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Houston’s retail market remains a steady performer among the city’s commercial real estate sectors, supported by ongoing population and job growth. The vacancy rate held steady at 5.6 percent in Q3/25, unchanged from the prior quarter. Leasing activity improved, with net absorption coming in at 821,439 square feet, up from 245,000 square feet in Q2/25. Average rents increased to $20.51 per square foot, continuing their upward trend. Construction activity eased to 2.6 million square feet underway, reflecting a more cautious development environment.

Vacancy rates rose early in the pandemic but began trending down in ’21 as the economy recovered. After peaking at 6.3 percent in Q3/20, rates declined steadily through most of ’23 before inching up again in ’24. The rate increased from 5.3 percent in Q3/24 to 5.6 percent in Q3/25, reflecting a modest rise in vacancy. Robust population growth and steady in-person shopping continue to support demand for retail space, even as consumer behavior shifts toward more online purchasing and experiential retail.

The market posted 821,439 square feet of positive net absorption in Q3/25, an improvement from 245,000 square feet in Q2/25 and slightly above the 634,000 square feet absorbed in Q3/24. While activity remains positive, absorption levels are below the stronger pace seen in prior years, reflecting more cautious expansion strategies by retailers.

At the end of Q3/25, the total space being marketed, including vacant, occupied yet available, available for sublease, or expected to become available amounted to 24.8 million square feet, up from 23.3 million square feet in Q3/24.

Retail construction has slowed due to higher interest rates and tighter lending standards. As of Q3/25, Houston had 2.6 million square feet of retail space underway, down from 3.2 million square feet in Q3/24 and 2.8 million in Q2/25. This marks the lowest construction pipeline since 2020, underscoring a more cautious development environment.

After years of steady growth, retail rents in Houston have largely stabilized since 2024. The average triple net (NNN) rent measured $20.51 per square foot in Q3/25, just below the recent high of $20.79 in Q1/24 and essentially unchanged from year-ago levels. These rates are quoted as NNN, meaning tenants are responsible for covering expenses such as property taxes, maintenance, utilities, and security. The leveling of rents suggests a more mature phase of the cycle, with pricing holding near record levels despite a more cautious leasing environment.

Prepared by Greater Houston Partnership Research

Leta Wauson, Research Director