Roundtable panel notes how grocers are expanding in Dallas and Houston, especially in suburban markets.
John Nelson
As reported in Texas Real Estate Business November 2012
The consensus from a panel of retail real state experts in Texas Real Estate Business? Retail Roundtable is that Texas, specifically Houston and Dallas, has been a target market for retail expansion for years and the momentum has not shifted. This interest in the Houston and Dallas areas is a direct product of the markets? thriving economy.
Houston and Dallas are enjoying job growth and an upswing in population, which naturally has led to increased demand for retail properties. Retailers, especially grocers, have expanded their footprint to meet the demand. Kroger, Trader Joe?s, Aldi, Whole Foods, Spouts and H-E-B, among other grocers, have all opened or broken ground on Texas locations, mostly in the suburban submarkets.
According to the Bureau of Labor Statistics, Houston has added 12,300 retail jobs in a 12-month period ending July 2012, a 4.6 percent hike. In Houston, total employment in the retail sector has increased month-to-month for 22 consecutive months. Similarly, Dallas? trade and transportation sector has added 11,900 jobs in the same 12-month period, a 2 percent gain.
In the core submarkets, the trend for retail development is more in mixed-use properties, such as BLVD Place in Houston or West 7th in Fort Worth. Retail and restaurant tenants are expanding into these high-profile developments instead of breaking ground on new developments, which the participants have attributed to the increasing cost of land and the difficult to obtain construction financing. New retail construction tends to be in the suburban markets, where land is cheaper and the population is growing more dense, according to the participants.
The following is the edited transcript of the Retail Roundtable, which features commentary from United Commercial Realty (UCR), Marcus & Millichap, NAI Robert Lynn, Baker Katz and Venture Commercial. To read the description of each participant, see the sidebar entitled ?Meet the Panel.?
For the roundtable:
1. Texas Real Estate Business: What is the health of the Texas retail market versus the Southwest and the rest of the nation?
Ken Reimer: It is pretty clear that Texas experienced little tumult relative to other regions in the last four years. We are positioned to take advantage of a recovery with our central time zone, diversified economy, Right to Work advantages, educated work force, business friendly political environment, low cost of living, and growing population.
Kenneth Katz: In general, the Texas market is healthy. We?ve had strong retail growth. One of the things that helped us in the recession is that we didn?t experience severe declines in residential values that markets in other parts of the country did. As a result, our consumer confidence and spending wasn?t as severely affected here as it was in other parts of the country. Also, most retailers report very strong sales numbers out of their Texas stores ? both in terms of absolute performance relative to other markets and profitability.
2. TREB: What retailers are expanding and where are they expanding?
Ken Reimer: Many retailers are frustrated by the lack of expansion opportunities and this has proven to be a barrier to growth for many smaller retail/restaurant concepts. There have been few new anchored developments in Texas, though grocers and discounters such as HEB, Walmart, Kroger, Aldi, and others are very actively pursuing new locations that will come online as 2014 or 2015 openings. Importantly, most of these retailers are self-developing with little or no focus on adjacent retail space.
Kenneth Katz: Grocers, fitness clubs, and fast-casual restaurants are very active segments in Houston. In the grocery sector, Wal-Mart and Kroger have been consistently active in our market. Trader Joe?s just opened their first two locations in Houston and they have a third under construction. Aldi has purchased a number of sites and plans to open their first wave of stores next year. Costco, who has been at three existing stores in Houston for about five years now, has plans to double their store count within the next 24 months. Active fitness retailers include LA Fitness, Planet Fitness and 24 Hour Fitness. Blast Fitness is a newcomer to Houston that acquired most of the Bally Total Fitness locations in our market.
3. What opportunities do you see for grocery and drug store chains in the suburbs versus the city?
Ken Reimer: It?s extraordinarily difficult to find sites inside the loop that are large enough/cost effective for both categories. But anchors such as Walmart, Sam?s Club, Kroger and LA Fitness are serving the densest areas at the periphery, while searching in the center of their target infill market. Land abounds in the suburbs, but proving up sites with limited growth is challenging.
Kenneth Katz: The majority of the opportunities for grocery and drug store growth is in the outlying suburban markets most of which are located in Houston?s extraterritorial jurisdiction. You?ll see growth in those areas for two reasons: The population will increase in the suburban markets faster than in the urban markets, and store spacing is less of a challenge compared to the urban core.
4. What uses are there for any second-generation space? Have any properties been repositioned in your market that you could mention?
