Last month, I wrote about the increased retail occupancy in the Dallas-Fort Worth market and the key reasons we’re seeing improvement. Our firm also also produces research on Texas’ other major markets—Austin, Houston and San Antonio—and I’m pleased to report that these markets also are showing gains after taking some hits in 2010.
For all of the state’s major markets, we can thank two key factors for improving conditions:
• Extremely limited construction that’s adding new anchor stores and no speculative space.
• Improving economies—including stronger job growth.
As of December 2011, Austin’s unemployment rate stood at 6.3 percent, down 1 percent since January 2011; Houston’s unemployment rate was 7.3 percent, down 1.5 percent since January 2011; and San Antonio’s unemployment rate was at 6.8 percent, down 1 percent since January 2011. Houston, in fact, led the country in job creation, with nearly 76,000 new jobs last year.
In Austin, the occupancy rate is now 93 percent, making it Texas’ strongest market in terms of the occupancy rate. The market did see some closings in 2011, including all of the Borders stores and three Sprouts Farmers Market stores. But Fresh Plus took one of the Sprouts, and Treehouse Home Improvement backfilled one of the Borders. The remainder are likely to be backfilled this year, as well-located space is at a premium in Austin.
In terms of new space, Austin added just 250,000 square feet, for concepts including Sam’s Club, 24 Hour Fitness and Cinemark. The new space is well below 2010’s level of 630,000 square feet.
In Houston, occupancy climbed half a percent to 88.5 percent, thanks to the backfilling of numerous empty boxes by concepts like The Container Store, Nordstrom Rack, Ross, Academy, Marshalls, and newcomer Alco, a Kansas-based department store chain.
For 2011, Houston added just 600,000 square feet, primarily for anchor stores from market leaders like Walmart, Kroger Marketplace, Kohl’s, and H-E-B.
In San Antonio, occupancy increased slightly during the past year and now stands at 90.4 percent. San Antonio actually saw new construction increase during 2011 when compared to 2010, but last year’s total amounted to just 301,000 square feet. New projects included a new H-E-B grocery, as well as an expanded H-E-B, plus a new movie theater and the first phase of a mixed-use project with a CVS and Chase Bank.