much is anyone’s guess.

The lasting impact of this event is also difficult to predict but, one thing is clear, this COVID shutdown has accelerated e-retail by several years. Most retailers are going to need to accelerate their omni-channel efforts or they will not survive in the mid-term. 

Vacancy & Availability

Houston’s average retail vacancy rate rose 10 basis points from 5.3% in Q4 2020 to 5.4% in Q1 2020. At the end of the first quarter, Houston had 15.8M SF of vacant retail space on the market. Among the major property types, theme/entertainment and single-tenant retail had the lowest vacancy rate of 1.1% and 1.7%, respectively, followed by malls at 2.3% and Lifestyle Centers at 2.9%. Neighborhood centers have the highest vacancy rate of 9.1%, followed by strip centers with a vacancy rate of 8.7%.

Approximately 1,020,454 SF of new inventory delivered during the first quarter. There is currently 1.7M SF of retail space under construction, of which 67% is pre-leased. One of the larger projects under construction is Brookhollow Marketplace located on a former Exxon campus in northwest Houston. The Fidelis owned development is approximately 190,000 SF and 100% pre-leased. Some of the tenants that will occupy space in the center include Burlington, Michael’s, Ross, T.J. Max, Old Navy, Ulta, Five Below, Rack Room Shoes and Bath & Body Works. Brookhollow Marketplace is expected to deliver in September 2020.

Rental Rates

According to CoStar, our data provider, Houston’s citywide average quoted retail rental rate for all property types decreased from $16.87 per SF NNN in Q4 2019 to $16.71 per SF NNN in Q1 2020. These average rental rates are typically much lower than actual deal rates since they include all retail property types and classes, the majority of those properties are not well leased and are listed with discounted asking rates. According to Colliers’ internal data, Class A in-line retail rental rates can vary widely from $20.00 to $85.00 per SF, depending on location and property type.

Absorption & Demand

Houston’s retail market posted 429,013 SF of positive net absorption in the first quarter, less than the 1,020,454 SF posted in the previous quarter. Some of the positive absorption can be attributed to tenants that expanded into new locations. Among those tenants are Dave & Buster’s, LA Fitness, Pottery Barn Outlet, Bond Collective, Melrose, Northern Tool & Equipment and The Learning Experience.


Leasing Activity

Houston’s retail leasing activity, which includes renewals, decreased 18.8% over the quarter from 1.6M SF to 1.3M SF. Looking forward, we expect leasing activity to decline during Q2 due to COVID-19. Some of the tenants that signed leases during the first quarter are listed in the table below.

Q1 2020 Houston Retail Highlights



Q1 2020 | Houston Retail Market Report

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Lisa Bridges

Director of Market Research


Lisa joined Colliers in 2010 as Director of Market Research and has 37 years of commercial real estate experience. Lisa initiates proactive market research projects to further the business goals of the company. She writes and prepares 29 market reports annually, including quarterly reports on Houston's retail, office, industrial and healthcare properties.  Further, she prepares statistical ownership reports for various clients as well as an annual Houston Economic Overview. Lisa also creates PowerPoint market presentations, trade journal articles, and other marketing materials supporting the company's business endeavors. She works with senior management in planning the company's marketing strategy and public relations support for local and national conferences, luncheon meetings, recruitment programs, and special events.  Lisa works closely with the company's brokers to develop effective custom market research material specific to existing and potential clients.

Lisa serves on the Colliers Editorial Board, the Colliers U.S. Research Council, and is a recipient of the Colliers Researcher of the Year Award.

Lisa earned the Commercial Property Research Certification (CPRC) from Colliers University.  CPRC is the first and only accreditation for commercial real estate research professionals. It offers a professional development path to increase strategic and tactical expertise in marketing/research, knowledge of the industry and capabilities with commercial real estate tools.

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Patrick Duffy



Pat is the managing director of brokerage services in Houston for Colliers.  Pat has more than 37 years of experience in commercial real estate as a producing broker, educator, sales manager and managing broker. Pat relocated to Houston from Florida where he served as President of the Colliers offices in Tampa Bay, Orlando and Southwest Florida.

​Pat started his career as Director of Marketing for a real estate data base company where he spent three years interviewing top brokerage houses throughout the United States and assisted in their automation needs as a consultant and instructor.   As President of the Colliers Houston office, he has direct responsibility for recruiting, training and managing the sales and leasing teams, property management and business plan creation and coordination for the company.

Pat was responsible for building and organizing retail service delivery capabilities for Colliers worldwide as chairman of the Colliers Retail Specialty Group (96-2000, 2002-2013).  Pat is also a founding member of the Colliers Oil and Gas practice group.  Among his academic accomplishments, Pat wrote the capstone case study for the CCIM program's final course offering from 1986 - 1998.  The case study combined the marketing and financial concepts taught by CCIM to allow the students to apply the material to a simulated commercial property disposition.

He has been an instructor for NACORE’s (now CORENET) Intermediate Finance Course and was awarded the Top-Rated Faculty Certificate in 2000.  Pat has been quoted in national and regional publications including the Wall Street Journal, Dow Jones, Newsweek, Real Estate Forum, National Real Estate Investor, Globe Street and others.  He has been an expert panelist for NAIOP, Real Share, ICSC and many other real estate organizations.

Pat has served as a member (and Chairman) of the Colliers Managers Steering committee, the Board of Directors for Colliers USA and is the past Chairman of the Colliers USA Board of Advisors.  In 2003, Pat was awarded Colliers Manager of the Year.  In 2004, he was chosen by Colliers as the Tom Richardson Award recipient, an honor based on strength of character. In 2012, Pat was chosen as the recipient of the Colliers USA Pinnacle Award for service excellence.  Pat is the only person in Colliers to win all three of these awards.  He served as an instructor for Colliers University 2010-14.   In 2017 Pat was recognized as a “Best Boss” by Real Estate Forum magazine.

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