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Asking Rents In Houston Retail On The Rise

Supply and demand in Houston's retail sector

Houston continues to withstand the retail woes shaking up the national scene, though Q2 was a bit of a mixed bag here.

Retail asking rents in Houston increased again by $0.23/SF in Q2 to a landmark $17.03 on an NNN basis, according to NAI Partners' Quarterly Market Report. Year-over-year average rents increased by 4% to $16.38.

However, vacancy increased 30 basis points year over year to 5.5%, and net absorption decreased by 67.8% to 400K SF following 1.2M SF of net absorption the previous quarter. 

Still, NAI Partners said supply and demand were mostly aligned through the first half of the year. So far, Houston has absorbed 1.6M SF and delivered 2M SF in 2018. That is a drop from the first half of 2017, when there was 2M SF in absorption and 3.5M SF in deliveries. 

"However, even with the difference in space, either added or being removed from the market, the fundamentals are very strong, with occupancy at 94.5%," NAI Partners wrote in the report. "While deliveries had been outpacing absorption during all four quarters of 2017 — indicating a slower tenant demand for new space — construction activity leveled off, averaging 4.5M SF during the same period, signaling controlled growth."

Another good sign for retail is the city's strong economy, which continues to surpass national employment benchmarks. According to the Texas Workforce, a record-breaking 3.1 million workers were on the region's payrolls. Metro Houston created 79,200 jobs, a 2.6% increase for the 12 months ending in May.