Texas Market Reports

San Antonio has at times been characterized as “a big city with a small-town feel.” However, with an MSA surpassing 2 million people and a claim to being one of the country’s largest and fastest growing cities, the small-town feeling is fading quickly. With robust population growth, strong job numbers and a decade of prosperity to lean on, our retail business is more dynamic than ever. It should be of no surprise to this readership that like other areas of the country, San Antonio is facing continued pressure on traditional brick-and-mortar retail as e-commerce continues to grow and penetrate the market. Yet many local and regional retailers are adapting. One of the best examples of this adaptation is H-E-B, San Antonio’s dominant supermarket chain, which has taken on the e-commerce challenge by integrating an online grocery shopping experience with the option of home delivery or curbside pickup at select stores. Currently, H-E-B is under construction on its second fulfillment center next to its retail store at Bulverde Marketplace. As retailers evolve, retail developers and property owners are experiencing swift changes within their tenant lineups and are working diligently to ensure their marketplaces continue to attract customers. Entertainment, fitness and health …

E-commerce has cut through brick-and-mortar retail in a Darwinian fashion, establishing clear winners and losers and drastically re-shaping landlords’ approaches to leasing. Purveyors of certain soft goods — apparel, jewelry, electronics — have seen their footprints at malls and retail centers dwindle as online shopping has infiltrated American consumer behavior. But given a little financial credit and strong branding that integrates local culture, these same concepts can find success in airport settings. “Local concepts create a sense of place and introduce travelers and visitors to what’s special about that place,” says Nicole Linton, marketing manager at Paradies Lagardere, a travel retail company that operates more than 1,000 stores and restaurants across 100 North American airports. “By adapting local concepts to airport settings, we help our partners create brand recognition, which leads to increased sales.” Of course, no airport is clamoring for any retailer — local or not — whose sales are declining and whose stores are closing. But once a retail or restaurant concept makes it onto an airport’s tenant roster, it enjoys higher price points and a captive audience, two key facets of sales growth that have increasingly eluded brick-and-mortar operators in the e-commerce era. “Retailers like the insulation …

Lenders and borrowers alike have come to recognize some fundamental truths of the retail financing market in the e-commerce era: Most big box users need to right-size their store footprints and prototypes; new construction in urban settings needs food and entertainment components; and friendly loan terms are increasingly predicated on the sponsor’s track record. In Texas, direct lenders of all types have remained active in the retail arena, with certain capital sources aligning themselves with specific sub-types of the asset class. For example, CMBS lenders often focus on stabilized properties with cash flow concerns, whereas regional banks might be better bets for new construction or redevelopment deals in high-growth markets. Properties distressed by tenant turnover or rent roll uncertainty can appeal to debt funds, and life companies seem to have a soft spot for grocery-anchored product. “The biggest point of optimism for the property type in 2019 lies in the fact that lenders are still lending on retail,” says Chad Owens, vice president in NorthMarq Capital’s Houston office. “Specifically among smaller life insurance companies, CMBS lenders and banks, retail is still a big part of their businesses.” Owens says that in Texas and beyond, there is ample capital available for …

Twenty years ago, if you were to make the 100-mile drive along Interstate 5 from Los Angeles to San Diego, you’d be driving through crop fields, ranchlands and vast tracts of undeveloped land. Today, that same corridor in southern California is defined by commercial and residential development, so much so that it’s hard to tell where one city ends and another one begins. In recent years, California has become a feeder of the growing Texas population as businesses and households alike seek the tax benefits of relocating from the West Coast to Texas. Central Texas has been the landing spot for many of those firms and families as well. Consequently, the region’s overall population growth is laying the groundwork for a similar type of transformation along the Interstate 35 corridor connecting Austin and San Antonio. While retail normally follows rooftops, in Central Texas we see retail developers and investors — as well as their counterparts in the industrial space — targeting these markets in advance of the residential building boom that they feel is sure to come. In addition, the remarkable population growth of both of the corridor’s anchoring cities has cemented its role as a rising star in terms …