Since Hurricane Harvey hit the Greater Houston area last August, many businesses across Cy-Fair were forced to close temporarily or relocate after sustaining flood damage.
However, although businesses have closed, renovated and relocated, retail experts said the Cy-Fair market overall has remained stable. Officials predict a slower construction rate in the first quarter of 2018 will help stabilize the market.
Businesses in shopping centers from the Kroger grocery store-anchored center at Hwy. 249 and Cypresswood Drive to Lakeland Village Center on Fry Road saw varying degrees of flood damage. Those damaged most heavily were largely located near Cypress Creek.
Jade Garden Chinese Restaurant, located in the Lakewood Forest Shopping center at Louetta and Grant roads, closed permanently following the hurricane. Dattz Pizza, located in the same center, reopened April 9 after months of being closed.
Although Rudy’s Cantina is located in the Lakewood Forest Shopping Center as well, owner Rudy Zuniga said he was able to recover only a few weeks after Harvey.
“We had a lot of floor damage, but we were able to open up again within a few weeks,” Zuniga said. “We didn’t have as much trouble as some of the others.”
Jonathan Stup—managing director and broker for AP Commercial Inc., which owns the Lakewood Forest Shopping Center—said the reason many local, nonchain retail shops were hardest hit had to do with insurance.
“When they’re sitting on their hands for four or five months with no income, that’s a problem for a lot of small businesses,” he said. “Unfortunately, they don’t take it upon themselves to get the correct insurances. That’s probably where I see the biggest heartaches.”
Even with closings and relocations, Mark Gregory, CEO of AP Commercial Inc., said he believes the retail market is in good shape. He said sellers currently have the upper hand due to higher pricing.
“I think there’s opportunity out there for us to lease to the stronger retailers,” he said. “I think retail is strong in Houston.”
According to a CBRE report on the Houston retail market at the end of 2017, Harvey’s effect on the market and space available in the Greater Houston area was felt immediately after the storm. However, the market started to recover around the last 90 days of 2017, the report found.
In the Cy-Fair area, Harvey’s effect on retail occupancy rates, which continue to hover around 95 percent, was negligible, the report found. The vacancy rate of 5.8 percent in the Far Northwest submarket—which covers the Cypress area beyond Beltway 8—is near the average for the Greater Houston area and similar to rates from previous years for the Cy-Fair region, according to CBRE.
The Far Northwest submarket saw a net positive absorption of 61,470 square feet in the fourth quarter of 2017, meaning that more space was rented by retail tenants than was left by tenants leaving their suites over the same period of time. The absorption rate actually increased over the course of the year, up from negative 52,040 square feet in the first quarter of 2017 in that submarket.
With regard to leasing out spaces that were vacated after Harvey, Gregory said he believes the leasing process should be more stable for the rest of 2018 in his shopping center and in others across the Greater Houston area.
Stup said the future for his center in Cy-Fair and for the general retail market will stabilize, and landlords will continue to find tenants.
“There’s definitely some interest there,” he said. “We’ll get it full; it’s just a matter of time.”