For the second straight three-month period, retail in Houston has failed to gain traction — while concerns go beyond the first half of the year.
Starting with the second quarter, net absorption continued its negative trend, posting -66,000 square feet, according to a market report from CBRE. That marked the second straight three-month period that the category remained in the red. By product type, neighborhood, community and strip centers experienced the most turbulence, with their combined -411,000 square feet in absorption. Lifestyle and Malls were the next closest, at -131,000 square feet.
Additionally, availability ticked up by 10 basis points from the first quarter to reach 5.7 percent. The Near Southeast submarket posted the highest rate, at 6.6 percent. That came as 448,000 square feet of retail product hit Houston's inventory in the second quarter.
"Some new availabilities in 2025 have been 'big box' spaces from recent tenant downsizes and bankruptcies," CBRE explained.
"These are seeing deal activity, but lengthening negotiations have resulted in slower absorption."
The less-than-ideal quarter adds to more of a nationwide issue. CBRE highlighted that consumer confidence is declining, as tariffs imposed by the Trump administration are expected to weigh on inflation.
Meanwhile, certain parts of retail might be better suited in the current landscape than others. For example, CBRE noted that analysts forecast luxury retailers will continue to see a slowdown in activity until 2027, while supply and discount stores are thriving now.
One concern in Houston is elevated retail rents, which averaged $19.60 NNN per square foot in the second quarter.
"Houston retailers are citing high rents and reduced expenditures as a major concern moving into the second half of 2025," CBRE warned.
Dhanani Private Equity Group commanded the acquisition in terms of square footage in the three months through June in the city, with its 305,000 square foot purchase of Fondren Southwest Village. RCG Ventures and Stockbridge ranked second and third, with 181,836 square feet and 126,000 square feet buys, respectively.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.