Colliers First Quarter Retail Trends Report stated that Houston’s strong economy and steady population growth (2nd fastest growing metropolitan area in the U.S.) are what have helped maintain healthy retail occupancy and rent growth.

The Houston retail market remains relatively stable in the second quarter. However, there is a definite tale of two markets within the retail sector.  Houston saw negative absorption in the second quarter and a statistically significant increase in overall vacancy for the first time in several years. The continued weakness in the “big box” retail sector, led by the bankruptcy of Toys R Us (18 closed locations in the Houston metropolitan statistical area), created negative absorption in Community (two anchors), Power (three or more big boxes) and Malls (both traditional and outlet). Smaller, neighborhood and unanchored strip centers, on the other hand, had healthy positive net absorption.

Despite this quarterly setback, Tex-X chief economist, Peter Muoio, ranks the city’s retail market as the third strongest in the nation, forecasting rents to rise and vacancy rates to fall across the metro area by 2020 as demand will continue to outpace supply. Houston’s projected population and job growth are brisk tailwinds for retail real estate and are expected to fuel the expansion of Houston’s retail real estate market for years to come, even as the industry continues to retrench nationwide.

What notable factors are behind this long-term positive trend?

Primarily, Houston, the most diverse city in the U.S. and second fastest-growing, is powered by a skilled and well-trained talent base, with an excellent quality of life and low cost of doing business. Forbes says Houston’s “secret sauce” is lower rents, easy parking, no zoning, housing affordability, diversity, upbeat attitude and openness to outsiders which has made Houston a “super city.”


Population growth plays a key role in the expansion of the retail market when shopper counts increase. The metro area grew almost three times the national rate for the third consecutive year. Ranked as the second fastest growing metropolitan area in the U.S., Houston ’s population in 2017 stood at 6,892,427 which is an increase of 94,417 new residents since 2016 (about 259 people per day).  The city itself is home to just under 2.3 million people; that’s a lot of shoppers!


Home sales are up 7% and the most significant factor behind homes sales is job growth. Rooftops beget retail development. Houston ranks second in new home starts in the country behind Dallas/Ft Worth. Ted C. Jones, chief economist at Stewart Title, states that the Houston metro area added 66,100 jobs (a 2.2% increase over the 12-month period ending in the first quarter). According to the Texas Workforce Commission, this is a 37% jump over initial estimates of 46,000 jobs.

Since 2000, Houston’s overall job base has expanded 36.5% and has been second only to Dallas-Fort Worth in creating jobs and attracting people. Forbes states that employment in the Houston area’s professional and service sector, the largest sources of high-wage jobs, has grown 48% since 2000, a rate almost twice that of the San Francisco region,two and half times that of New York or Chicago and four times that of Los Angeles. Houston has boosted its middle-class employment by 26% compared to a 6% expansion nationally.

Two years in a row, Site Selection magazine ranked Houston second of the top metros in the nation for new and expanded corporate facilities, with Texas earning the top spot in the magazine’s state rankings (each year since 2011, Texas has ranked at least among the top three).


An affordable cost of living draws new business and talent to an area. Houston provides big city life without the hefty price tag, as a dollar goes further in Houston. For the eighth consecutive year, Houston ranked first in U-Haul’s annual national migration trend report.

According to the 2017 C3ER Cost of Living Index of2017, Houston has the fifth lowest overall cost of living among the nation’s 20 most populous metropolitan areas. The same study reported that Houston’s overall after-taxes living costs are 23% below the average for the 20 largest urban areas, mainly due to affordable housing costs, which are 39.6% below average.


According to the City of Houston Planning and Development department, 637,430, or 28% of Houston’s total population, are millennials (this compares to 13% of the population for the U.S. overall). They will dominate the workforce and are the most educated and socially conscious generation to date. Called a “millennial magnet” by writer John Egan, Houston is among the top cities for millennials primarily because of multiple job opportunities.

Millennials love to shop and although 30% of them shop online, the majority find shopping recreational. According to Coupon Follow, while they have a reputation for being fixated on technology, as a generation, they still make the majority of their purchase from brick and mortar stores. Personal consumption continues to be the largest contributor to the GDP.

This population is fed by young immigrants expanding its ranks, with 44.2% being part of a minority race or ethnic group. It’s the most ethnically and racially diverse, and soon to be largest, generation in American history.

