A phenomenon that continues to boggle my mind and, in many cases impress me, is how the Texas economy continues to flourish. Even in the midst of the recent economic downturn that left few retail markets untouched, the Lone Star State remained one of the few bright spots in a recessionary sky.
The fact that most retailers have not seen a significant downturn in sales throughout most of Texas is one very unique phenomenon, indeed. Dallas, Houston, Austin, and to some extent San Antonio, are all markets where retailers have been substantially outperforming their stores in other markets. There are always a few exceptions, of course, but the strong performance really holds true across all retail types.
To me, the big question is why? The traditional explanation for financial success in the Lone Star state is the oil industry. But I don’t think that’s all there is to the story. Texas employment has remained strong statewide, not just in and around Houston and the traditional Gulf Coast oil region. I think the strong presence of education and health care that exists in Dallas and Houston is an underreported and important piece of the puzzle, as well. I continue to be surprised and impressed by the fact that virtually all of the state’s major markets are seeing a continued population boom; a trend that seems to show no sign of slowing any time soon. With that strong economic performance and continued population growth, the state’s housing market hasn’t been hit quite as hard as the rest of the country. Whatever the reasons behind it, Texas is certainly doing something right.
For all intents and purposes I often think about Texas as its own entity — almost like it’s a whole separate country unto itself. When it comes to Texas retail, the normal rules don’t always apply. Projects like CityCentre in Houston have done quite well, despite opening at one of the least welcoming retail periods in recent memory. That kind of performance speaks to the strength of the project, but I think more importantly it speaks to the broader strength of the state and regional marketplace.
When your state’s retail environment is so strong that it occupies virtually an entirely different category than most of the rest of the nation, that’s obviously a pretty big deal. What this means going forward for Texas retail and mixed-use development is a little more complicated. The better centers are already close to being fully leased and tough to get into, yet at the same time, most Texas markets are at least well stored if not over-stored in some cases. The strong economy and continued population increase would seem to indicate a favorable environment for future development, but I think it will most likely come in the form of redevelopment. The state’s retail square footage was increasing rapidly (some thought too rapidly) in the late 1990s and into 2005, with developers building a bit faster than the population demanded. The current population growth is absorbing a lot of that retail, leaving absorption and repositioning as the new growth pattern going forward.
The bottom line is that Texas has certainly justified its unique status as a retail dynamo. The old expression that someone is “all hat and no horse” does not apply here. I think retailers will continue to discover there is plenty of horsepower in the Texas economy.
What do you think? Please make a public comment below or feel free to e-mail me privately at email@example.com.
Click here for past columns by Jeff Green.