SQL Server: Using ROWLOCK on UPDATE with OUTPUT

Question

I have a table with the following structure:

  ID     NAME     STATUS

  1      Item1    Pending

  2      Item2    Pending

  3      Item3    Pending

  ........................

I use a stored procedure to update the first N rows of the table, with status "Pending", to status 'Processing' and return the affected rows. Snippet:

    UPDATE TOP (@size) sample_table
    SET status = "PROCESSING"
    OUTPUT inserted.*
    WHERE status = 'PENDING'

This works as intended. Now an issue arises when I have multiple instances of my application running the SQL code script above.

I need to ensure that no 2+ instances run the above on the same data.

I can simply lock the table for the operation but I will have thousands of entries in that table in the future so this will hamper performance.

I have been reading up on ROWLOCK and it seems to do what I require but I have seen accounts where ROWLOCK was ignored(or elevated to table lock) by the query optimizer.

Is using ROWLOCK appropriate for my use case? Is there a better approach to this problem?