HOUSTON—A new report out from Colliers International shows leasing in the city's retail market declined in the second quarter due to limited available space.

“The retail vacancy rate has dropped to 5.8 percent city-wide, which is the lowest vacancy rate over the last 10 years,” Lisa Bridges, director of market research at Colliers, told GlobeSt.com. “The majority of the new development is located in the suburban submarkets and is mostly grocery-anchored centers. 

During the second quarter, the report states, 933,719 square feet of Houston's retail inventory was absorbed, slightly more than the 837,255 square feet from the previous quarter. Retail leasing activity decreased, reaching 1 million square feet, a decrease of 30 percent from the 1.3 million square feet leased in the first quarter.

In addition, over 1.1 million square feet of new inventory delivered during the second quarter and 87.1 percent of the new product is pre-leased. Houston's retail construction pipeline totals 1.9 million square feet and 78 percent is pre-leased.

Houston's average retail vacancy rate decreased slightly from 6 percent to 5.8 percent between quarters, and decreased from 6.2 percent over the past year. The citywide average quoted retail rental rate increased 1.5 percent between quarters from $15.08 to $15.30 per square foot NNN. The average rate has increased 2.3 percent on a year-over-year basis from $14.96 per square foot NNN.

“Retail leasing activity will remain steady in the near term as more new neighborhood centers are built due to expansion in the housing market,” Bridges says. “The urban retail submarket is well leased and the cost to develop these areas is expensive, therefore most of the future growth will be located in the suburban markets.