Houston Market Profile: Newly Built And Opened Retail Space Up 33% Vs. 2015

Shelby Market Profile

by Terrie Ellerbee/associate editor

In Houston, three titans battle for the most market share: H-E-B, Kroger and Walmart. H-E-B and Kroger have big plans for Houston; Walmart, not so much.

By the end of this year, a new H-E-B will be up and running in Kingwood. Scott McClelland, Houston Division president, spoke at a Kingwood town hall meeting on Feb. 23. He said the new Kingwood location will be the third to have the “H-E-B to You” option for ordering groceries online, reports yourHoustonnews.com. Shoppers will pull up to a designated area and pick up their groceries curbside.

Scott McClelland
Scott McClelland

“Next year, we are going to have home delivery,” McClelland said.

The 99,000-s.f. store will be part of the Main Street Kingwood development at West Lake Houston Parkway and Kingwood Drive. When it opens in October, it will replace a 48,000-s.f. location across the street. The retailer will hire an additional 120 people to join the current 278 employees who will transfer to the new store.

The San Antonio-based grocery company opened a 100,000-s.f. store in Clear Lake on Feb. 17 that employs 350 people. It anchors The Reserve at Clear Lake City. A smaller H-E-B a few miles away remains open, the Houston Business Journal reports.

This fall, H-E-B will open a store in Magnolia at Tamina Road and FM 1488.

H-E-B Deer Park opened in La Porte on Nov. 11.
H-E-B Deer Park opened in La Porte on Nov. 11.

H-E-B will open a second Magnolia location in a mixed-use development along FM 1488 between FM 149 and Spur 149. Plans are to break ground on Magnolia Commons by the end of this year, Community Impact Newspaper reports. H-E-B will be the first tenant.

Next year, H-E-B will open a store in fast-growing Fulshear. Construction is expected to begin soon at Fulshear Bend Drive and FM 1463, the Houston Business Journal reports. That store will be part of a 3,200-acre master planned community called Cross Creek Ranch.

H-E-B may be looking to open a grocery store in Houston Heights as well. It would be located on Washington Avenue between Studemont Street and Heights Boulevard, according to the Houston Business Journal.

McClelland said at a Greater East Montgomery County Chamber of Commerce lunch on Feb. 3 that just 6 percent of Houstonians shop exclusively at H-E-B. He also said that the ability to change is key to success, The Kingwood Observer reports.

“We want our shoppers to use H-E-B as their primary shopping trip,” McClelland said at the event. “Of the top 10 grocery store chains in 1995, only two remain now in their current format—Kroger and Walmart—and the main thing to take away from that is the consumer changes over time and we have to keep pace with what the customer wants.”

Kroger splits Southwest Division

Though it can’t claim to be a homegrown Texas company, Kroger has been in the Lone Star State long enough to not be a newcomer. It first entered the Houston market more than 60 years ago, when it acquired Henke & Pillot.

Last year, Kroger divided its Southwest Division into two separate entities: the Houston Division and the Dallas Division. Bill Breetz, who has served as president of the Southwest Division since 2002, now is president of the Houston Division.

Kroger has grown significantly in the Houston market in recent years and continues to ramp up. The Ohio-based retailer is in the second year of a three-year, $500 million capital investment plan for Houston. This year, it is adding eight stores and remodeling 14 others in the market.

The eighth Houston-area Kroger Marketplace opened in Cypress at the Fairfield Marketplace in January. The ninth, a 124,000-s.f. store, opened in Baytown on March 16.

Kroger also will open Marketplace stores in Clute, Houston, League City and Katy and new conventional stores in Katy and New Caney.

Regency Centers just announced a joint venture with CDC Houston to develop The Market at Springwoods Village, a 170,000-s.f. retail center. It will be anchored by a 100,000-s.f. Kroger store. Construction was expected to get under way in March, with a possible spring 2017 opening.

Kroger also is bringing its online grocery ordering service to Houston.

Whole Foods continues to add to its presence and experiment a bit in Houston. It is among the first markets where the retailer’s new, smaller 365 by Whole Foods Market stores will open.

PRO Houston WFM_Brewing_Post_OakLast July, Whole Foods opened the first craft brewery in a grocery store, and it was at a store in Houston. The Whole Food Market Brewing Co. is located inside the Post Oak store. The first keg was tapped last August at all Houston-area Whole Foods stores.

