Activity from retail tenants remained robust throughout all of 2024. New retail concepts continued to focus their growth plans on Houston, while retailers with an existing Houston presence continue with expansion plans heading into 2025.
Construction and capital costs remain a hinderance for developers as construction levels slow. Overall, the retail market remains a bright spot, supported by continued population growth and a thriving local economy. Said Colliers Houston President, Danny Rice
2024 REPORT REVISIONS
The Q4 2024 Houston retail market report reflects a significant change carried over from the first quarter but different from prior years.
Colliers now includes statistics on all retail properties 5,000 SF or greater.
Due to this revision, direct comparisons to prior published editions of the Houston retail market report will be challenging.
Key Takeaways
- Retailers expand, new concepts open
- New supply drops due to decreased construction
- Vacancy steady
- Absorption slower but constant
Houston Highlights
Houston’s retail market saw new concepts and retailer expansions throughout 2024, despite recent slowdowns in construction and deliveries. Construction dropped to almost 3.0M SF during the fourth quarter, the lowest since the pandemic, and a 31.7% contraction from the same time last year. Absorption also fell in both the quarter and overall in 2024, with the annual absorption of 1.8M SF the lowest on record. Deliveries also dropped during the fourth quarter for an annual total of 3.2M SF for the year, but multiple expansions by large retailers such as Costco, HEB and the Home Depot included opening two new stores each during the year. Even with new supply outpacing absorption each quarter this year, overall vacancy has remained healthy at 5.4%, albeit 30 basis points above last year’s vacancy number. The average rental rate finished the year at $20.63 PSF, representing a 2.5% year-over-year increase. Leasing activity totaled 8.3M SF in 2024, marking a 2.4% increase over the prior year. Several key projects have targeted opening dates during early 2025 including the largest project under construction, the 748,800-SF Manvel Town Center in the South.
Market Indicators
Historic Comparison
Market Fundamentals
Overall vacancy remains stable, ranging from 5.0% to 5.5% over the past three years. Although net absorption slowed each quarter this year, leasing activity has remained constant.
New supply fell in the fourth quarter to 472,302 square feet, bringing total deliveries for 2024 to 3.2 million square feet, an 18.6% decrease from 2023. Available sublease space was relatively unchanged throughout the year, declining 1.7% from the prior quarter to 617,943 SF, which is a 1.0% increase from Q4 2023.
Colliers’ Transactions
Executive Summary
Commentary by Kaylee Boyd, Associate
As the year came to a close, Texas made its long-awaited debut on the prestigious Michelin Guide, with 15 restaurants awarded a one-star review, six of which went to restaurants in our backyard. Additionally, Houston landed 17 of the 44 Bib Gourmand-awarded restaurants while seven local restaurants made the recommended list, signifying great food at great value. Houston’s entry into the Michelin Guide marks a significant milestone for the city’s culinary scene, highlighting the city’s evolving culture with a diverse mix of fine dining and innovative flavors.
Michelin’s reputation of favoring world-class, fine-dining establishments led to Houston classics, such as BCN Taste & Tradition, to be awarded their long-awaited star. However, critics such as Alison Cook, the Houston Chronicle’s now retired seasoned restaurant critic, argue that “this Texas guide isn’t really about a benevolent outside force recognizing the maturity of the state’s dining scene, or finding respect for it. It’s about money.” Dozens of cities across the world are highlighted in the Michelin Guide, which certainly has not come without a cost. Cities and groups such as Houston First and Travel Texas pay for the inclusion.
Nevertheless, Houston’s inclusion in the guide elevates the city’s culinary reputation, further positioning our city as a destination for best-in-class restaurant brands. In fact, Houston’s rise nationally as a go-to-market for new concepts to tap into has been apparent well before this recognition.
National restaurant brands are eager to include Houston on their expansion list and capitalize on the growing demand for quality dining experiences in our city. However, we are seeing consistently low vacancy rates across the Houston MSA, creating the challenge of finding prime locations for these restaurants. With such high demand and low inventory, we must navigate space constraints and find creative solutions to accommodate the demand.
Construction Activity Delivery Timeline
Houston Historical Retail Sales Activity
