Retail

23Q4
Houston

Looking back on 2023, the retail sector continued to outperform and lead the
overall market with demand for retail space outpacing current supply. Vacancy
continues to remain at record lows even with one million square feet of new
product being delivered to the market during the year.
The resiliency of consumer spending has surprised many economists given
the backdrop of elevated inflation, high interest rates and uncertain geopolitical
climate that was felt throughout much of 2023. Specific to Houston, population
growth continues to be the driving force for retailers – especially food and
beverage – and developers eager to put a flag in the market or expand their
current positions.

Danny Rice | President

Accelerating success.
 Retail Key Takeaways

23Q4
• Vacancy marginally improves

Houston
• Absorption rebounds for quarter and year
• Leasing activity decreases slightly
• Rental rates stabilize

YOY YOY Under YOY Overall Asking Lease YOY

Vacancy Rate Net Absorption Construction Rates (NNN)

6.4% FORECAST
642.7K SF FORECAST
655.1K SF FORECAST
$18.63/SF FORECAST

Houston Highlights
Houston’s overall retail vacancy rate marginally improved to 6.4% from 6.6% in third quarter. Demand outpaced new supply with
more than twice the square footage absorbed as delivered during the quarter while prolonging a strong annual absorption trend
for the third straight year. In 2023, annual absorption totaled 1.5 MSF while 1.0 MSF delivered, and the Southwest led all submarkets
with 503,289 SF absorbed with 435,015 SF delivered. Leasing activity of 1.1 MSF decreased from 1.3 MSF the prior quarter. Annual
leasing activity of 4.9 MSF fell from the last five quarters, which averaged 5.5 MSF. The construction pipeline remains limited with
655,062 SF currently underway, a 50% drop year-over-year. Averaged rental rates reported a marginal decrease from the previous
quarter but a 4.4% increase year-over-year.

Market Indicators Market Fundamentals

3.8% 2.3% $72
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Total Inventory
206.7 207.4 207.7
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New Supply
410.7 244.3 345.9 ;ϭ͕ϱϬϬ͕ϬϬϬͿ Ϭ͘Ϭй
(in Thousands of SF) Yϭ YϮ Yϯ Yϰ Yϭ YϮ Yϯ Yϰ Yϭ YϮ Yϯ Yϰ Yϭ YϮ Yϯ Yϰ Yϭ YϮ Yϯ Yϰ Yϭ YϮ Yϯ Yϰ
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Net Absorption ďƐŽƌƉƚŝŽŶ EĞǁ^ƵƉƉůLJ dŽƚĂůsĂĐĂŶĐLJ

309.5 4.2 642.7
(in Thousands of SF) Absorption New Supply Total Vacancy

Overall Vacancy 6.6% 6.6% 6.4% Overall vacancy has been steady, ranging from 6.4% to 6.6% the
last six quarters and below 8.0% during the last two years. Strong
Under demand during the fourth quarter reversed a weak third quarter,
Construction 1,323.1 891.6 655.1 and with limited new supply, created a strong retail market.
(in Thousands of SF)
Net absorption during fourth quarter increased to the highest
Overall Asking level since last year’s second quarter. Sublease space has
$18.02 $18.77 $18.63 decreased from the third quarter and represents a 34.3% drop
Lease Rates (NNN)
year-over-year.
Source: CoStar

Recent Transactions *Colliers’ Transaction

Lease Lease Lease Lease* Lease*

Willowbrook Plaza Westchase Shopping Center Conroe Marketplace Windemere Village State Highway 6 & Vicksburg
Northwest | 45.0k SF West | 30.0k SF North | 24.7k SF Shopping Center Southwest | 1.6k SF
Northwest | 3.5k SF
 Retail
Houston

23Q4

Executive Summary
Commentary by Wade H Greene IV, CCIM, Director of Retail Services

