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The metro Houston retail real estate market remains the healthiest of the markets. The average vacancy rate has fallen from a recent peak. The market continues to absorb space. Rents continue to move upward. And overbuilding is not a current concern.
Houston’s retail vacancy rate has steadily improved since the economy reopened after shutting down during the early stages of the pandemic. The rates inched up slightly from 5.0 percent in Q3/22 but have remained flat at 5.1 percent from Q2 to Q3/23. Robust population growth and a return to conventional, in-person shopping increased demand for retail space.
The retail market has absorbed 3.2 million square feet over the past 12 months and 600,000 in the most recent quarter.
Retail construction is holding steady despite higher interest rates and tougher lending standards. As of Q3/23, Houston had 4.7 million square feet of retail space underway. Strong population and job growth support the need for additional retail space.
Rents continue to rise. The average was $20.43/sq. ft./year at the end of Q3/23. That is up from $19.48 the same quarter a year ago, $18.83 two years ago, and $18.07 in Q3/20. The rates quoted are triple net (NNN) where the tenant is responsible for all expenses associated with their share of building occupancy, i.e., taxes, maintenance, utilities, security, etc.
Prepared by Greater Houston Partnership Research
Patrick Jankowski, CERP
Senior Vice President, Research
Retail market has absorbed 3.2 million sq. ft. over the past 12 months.