SVN Research
Submarket Snapshots
Houston Retail Top Submarkets
February 03, 2025
The Top Retail Submarkets Report provides a comprehensive look at Houston’s retail real estate market, focusing on net absorption, availability, market activity, and rental rates across key submarkets. Below is a more detailed breakdown of each category:
1
Net Absorption Trends
Net absorption measures the change in occupied retail space over the past 12 months, reflecting demand dynamics.
Top Submarkets for Net Absorption (SF)
- Far Katy South: Led all submarkets in positive absorption, indicating strong retail demand.
- Montgomery County: Continues to see retail growth, driven by suburban expansion.
- Far Southwest & Bridgelands: Show steady demand, supported by residential developments.
- Near Southeast & Far Katy North: Emerging as growing retail hubs.
- NASA/Clear Lake & Inner Loop/Heights: Strong infill locations with sustained tenant interest.
Implications:
- High absorption suggests a thriving retail environment, particularly in suburban and developing markets.
- Demand in inner-loop areas remains strong but competitive.
2
Retail Space Availability
Availability measures the total amount of retail space currently vacant and available.
Highest Availability by Submarket (SF & Rate)
- Montgomery County & NASA/Clear Lake: Have the largest retail space availability, likely due to new developments or struggling properties.
- Southwest Far North & Near Southeast: Show elevated vacancy rates.
- Far Katy South & Far New Territory: Some of the highest available square footage, which could indicate slower absorption.
Implications:
- Areas with high availability but strong absorption (e.g., Montgomery County) may signal future leasing opportunities.
- Investors should monitor availability trends for potential tenant turnover risks.
3
Market Activity
This metric highlights the submarkets with the most leasing and sales transactions.
Most Active Retail Submarkets
- Montgomery County & Far Katy South: Among the busiest markets, suggesting a high level of retail expansion.
- Inner Loop/Heights & Bridgelands: Show strong retail movement, possibly benefiting from high consumer foot traffic and residential density.
Implications:
- Active submarkets attract tenants and investors, leading to competitive leasing conditions.
- The mix of suburban and urban activity indicates diverse retail opportunities.
4
Market Rental Rates
Rental rates per square foot (SF) provide insight into submarket desirability and profitability.
Highest Market Rents (per SF)
- Galleria/Uptown: Highest rental rates, exceeding $35/SF.
- Inner Loop River Oaks & Inner Loop University: Premium pricing due to high-end demographics.
- Willowbrook, Near West, & CBD: Mid-to-upper tier rental rates.
- Far New Territory, Bridgelands, & Far Katy South: Lower rent markets with potential for growth.
Implications:
- High rents in Galleria and Inner Loop suggest strong demand but high barriers to entry.
- Lower rents in suburban markets could attract expanding retailers.
Conclusion & Key Takeaways
- Suburban Growth: Retail demand remains strong in Far Katy South, Montgomery County, and Bridgelands, driven by residential expansion.
- Availability vs. Demand: Some markets (e.g., Montgomery County) show high availability but also strong absorption, signaling a healthy turnover cycle.
- Investment Opportunities: High-activity submarkets like Inner Loop/Heights and Bridgelands may offer leasing and acquisition opportunities.
- Rental Trends: Prime locations command high rents, but suburban markets provide affordability for new entrants.
This report highlights the ongoing expansion of Houston’s retail market, with suburban submarkets continuing to thrive and inner-loop locations maintaining high demand.