Millennials are comprised of ages 20-25, (no precise dates of when but demographers typically use the numbers but most agree they are born between 1982 and2000). In 2015, the Census counted approximately 83.1 million millennials in the U.S. (exceeding the 75.4 million baby boomers).


Although the city’s baby boomer population does not top the charts, they are a significant demographic in Houston. Boomers are 21% of Houston’s population, the third least of any major city in the U.S.

As far as generational shopping differences, a Nielsen study found that 80% of the disposable income in the U.S. is controlled by this demographic. They have greater disposable income and more purchasing clout.  Business Insider found that four out of five retailers attribute nearly 50% of their sales to boomers and the baby boomer population is a retail force to be reckoned with as 84% prefer to shop in-store, according to research house Colloquy.

As they age, and longevity increases, the boomers are shaping senior housing and changing the healthcare markets. As the healthcare industry ramps up to serve them, healthcare providers are leasing space in retail centers for the convenience, parking and high visibility.

Metrostudy estimates that 52% of all new-home purchases within the next 5 to 10 years will be made by adults 55 and older, as they down-size and choose to move to over 50 communities.

Baby Boomers are comprised of ages 52- to 62, born from 1946 to 1964. In 2016, this segment of the population amounted to 74 million people and peaked at 78.8 million in 1999.


Called the nation’s most diverse metropolitan area, 1.4 million people in Houston are foreign-born — an increase of almost 60% since 2000. Among U.S. metropolitan areas, Houston’s immigrant population was the fifth largest. Of new Houstonians, 35% of them have come from another U.S. or international location. From 2000 through 2013, Houston’s immigrant population grew at nearly twice the national rate (59%) versus 33%. (Migration Population Institute) Michael Emerson, a Rice University sociologist who studies Houston’s demographic change, states that the city’s transformation into an international megalopolis happened quickly and only within the past few decades. As the metro area is home to over 6 million people, 93% of this growth was non-white.

Jobs fueled the transformation. The energy industry, biotech, the bustling shipping port and the Texas Medical Center, cheap land, affordable homes and low barriers to doing business have lured immigrants from elsewhere and provides a solid foundation for the integration of immigrants and their children.

Considering Houston’s notable growth and immigration, Houston architect, Tim Cisneros, says Houston’s retail strip centers are the “immigrants friend,” allowing small businesses to open and serves as ports of entry for new immigrants. Retailing by immigrants has provided significant benefits to the redevelopment of neighborhoods and has contributed to the retrofit of traditional urban spaces.

The LA Times writes that by 2050 America will look a lot like Houston does today. Houston’s stunning growth and high-volume immigration have turned it into the most racially and ethnically diverse major metropolis in the country, surpassing New York City in 2010. Houston today reflects America’s future and is where America’s future is going to be worked out.


Approximately 2,718,000 (37%) of the people in the Houston metro area are Hispanic. The percentage of Latinos in the Houston metro increased dramatically from one-fifth of the population in 1990 to over a third of the population of today. Along with the rest of the nation, in Houston, they are the largest minority group and among the fastest growing demographic. In addition, 51% of all those under the age of 20 in Houston are Latinos.

Among the 2.11 million Hispanics in the Houston metro area, 41% were foreign-born, the fourth-highest percent among the ten largest metropolitan areas in the U.S., according to the Pew Research Center. They prefer ethnic-focused stores and prefer to purchase products commonly associated with authentic Hispanic cuisine.

Hispanics have become one of the most sought-after ethnic groups in the retail grocery market (The Marketing Insider) and have increased their dollar spending in the U.S. Fast Moving Consumer Goods industry (FMCG) by 0.7% in the year that ended on Oct. 28, 2017. They have out-spent non-Hispanic consumers in 12 of 16 primary FMCG categories over the past year.

Their culture is centered on the family which extends into meal planning, directly impacting shopping. They shop with their friends and family. Studies show that people who shop with friends and family spend more at grocery stores. Like shopping for meals, shopping for clothes is more than taking a trip to the department store; it’s a family affair.


Looking forward, as Houston’s population continues to grow, the retail sector will expand and will have a positive effect on Houston’s overall economy.

Kelly Hutchinson is a Senior Associate at Colliers International and specializes in retail shopping center,  land dispositions and acquisitions in Houston, TX where she is recognized for her local market knowledge and transaction expertise.