Houston’s retail market has remained healthy through mid-year 2017, with low vacancy, steady leasing activity and positive absorption. Despite 1.5M SF of new construction deliveries in Q2 2017, the average vacancy rate remained unchanged from last quarter, at 5.6%. Almost half of the 2.3M SF of retail space under construction is preleased and 83% of new construction delivered in 2017 is occupied.

Houston’s retail leasing activity, which includes renewals, increased over the quarter from 1.2M SF in Q1 2017 to 1.4M SF in Q2 2017. Much of the high-end class A space located within the major innercity retail hubs is 90-100% leased. It is hard to find good quality well located available space. Most of the space that is available is in older centers or projects under construction in the suburbs near new master-planned residential development. Many large retailers such as Macy’s and Sears, have announced store closings, but there are still new retailers entering the Houston market such as Dirt Cheap, a deep-discount chain, which recently leased space in 3 locations.

According to the U.S. Bureau of Labor Statistics, the Houston metropolitan area created 45,300 jobs (not seasonally adjusted) between May 2016 and May 2017. That is a substantial increase in job growth for Houston when compared to the 200 jobs gained in 2015 and the 18,700 gained in 2016, but still below the average of 65,000. Most of the recent quarterly job growth occurred in employment services, public education, food services and drinking places, health care, and fabricated metal products.

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