Kenneth Katz: A number of spaces that were available for long periods of time are now being leased. For example, BLVD Place is now under construction. It?s being redeveloped into a mixed-use project that will be anchored by Whole Foods and Apache Corporation?s new headquarters. A former Borders at Kirby and Alabama has been leased by Texas Children?s Pediatrics. Another example is the Commons of Willowbrook at SH249 and FM 1960. The owner is repositioning that project by demolishing one large multi-tenant pad, which will enhance visibility and parking and make what was previously a difficult anchor position more desirable.
5. What retail activity is happening in the suburban markets as compared to the city? What are some of the developments taking shape in your market?
Ken Reimer: While almost every tenant would expand into denser, less competitive (per capita) infill locations, small to mid-size concepts that can generate the volume and profit to pay for more expensive infill sites have been successful. These include many ?chef driven? restaurants and fast food concepts such as Chick-fil-A, and higher-end retailers such as Room & Board. Larger retailers including Kroger, Walmart, Sam?s Club or LA Fitness are getting as close to the ?bulls eye? as possible, often serving uptown customers at the periphery.
There are many proposed Dallas-area developments, although some are two to four years off. They include Nebraska Furniture on State Highway 121; Rayzor Ranch in Denton; the redevelopment of Valley View Mall in Dallas; the redevelopment of Golden Triangle Mall in Denton; Greenway?s 1709 and Kimball project called Kimball Crossing; Margaux Development?s work on the corners of State Highways 114 and 170, and U.S. 377 and North Tarrant Parkway; LPC?s Oak Lawn development at Blackburn; UCD?s North proposed grocery anchored center at Lake Forest and U.S. Highway 380; and the Walmart development in Crossroads on U.S. Highway 380.
Kenneth Katz: Many suburban markets are experiencing continued residential growth and expansion. As the population continues grow in these areas, there is an increased need for retail services. The majority of new development to serve this increased population base is in the form of grocery store growth. As demand for space increases among fast casual restaurants and other retailers looking for regional opportunities, space at the major retail intersections that were established in the years leading up to the recession are highly sought after.
Tomball MarketPlace is a regional power-center that came online just before the recession. Although the infrastructure was complete, the project was dormant until last year. It is now close to stabilization and anchors include Kohl?s, Ross Dress for Less, Marshalls and Academy Sports + Outdoors along with a number of additional mid-size retailers. Grand Lakes MarketPlace, a Whole Food-anchored center that also features Costco Plus, Stein Mart and speculative retail space, is now under construction in Cinco Ranch. Katy Ranch Crossing is a non-traditional power center that is under construction and will be anchored by The Main Event, Baskins, Goodwill and Spec?s. Another noteworthy project under construction is South Park at Cinco Ranch, a Kroger and Academy-anchored development.
6. As far as troubled shopping centers, are they an opportunity or are they an issue? Why?
Ken Reimer: As the margin for error has become much smaller, retailers today break fewer and fewer rules and more than ever stick to spaces with excellent access, visibility, signage and traffic. Centers that broke many rules with some success (some with less success), will continue to be challenging for retail, but perhaps better positioned for alternative uses that are not as dependent upon convenience and visibility (office, medical, dance studios, etc).
Kenneth Katz: There are a number of opportunities for troubled centers to be turned around and repositioned. For those centers that just haven?t received the investment and expertise they need in order to be turned around, opportunity exists. Where opportunity might not exist is with those centers that are located in trade areas where demand is light or where the projected increases in occupancy and rents do not justify the investment.
7. Are foreign investors looking into Texas markets for opportunities? Which ones are interested in your market?s properties?
Ken Reimer: I?ve noticed a lot of foreign money is being spent by Middle Eastern, Asia and California money sources.
8. How easy are acquisition and/or construction financing to come by? Is it easier for buyers and developers to borrow compared to this time last year?
Kenneth Katz: Construction financing to acquire raw land or substantially empty buildings is still very difficult for most borrowers. For projects that are stabilized, financing is as available and attractive as it has ever been in recent history.
9. What do you feel like will be the big story of 2013 as it relates to the retail market in your city?
Ken Reimer: I suspect that very few new developments with tenants will open in 2013, but many will be coming on line in 2014.
Kenneth Katz: One of the major stories in 2013 will be the long-awaited increase in the pace of development. In the next 18 months, Houston will likely see 11 or 12 new sizeable projects. That is a significant increase over the six new centers that were developed in the last four years combined. Another continuing story for Houston is the new Exxon Mobile corporate campus south of The Woodlands. That move will bring 12,000 employees into the area. It?s going to be interesting to see the impact of this move on both the housing market and the retail market.
Source: http://www.xteam.net/news/big-appetite-for-grocery-tenants-2/
jim rome ufc on fox 2 weigh ins brandi glanville convulsions john tyler chuck elisabeth hasselbeck
Single Floor house plan - elevation design for 1250 sq ft by? shanavaz .
