Retail leasing activity in Houston remained solid through 2025, driven primarily by demand for newer, higher-quality centers. Properties built within the past five years absorbed over 3 million SF in the past year, supported by tenants like grocery, fitness, quick-service restaurant, and auto-service users. Leasing volume through the first three quarters reached 8.1 million SF, up 10% year-over-year, with strong backfill demand as bankruptcies eased. However, prime space remains limited—half of available inventory was built before 1990, and availability in Uptown/Galleria sits near historic lows at 2%. Rent growth has slowed to 1.5% year-over-year, averaging $24.00/SF, though prime suburban pads exceed $30/SF. Despite the cooling pace, Houston remains a landlord’s market with minimal concessions for top-tier space.

 

Key Findings

• Houston’s retail market remains tight, with vacancy at 5.3% and absorption of 876,000 SF driven by strong demand for newer, high-quality space and limited prime availability.
• Asking rents rose 1.6% year-over-year to $24.30/SF as construction costs and lending constraints kept new supply low, with only 2.7 million SF currently underway.
• Investment momentum strengthened with $326 million in sales at $246/SF and cap rates stabilizing at 7.3%, reflecting renewed confidence and increased REIT and private buyer activity.

 

Houston Retail Supply & Demand Dynamics

Source: CoStar Group, Inc.

 

Houston Demographics

Source: CoStar Group, Inc.

• Unemployment Rate: 4.4%
• Current Population: 7,889,857
• Households: 2,889,349
• Median Household Income: $81,974

 

Houston’s economy remains one of the nation’s strongest, with employment still well above pre-pandemic levels despite a slowdown in job growth. The metro’s population of 7.9 million continues to rise, supported by affordability, diversity, and a pro-business climate. Houston is rapidly diversifying into healthcare, life sciences, and aerospace, led by major developments like the TMC3 project, which will add thousands of jobs and billions in economic impact. Median household income slightly exceeds the national average, reflecting strong earning potential and a relatively low cost of living. Houston’s global connectivity—particularly its strong ties to Mexico and Latin America—also supports steady business, trade, and medical tourism growth.

 

Population, Labor, & Income Growth

Source: CoStar Group, Inc.

 

 Houston Retail Construction

Retail construction in Houston remains near record lows as high costs and strict lending standards hinder new starts. Most projects require anchor tenants or 30–50% preleasing to move forward. About 2.7 million SF is underway, half the 2015–2019 average, with roughly 75% preleased, limiting new supply impacts. Development is concentrated in fast-growing suburban areas like Montgomery County and Far South Houston, often featuring grocery-anchored or smaller strip centers. Urban redevelopment is gaining traction, highlighted by Midway’s $2.5 billion East River project near Downtown and the 105-acre San Jacinto Marketplace in Baytown. Overall, supply will remain constrained as rising construction costs continue to outpace achievable rents.

 

SF Construction Starts

Source: CoStar Group, Inc.

 

SF Under Construction

Source: CoStar Group, Inc.

 

 Houston Retail Sales

Houston’s retail investment market has been highly active in 2025, with transaction volume up nearly 50% year-over-year as buyers and sellers align on pricing. Regional banks remain the most active lenders, while larger banks and insurance companies are gradually returning. Cap rates, which expanded sharply in 2023–2024, have largely stabilized or even compressed, with triple-net properties trading around 5–6% and strip centers in the 7–8% range. Private buyers still dominate, though REITs are reentering, exemplified by Brixmor’s $223 million purchase of LaCenterra at Cinco Ranch. Despite inflation and tariff concerns, limited new construction and strong demand continue to support Houston’s retail market stability.

 

Houston Retail Sales Volume

Source: CoStar Group, Inc.

 

By the Numbers

Source: CoStar Group, Inc.

• Sales Volume: $326M
• Price Per SF: $246
• Cap Rate: 7.3%
• Vacancy Rate: 5.3%
• Rent Growth: 1.6%
• Asking Rent Per SF: $24.30
• Under Construction: 2.7M SF
• Delivered: 733K SF
• Absorbed: 876K SF