![\"Placeholder\"\/](\"https:\/\/www.europesays.com\/us\/wp-content\/uploads\/2025\/06\/1750589843_18_placeholder.png\")
<\/p>\nThe strength of Houston\u2019s retail market is a double-edged sword.<\/p>\n
<\/p>\n
The leasing process is lengthening as near-record rental rates\u00a0mean tenants struggle to find space they can afford and landlords may\u00a0hold out for the ideal concept to fill empty spaces.\u00a0<\/p>\n
But as people keep moving to Houston, retailers do, too, keeping vacancy low despite expensive rent and high-profile bankruptcies, brokers say.<\/p>\n
National tenants trying to grow their brand are willing to pay\u00a0more rent in Houston since the region can get them exposure and they typically perform well enough to make the price tag worthwhile, Baker Katz<\/a> broker Lunden McGill said.<\/p>\n \u201cIf they’re going to pay more than they’re used to, Houston’s going to be a market that they’re going to do it in,\u201d McGill said.\u00a0<\/p>\n Despite quarterly fluctuations, retail rents have stabilized at elevated rates since 2024, the\u00a0Greater Houston Partnership reports<\/a>.\u00a0The average triple-net rent was $20.51 per\u00a0SF in the third quarter, just below the recent high of $20.79 in the first quarter of 2024\u00a0and\u00a0virtually unchanged from year-ago levels.\u00a0<\/p>\n \u201cThe leveling of rents suggests a more mature phase of the cycle, with pricing holding near record levels despite a more cautious leasing environment,\u201d the GHP report says.<\/p>\n Leasing activity decreased in the third quarter, from 2M SF to 1.8M SF, but new supply delivered plunged further, according to a Partners Real Estate report<\/a>. Supply and demand being in lockstep has kept vacancy flat and low at 5.6%.<\/p>\n About 700K SF came online\u00a0in the quarter, down about 24% from the previous quarter and down 41% from the previous year,\u00a0according to the Partners report. Neighborhood retail centers, typically 30K SF or less, near recently developed residential subdivisions account for the majority of new construction.<\/p>\n The rental rate discrepancy between submarkets in the Houston area is large, with average rent above $28 per SF in the Inner Loop and at $17 per SF in the Southeast, Partners said.<\/p>\n The biggest tenants to move in last quarter were indoor pickleball concept The Picklr<\/a> taking about 67K SF in The Woodlands and EoS Fitness<\/a> moving into 51K SF in Katy.\u00a0<\/p>\n A\u00a0significant proportion of retail activity has been driven by experiential concepts backfilling junior boxes vacated by brands like Joann and Party City<\/a>, McGill and fellow Baker Katz broker John Frazier said.<\/p>\n \u201cWhat we have had, largely by virtue of those closings, is an inventory of boxes that work well for tenants like Altitude Trampoline Park and Momentum,\u201d Frazier said.<\/p>\n Utah-based Momentum Indoor Climbing gym announced plans this summer<\/a> for its third Houston location at a 38K SF former Bel Furniture in Memorial City<\/a>.<\/p>\n Other experiential tenants backfilling spaces in the Houston area this year include Dave & Buster\u2019s and Ace Pickleball Club moving into a long-vacant former Gander Mountain in Sugar Land, trampoline park Sky Zone<\/a> Houston moving into a former Conn\u2019s, and Crunch Fitness<\/a> backfilling a 28K SF Bed Bath & Beyond, according to a midyear report from Weitzman<\/a>.\u00a0<\/p>\n But having the ideal space available doesn\u2019t make leasing an easy process for the tenants.\u00a0<\/p>\n \u201cEven though there are more boxes available than traditional in-line, small-shop retail across our market, it\u2019s still pretty competitive,\u201d McGill said. \u201cIt\u2019s causing tenants to have to really step up from a rent standpoint.\u201d\u00a0<\/p>\n High rents and other volatile market conditions have led real estate decisions to stretch out.<\/p>\n \u201cIt just takes a little bit longer to get comfortable when rents are higher,\u201d McGill said.\u00a0<\/p>\n Landlords of retail centers in high-demand areas like Baybrook may sit on a vacant space for six months to wait for the perfect\u00a0tenant who will pay high rents.\u00a0Average triple-net rents in Houston have grown from\u00a0$15.91 per SF in 2018<\/a> to\u00a0more than $20 per SF since late 2023.\u00a0<\/p>\n Some concepts require large upfront investments. Momentum’s build-out of its Memorial City location is projected to cost $2.2M, according to a filing with the Texas Department of Licensing and Regulation.\u00a0<\/p>\n Tenants may negotiate lower rents by forgoing large tenant improvement allowances and paying for build-outs themselves, McGill said. That investment can be worth it for tenants\u00a0that know how well they already perform in Houston.\u00a0<\/p>\n<\/p>\n