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 early in the pandemic but began trending down in ‘21 as the economy recovered. After peaking at 6.2 percent in Q3/20, rates fell through most of ’23, inched up in the first half of ’24, and settled in at 5.3 percent in the second half of ‘24. Robust population growth and a return to conventional, in-person shopping are driving the demand for retail space.
The market absorbed almost 353,000 square feet of retail space in Q4/24, a significant decrease compared to the absorption of over 1.5 million square feet in Q4/23.
At the end of Q4/24, the total space being marketed, including vacant, occupied yet available, available for sublease, or available at a future date, amounted to 25.1 million square feet. This represents an increase from 23.8 million square feet in Q4/23.
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 Q4/24, the average retail rent reached $20.88 per square foot per year, an increase from $20.28 in Q4/23 and $19.45 in Q4/22. 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
[email protected]