Houston retail sector remains on top, tailwinds for 2024
Despite the challenges that faced commercial real estate
markets across the country, Houston continued to shine
across all metrics in the retail sector. Houston landed at the
top of end-of-year lists for space absorbed, space delivered
and occupancy rates, while remaining middle-of-the-pack for
rents and occupancy costs.
Last year we saw several new-to-market national concepts
such as Puttshack, Clarks Oyster Bar, Luminary and Gentle
Monster enter our region along with the expansion of several
national hospitality groups. This year we will see more new-to-
Houston brands and concepts in addition to those that already
have a footprint here looking to expand their presence.
Chipotle, (a Colliers client) for example, has seen a double-digit
percentage increase in its sales in Houston year-over-year and
is working with our team to double their footprint here.
One common headwind faced throughout our market last
year was the lack of available space, especially with sites that
were up-to-brand standard for both our and our peers’ clients.
This, in turn, created a pipeline effect for users looking in
the market. Many brands were signing deals with 2024, 2025
and 2026 deliveries just to secure a spot in their targeted
trade area. As shown in our research, there was an influx of
delivered space at the end of last year compared to the last
several quarters.
We believe the demand for retail space in this market will
result in the delivery of space we have not seen in some time.
This demand – coupled with the leveling of construction prices
and cautious optimism regarding reduced interest rates – will
include the green lighting of power centers that were not
economically feasible to underwrite in the last few years. Our
team has observed that both landlords and tenants, in what
was once a stalemate, stepped up in contribution and rent,
respectively, to make deals happen in this market when it still
hit the pro forma metrics for both parties.
Houston continues to be one of the fastest growing markets
nationally while maintaining its status of being one of the most
affordable major cities in the country. Retail will always follow
the roof tops, and Houston is delivering them, with little to no
geographic boundaries that plague other growing markets.
When one of the biggest challenges facing a market is lack of
inventory to meet demand and that supply is on the way, 2024
is shaping up to be another year that we should thank our
lucky stars that we live and do business in this great city.

Colliers | Houston | 23Q4 | Retail Report

 Retail
Houston

23Q4
Houston | Q4 2023 | Retail | Market Statistics

Direct Sublease Total Total Previous Net Net Avg Asking

Total Availability Availability Availability Vacancy Vacancy Absorption Absorption Under Deliveries Rental
Submarket Inventory SF Rate Rate Rate Rate Rate Current YTD Construction YTD Rates NNN
CBD/
12,257,921 6.7% 0.0% 6.7% 4.5% 4.5% (4,913) 36,010 120,171 62,128 $31.86
Inner Loop

East 5,494,182 4.5% 0.0% 4.5% 3.6% 3.3% (13,343) 93,307 0 0 $17.45

North 39,173,086 7.0% 0.3% 7.3% 7.8% 8.0% 79,745 (121,633) 20,054 117,793 $16.84

Northeast 6,616,912 6.7% 0.9% 7.7% 5.2% 6.4% 99,968 275,396 237,040 41,570 $18.98

Northwest 37,515,479 7.8% 0.2% 8.0% 8.7% 8.7% 30,307 176,909 46,495 163,450 $18.97

South 8,264,531 5.5% 0.1% 5.5% 4.6% 5.0% 144,584 133,601 10,560 117,000 $18.19

Southeast 31,619,432 6.5% 0.1% 6.6% 5.9% 5.9% 32,832 60,793 22,100 48,165 $17.37

Southwest 36,374,057 6.2% 0.1% 6.3% 5.9% 5.9% 82,125 503,289 128,243 435,015 $18.50

West 30,351,709 5.6% 0.1% 5.7% 4.7% 5.4% 191,400 234,537 70,399 74,915 $22.10

Overall Totals 207,667,309 6.5% 0.2% 6.7% 6.4% 6.6% 642,705 1,392,209 655,062 1,060,036 $18.63

Source: CoStar

Construction Activity Delivery Timeline

70,000 SF or Greater
Source: CoStar

Market Square at Eldridge

Meow Wolf at Moncrief Lenoir
Parkway Outparcel M
2103 Lyons Avenue
Eldridge Parkway
CBD/Inner Loop
West
January 2024
January 2024
100,171 SF
70,399 SF
Petag Corporation
NewQuest Properties

2023 2025

Marcel Harvest Green

Woodland Hills Shopping Center
Building E
N Sam Houston Parkway E &
18802 W Airport Blvd
Woodland Hills Drive
Southwest
Northeast
February 2024
March 2024
82,770 SF
237,040 SF
The Marcel Group
International Investors Group

Colliers | Houston | 23Q4 | Retail Report

 501 offices in Market Contacts:
Patsy Fretwell

66 countries on Research Director

Houston

6 continents
+1 713 830 2125
patsy.fretwell@colliers.com

Danny Rice
President
United States: 156 Houston
+1 713 830 2134
Canada: 45
danny.rice@colliers.com
Latin America: 20
Asia Pacific: 99
William Uhalt
EMEA: 112
Research Manager
Houston
+1 713 830 2137
william.uhalt@colliers.com

Contributor:
$4.5B Wade H Greene IV, CCIM
Principal | Director of Retail Services
Annual revenue Houston
+1 713 830 2189
wade.greene@colliers.com

2B
Square feet managed

18,000
Colliers’ statistical criteria includes select
retail properties 10,000 square feet or greater.

Professionals Copyright © 2024 Colliers

The information contained herein has been obtained from
sources deemed reliable. While every reasonable effort has
been made to ensure its accuracy, we cannot guarantee it. No
responsibility is assumed for any inaccuracies. Readers are
encouraged to consult their professional advisors prior to acting
on any of the material contained in this report.

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