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Houston Market Profile: Retail Square Footage Growth Slows In Space City

Delaware Janssen

by Terrie Ellerbee/editor-Southwest

Wulfe & Co.’s 25th annual retail survey projects that 2018 will bring 3.3 million square feet of new retail shopping center space to the greater Houston area. That is fewer square feet than in 2016 and 2017, when construction levels averaged 4.4 million square feet each year, according to Ed Wulfe, chairman and CEO of Houston-based retail real estate brokerage, development and property management firm Wulfe & Co.

The Grand Parkway that circles Houston.
The Grand Parkway that circles Houston.

Hurricane Harvey is to blame for some of the slowdown, as its impact pushed the completion date of some projects into 2019, Wulfe said.

E-commerce also played a part. Many grocery retailers prioritized expanding their e-commerce operations over brick-and-mortar projects. Some, like H-E-B, have added designated areas for curbside pickup. Wulfe said that this year, retailers of all sizes will continue to work toward an omnichannel approach to give customers a seamless physical and digital shopping experience.

A significant portion of the new millions of retail square footage will go up along the Grand Parkway. Otherwise known as State Highway 99, it eventually will be a 180-mile route forming a near circle around the Greater Houston area. Not only has its construction fueled residential growth—and retail is following those rooftops—but the Grand Parkway also will provide for more emergency evacuation routes.

Harvey

There isn’t much that can be said about Hurricane Harvey, the punishing Category 4 storm that got to the Houston area and stayed around for several days. More rain than some thought was even possible fell on Houston and surrounding areas. The 48.20 inches measured in a rain gauge on Clear Creek and I-95 near Houston was the largest rainfall amount in a single storm for any place ever in the continental U.S., according to the National Oceanic and Atmospheric Administration’s climate.gov website.

H-E-B’s Kingwood location after Hurricane Harvey and the resulting flood. (Image from LinkedIn)
H-E-B’s Kingwood location after Hurricane Harvey and the resulting flood. (Image from LinkedIn)

Perhaps nothing summed up the impact the resulting floodwaters had on the region’s retail food industry so astutely as an article featuring H-E-B President Scott McClelland in his own words that was published by LinkedIn Managing Editor Chip Cutter on the site Sept. 2.

“I’ve been through a number of natural disasters, whether they’ve been hurricanes or tornadoes or floods,” McClelland said. “I’ve never seen anything like this. This takes calamity and disaster to a whole new level.”

H-E-B brought 2,000 employees (called Partners by the company) to the area from Austin, San Antonio and the Rio Grande Valley. Hundreds of employees drove to Houston on their own volition to volunteer and cover for area store personnel who were dealing with their own losses after the storm. Volunteer employees would work 18 hours a day to help restock and “then they’ll go sleep on the couch at somebody’s house,” McClelland said.

H-E-B helicoptered in truck drivers from its headquarters city in San Antonio.

“The neck in the funnel, really in our capacity, was to get enough drivers to be able to get our trucks out of the yard and get them delivered,” McClelland said.

H-E-B President Scott McClelland shakes hands with a young shopper at the Kingwood reopening.

McClelland knew that after the flooding, people would want “stick goods”—mops, brooms, bleach. Truckloads of half paper towels and half toilet paper were shipped to one store, partially unloaded and then sent on to the next, skipping the warehouse altogether. Where boiled water advisories went into effect, H-E-B sent trucks loaded with water in that direction. That is above and beyond the 150,000 half-liter bottles of water it donated to the George R. Brown Convention Center, which was used as a shelter.

H-E-B sent its Mobile Kitchens and Disaster Relief Units to areas where even the National Guard couldn’t penetrate.

H-E-B initially donated $100,000 in cash and invited customers to help with contributions of $1, $3 or $5 added on to their grocery bill. Donations quickly grew to $1 million.

H-E-B Chairman and CEO Charles Butt donated $5 million to the Justin J. Watt Foundation’s Houston Flood Relief Fund, which ultimately had total donations of $28 million. The Butt family also donated $1 million.

“Recovery’s not going to be measured in terms of days or weeks but really months. But you know, Houston will rise,” McClelland said. “You come back in a year, you aren’t going to see a bunch of homes and buildings boarded up. This thing will get rebuilt.”

H-E-B reopened all but three of its stores in Harvey’s wake. One reopened in late September. Another remained closed until January this year. The third was shuttered for good but a new H-E-B will be built nearby.

Joe Villareal, director of retail operations, Joe V’s, hugs a shopper who just received a gift card during the reopening celebration in January that followed remodeling work.
Joe Villareal, director of retail operations, Joe V’s, hugs a shopper who just received a gift card during the reopening celebration in January that followed remodeling work.

