Market Snapshot: Houston’s Retail Demand High

Retail might be a lagging CRE asset to improve nationwide, but Houston's retail market is not feeling the pinch.

By Liviu Oltean, Associate Editor

Houston - Retail Net Absorption And Occupancy Rate Q4 2014
Houston – Retail Net Absorption And Occupancy Rate Q4 2014

In 2014, the retail market in Houston performed exceedingly well and analysts expect growth to continue in 2015. According to recent CBRE research data, in the last quarter of 2014 Houston absorbed 316,988 square feet, which brought the net absorption per year to 2.1 million square feet, the highest absorption rate since 2003.

Despite delivering 1.8 million square feet of new construction in 2014, vacancy dropped to a record 6.6 percent. Demand remains high in retail centers located in Cypress, the Galleria area, The Woodlands and Sugar Land, where occupancy rates are well over 90 percent because of the multitude of single-family and multifamily projects that are under development there.

Q4 2014 is the second quarter in which Houston registered a lower quarter-to-quarter absorption rate; however the year-to-date absorption rate of 2014 exceeded that of 2013. The average rental rate for retail properties also continued to increase from $22.06 per square foot in Q3 to $22.15 per square foot in Q4. The most significant increases were registered in the Inner Loop, Far North and South submarkets.

Fueled by the highest occupancy rate on record and an estimated population increase of 125,000 residents in 2015, analysts remain optimistic about the retail market in Houston despite the problems in the energy industry.

The most notable retail transactions of 2014 in Houston were Fidelis Realty Partners’ development of a 750,000-square-foot shopping, dining and entertainment center; and HCL-MarqE’s acquisition of the 352,000-square-foot Marq*E Entertainment Center.


Chart courtesy of CBRE