Why are grocers gobbling up Houston real estate?

Dive Brief:

  • Commercial real estate firm Wulfe & Co. conducted a survey of Houston’s retail market and found 5 million square feet of new retail space will open in the city this year, a 9.2% increase over 2016, according to The Shelby Report.
  • The survey shows that supermarkets account for 23% of this projected growth. Some of the retailers adding new stores in the Houston area this year include H-E-B, which will open three markets and one Joe V’s Smart Shop; Kroger, scheduled to open six large stores; and Aldi, which will open 10 stores.
  • “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, well-tenanted retail developments is intensive in spite of the higher rental rates,” Ed Wulfe, chairman and CEO of Wulfe and Co., told The Shelby Report. 

Dive Insight:

The 2015 U.S. Census Report revealed that Houston added close to 159,000 new residents last year, placing it among the fastest growing cities in the nation.

CBRE’s latest multifamily report also shows that population growth in Houston has been rampant. This influx of people to the Houston area has been a key driver for grocery expansion, especially for chains looking to gain access to new shopper demographics.

H-E-B, Kroger, Aldi, Wal-Mart, Costco and Target are all expanding their brand footprint in the city, not only because of its strong population growth, but because of the amount of millennials and other young shoppers that are drawn to the area. The cost of living in Houston is lower than other major cities and a thriving energy industry is also bringing people to the area. Forbes reported that median annual pay for college-educated workers is $71,900 — the fourth-highest among the largest 100 U.S. metro areas, and another hefty incentive for young people. 

Kroger has made significant inroads in Houston, and is currently in the midst of a $500 million development project to build new stores and revamp existing ones. It will be interesting to see if a relative outsider like Kroger will be able to compete with chains that have been long established in the area — like Wal-Mart, H-E-B and Whole Foods — and if other retailers will make moves to encroach on this lucrative space. 

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Filed Under: Grocery Corporate