Joe V’s Smart Shop, an H-E-B banner, reopened its Uvalde Road location on Sept. 29, about a month after Hurricane Harvey caused it to close. On Jan. 31 this year, the store celebrated the completion of remodeling work.

On Jan. 19, H-E-B reopened its 105,000-s.f. Kingwood location that it was forced to close due to Hurricane Harvey. The store had been open for less than a year when the storm left behind seven feet of water. Armando Flores, SVP for H-E-B Houston, told Houston Public Media that everything in the store was replaced.

“’We basically took the store back down to the concrete and started from scratch again,” Flores said.

The third store ravaged by the storm was shuttered for good. H-E-B’s Meyerland location next to Brays Bayou previously had flooded in 2015 and was rebuilt. After Hurricane Harvey, H-E-B decided not to rebuild it. Instead, the grocer will open a new 95,000-s.f., two-story H-E-B in Meyerland Plaza. It will be located about two miles away from the store that was damaged by flooding. Construction will begin in the first quarter of 2019 and the store is expected to open in the fall of next year.

H-E-B, other grocers adding Houston locations

Wulfe said many of the new retail developments for 2018 are either already under construction, have leases with national chains or are being self-developed by supermarkets that own or lease the properties.

H-E-B will dominate new retail construction and represent 16 percent of the projected growth in the Houston area. It plans to open six new stores in 2018; two already have debuted. H-E-B’s Richmond Market near the Brazos Town Center at 23500 Berry Parkway opened on Jan. 24. On Feb. 16, H-E-B opened in Katy. It anchors The Market Cross Creek Ranch development at 4950 FM 1463.

An 87,000-s.f. H-E-B will open in Mont Belvieu Marketplace this spring. Ground was broken last August. The new development is located at the corner of I-10 and FM 3180/Eagle Drive.

Also this spring, H-E-B will open a new 70,000-s.f. store on the top of a two-story parking facility. It will be located at 5130 Cedar Street in Bellaire, where an older H-E-B was demolished.

H-E-B is expected to open a store this summer at the corner of FM 2920 and Gosling near Spring.

H-E-B in the Heights at 2300 North Shepherd Drive will open in early fall 2018. Like the store in Bellaire, this 92,000-s.f. H-E-B also will be situated on top of a ground-level parking garage.

H-E-B has more plans for 2019 in addition to the new Meyerland Plaza location.  A new H-E-B will be part of a mixed-use development called Buffalo Heights in Houston. H-E-B also plans to open a store at state Highway 288 and North MacGregor Way, the Houston Business Journal reports.

H-E-B isn’t the only retailer adding to the new square footage around Houston. Kroger opened a new 125,000-s.f. store in the 336 Marketplace in Conroe on Jan. 26. It is the first tenant to open in the master-planned community.

According to Wulfe & Co., Kroger will open another large store in the Houston area, and Aldi will add 10 locations to the three dozen it already operates in the Houston area.

A 30,000-s.f. Sprouts Farmers Market will anchor the second phase of University Commons in Sugar Land.

(Katy Asian Town Facebook photo)
(Katy Asian Town Facebook photo)

H-Mart will open its third Houston store at 23119 Colonial Parkway in Katy. It will anchor a 15.5-acre retail center called Katy Asian Town at Grand Parkway and I-10. The Korean-focused chain now operates Houston-area stores at 1302 Blalock Road and 9895 Bellaire Boulevard in Bellaire.

A 190,000-s.f. Walmart Supercenter is under construction at 26824 FM 1093 in Richmond. It is expected to open this summer.

“Even with the new retail space, overall retail occupancy in Houston will continue strong and approach an all-time high rate of an estimated 95 percent,” Wulfe said. “Retail rental rates will increase slightly in response to the limited availability of shopping center space, higher land and development costs and estimated increases in interest rates. With the area’s continued growth along with the expansion needs of both established and new-to-market retailers, the competition for available space in well-located retail developments is intense in spite of the higher rental rates.”


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About the author

Alissa Marchat

Alissa was Staff Writer at The Shelby Report.

2 Comments

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  • Alissa, this is a fantastic write-up on H-E-B! I am a proud Partner and I’m humbled by all the work the company does to serve our customers and communities. Sincere thanks from a fellow grocery geek and avocado toast lover!

    • Thanks, Monali! I’m glad you enjoyed the article. This one is actually written by our Terrie Ellerbee, but she did a great job, didn’t she? Thanks for reading!

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