Harvest Natural Market opened its very first store last July in Katy. Among the 27,000-s.f. store’s features are an “Italian Corner,” wine room and Bistro & Bar. According to its website, it is designed to give the impression of “strolling down a street in Italy, or perhaps picking up fresh fish at a market in Greece.” It also features an in-store restaurant called Harvest Express offering meals made with organic, local and sustainable ingredients.

Harvest Natural Market opened its first store in Katy last year and opened another in March in The Woodlands.
Harvest Natural Market opened its first store in Katy last year and opened another in March in The Woodlands.

The second Harvest Natural Market location opened March 25 at 25115 Gosling Road in The Woodlands. It will be 10,000 s.f. larger than the Katy store, the Woodlands Monocle reports.

Harvest Natural Market also plans to open stores in Pecan Grove, Richmond and Sugar Land.

Aldi continues to open stores after first entering Houston in April 2013. The German company with U.S. head­quarters in Illinois has said it would open at least 30 locations in Houston. Aldi also is building a 650,000-s.f. distribution center and divisional headquarters in Rosenberg. Ground was broken in spring 2014, and the facility is expected to open soon.

When Walmart announced that it would shutter 154 stores in the U.S., it was Texas that stood out as having the most closures with 29. But Texas has more Walmart locations than any other state.

In Houston, two Walmart stores closed: a Neighborhood Market at 2740 Gessner Road and a supercenter at 1960 Road W. Both closed Jan. 28. All told, about 440 people lost their jobs.

Meanwhile, a Walmart Neighborhood Market has opened since then at The Market at Alder Trails Shopping Center in Cypress.

Buc-ee’s to open massive store

The Houston Business Journal reports that Buc-ee’s will open a convenience store in Katy that will be at least 50,000 s.f. and have an estimated 100 gas pumps. It will be located at the northeast corner of I-10 and the new Cane Island Parkway.

Buc-ee’s currently operates stores in Richmond and Cypress. Its first store opened in Lake Jackson in 1982.PRO Houston Buc-ee's logo

Buc-ee’s is known not only for its large stores, but also its clean restrooms. Cintas named the New Braunfels Buc-ee’s, which has 83 toilets, the winner of a nationwide “best restroom” contest in 2012. Buc-ee’s bested Arizona restaurant Liberty Market and the Hollywood Bowl in California for the title.

Ground is scheduled to be broken in the second quarter for the new Buc-ee’s, and the store is expected to open in 2017.

Millions of retail square footage planned

Wulfe & Co.’s 23rd Annual Retail Survey projects that 4.53 million s.f. of new retail shopping center space will be built and opened in the greater Houston area this year. That is a 33 percent increase vs. last year, according to Ed Wulfe, chairman and CEO of Houston-based Wulfe & Co., a retail real estate brokerage development and property management firm.

Ed Wulfe
Ed Wulfe

Wulfe says there has been a single- and multi-family housing boom in the past four years as Houston’s population has grown by an average of approximately 100,000 people annually. Retail space is increasing to meet demand.

Wulfe says the majority of new retail space is either owned or leased by discount stores, “power” retailers and individual stores, like many supermarkets. Only about 13 percent of speculative small store space will be available for lease.

Larger retailers that will open this year include Costco and Walmart, which, in addition to at least four Neighborhood Market stores, also will open a 180,000-s.f. supercenter, according to Wulfe & Co.

Wulfe said many new major retail projects are going to capitalize on the evolution of Grand Parkway, a beltway being constructed in pieces that circles the greater Houston area.

Target will open a 126,000-s.f. store in the Grand Parkway Marketplace development in the spring, the Houston Chronicle reports. The shopping center is scheduled to open in the spring of 2017.

Much of the new retail space for the year is already under construction, leased to financially strong national retailers or under development by a major firm.

Just as last year, supermarkets will dominate retail construction, representing 39 percent of 2016’s projected growth, Wulfe says.

“With this high expansion of new retail space commitments, overall retail occupancy in Houston will continue to strengthen and achieve an all-time high occupancy rate in excess of 94 percent,” Wulfe said. “Retail rental rates will also continue to increase, driven by the limited availability of shopping center space and the higher land and development costs.”

*Editor’s note: This Houston Market Profile also appears in the April 2016 print edition of The Shelby Report of the Southwest.

About The Author

A former newspaper editor and publisher who has handled digital duties for The Shelby Report since 2011. She once enjoyed leisurely perusing the grocery store aisles but, since having a baby in 2016, is now an enthusiastic click-and-collect shopper.