Houston's Competitive Retail Market Brings Quick Backfills, In Most Cases

Houston’s retail market is sustaining its record-high occupancy streak as demand quickly fills new and vacated spaces across the metro area, leaving a question of why some high-profile spaces remain empty. 

Houston retail ended the second quarter at 95.2% occupancy, according to a Weitzman report. Retail brokers say this is evidence of a balanced market that is becoming increasingly competitive. 

Despite this, some notable vacancies have emerged and remain, like a former Whole Foods in Midtown that shuttered nearly three years ago. This stands out in a market where well-located vacancies are particularly attractive to tenants. 

“We can say that the demand for existing space is as competitive as we’ve seen,” Weitzman Senior Vice President Kyle Knight said in a statement to Bisnow. “That’s due to Houston’s strong population and residential growth, steady retail demand and a limited amount of new speculative space.”

It is likely that the 40K SF at 515 Elgin St. is still available for several reasons, Knight said. If the space must be leased in its entirety, it limits the pool of potential tenants. Likely candidates could be larger-format fitness operators, entertainment concepts or even medical office tenants, he added.

The location is also an in-between market area for grocers. Randalls is the only remaining grocery store in Midtown. Many concepts that might like the location don’t need that much space, Knight said. 

Whole Foods didn’t disclose the reasons it shuttered the store in 2023 or how many years were left on its lease. 

“Houston has two extremely strong competitors in the grocery sector, which is a tough business with slim margins to begin with, and occupiers may retreat if revenues don’t sustain a location,” Cushman & Wakefield Managing Director Eric Lestin said in a statement.

Another grocery store, Randalls at 5161 San Felipe St., shuttered last quarter.

“In such a competitive environment, our company must sometimes make the tough decision to close a store so that we can reinvest in our remaining stores in the marketplace,” Christy Lara, Albertsons PR director for Texas and Louisiana, told Chron.

There are reports of a specialty grocer in the works to backfill that space, Knight said. 

According to Wietzman’s report, vacancies that were backfilled in the first half of the year include:

• The former Sears at Willowbrook Mall in Northwest Houston, which now houses international fashion retailer Primark
• A former Kroger in Dickinson that shuttered in mid-2025 and will become a Crunch Fitness later this year
• A 24K SF Party City space in Baybrook Gateway and part of a former H-E-B in Kingwood that are now Sprouts locations
• A former 56K SF Randalls in Meyer Park, which is now a Floor & Decor

Another well-located vacancy is the former Grand Lux Cafe in Kimco Realty’s Centre at Post Oak, directly across the street from The Galleria. The Cheesecake Factory's sister brand occupied 13K SF at 5000 Westheimer Road for 21 years before closing in January.

Large-format restaurants aren’t as common as they were even a decade ago, so filling that space without subdividing it could be a challenge, CBRE Houston Restaurant Practice Leader Thomas Nguyen said. 

There are still some large-format restaurants, like the Eataly food hall and Italian market concept that will occupy a 20K SF former furniture store within the same Centre at Post Oak development. 

But securing second-generation restaurant space in Houston has become even more competitive than it was two years ago as expenses keep rising for landlords and tenants, Nguyen said. 

Average asking small-shop annual rental rates for Class-A space inside the 610 Loop ranged from $50 to $70 per SF in the first half of this year, according to the Weitzman report. Class-A space outside of the Loop ranged from $39 to $50 per SF on average. 

“It makes it difficult in the marketplace just because rents are as high as I’ve ever seen them,” Nguyen said. 

Lestin and Siree Jones of Cushman & Wakefield represented Jamaica Pon di Road in securing its second location, opening in early August at 3424 FM 1092 in Missouri City. They toured about 10 second-generation restaurant spaces throughout Houston before selecting KM Realty’s Township Square Shopping Plaza in Missouri City, Jones said.

“The lease negotiations, themselves, required a thoughtful and strategic approach with a focus on competitive terms that aligned with the restaurant’s operational and financial goals rather than simply winning the space,” Jones said in a statement.

Overall, Houston’s retail market has strong demand, and concepts are getting creative to secure the space they want in a specific submarket, Knight said. Weitzman is marketing an empty theater space, and a fitness operator is looking into whether it could fit a gym into the space and incorporate the movie screens for treadmill sessions. 

“So an empty space is like that duck in the parable,” Knight said. “Things might look still on the surface, but there’s a lot of activity that you don’t see.”