Quarterly Update: Retail Market

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Houston’s retail market remains a strong performer among the city’s commercial real estate sectors, driven by population and job growth. Though vacancy rates have ticked up, they remain relatively low. Retailers continue to demand space, but at a slower pace than in ’23. Rents remain stable, and there are no significant concerns about overbuilding.

Vacancy rates rose in the early months of the pandemic but began trending down in ‘21 as the economy recovered. After peaking at 6.2 percent in Q3/20, the rate fell through most of ’23, inched up in in early ’24, and settled in at 5.3 percent in Q3/24. Robust population growth and a return to conventional, in-person shopping are driving the demand for retail space.

The market absorbed almost 400,000 square feet of retail space in Q3/24, a decrease compared to the absorption of over 800,000 square feet in Q3/23.

At the end of Q3/24, the total space being marketed, including vacant, occupied yet available, available for sublease, or available at a future date, amounted to 24.6 million square feet. This represents an increase from 23.5 million square feet in Q3/23.

Retail construction has slowed with higher interest rates and tougher lending standards. As of Q3/24, Houston had 3.4 million square feet of retail space underway, a decline from earlier in the year. 

Rents continue to rise. In Q3/24, the average retail rent reached $20.86 per square foot per year, an increase from $20.37 in Q3/23 and $19.45 in Q3/22. These rates are quoted as triple net (NNN), indicating that tenants are responsible for covering all expenses associated with their share of building occupancy, including taxes, maintenance, utilities, security, and more.

Prepared by Greater Houston Partnership Research

Leta Wauson
Research Director
lwauson@houston.org