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Houston's retail market boasts the healthiest performance among the city's commercial real estate sectors thanks to population and job growth. Retail vacancy rates remain low. Merchants continue to absorb space, although at a slower pace than in ‘23. Rents remain stable. And overbuilding is not a concern.
Vacancy rates have trended down since the economy reopened in the early summer of ’20. Though rates recently ticked up they remain well below historic averages, registering at 5.2% as of Q1/24. Robust population growth and a return to conventional, in-person shopping are driving the demand for retail space.
The market absorbed 300,000 square feet of retail space in Q1/24, a significant drop when compared to the absorption of 1.4 million square feet in Q1/23.
At the end of Q1/24, the total space being marketed, including vacant, occupied yet available, available for sublease, or available at a future date, amounted to 23.6 million square feet. This represents an increase from 23.2 million square feet in Q4/23 and 22.3 million square feet in Q1/23.
Retail construction is holding steady despite higher interest rates and tougher lending standards. As of Q1/24, Houston had 3.2 million square feet of retail space underway. Strong population and job growth support the need for additional retail space.
Rents continue to rise. In Q1/24, the average retail rent reached $20.87 per square foot per year, reflecting an increase from $19.62 in Q1/23 and $18.97 in Q1/22. 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
Patrick Jankowski, CERP
Chief Economist
Senior Vice President, Research
pjankowski@houston.org
Leta Wauson
Research Director
lwauson@houston.org
Retail market vacancy rate is 5.2% as of Q1/24
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