Houston, TX Retail Market Report Q2 2026

Houston’s economy entered the second quarter of 2026 with a diverse demand base supporting the retail sector. Population and household growth continued to expand the region’s consumer base, particularly across suburban growth corridors. Employment conditions also provided an important foundation for retail spending, although consumers remained sensitive to elevated living costs and broader economic uncertainty. The energy sector continued to influence regional business activity, but Houston’s expansion across healthcare, logistics, manufacturing, and professional services reduced its dependence on a single industry. Household formation and residential development supported retail demand in emerging suburban communities where population growth has outpaced existing commercial supply. At the same time, higher borrowing costs constrained some business expansion and increased occupancy costs for retailers pursuing new locations.

Key Findings

• Houston’s retail fundamentals stayed relatively tight during the second quarter, although negative absorption signaled some near-term softening in tenant demand.
• A sizable construction pipeline points to continued developer confidence, but new supply could create more competition for tenants as projects deliver.
• Investment activity remained active, while elevated cap rates reflected a pricing environment that still favors disciplined underwriting and selective acquisitions.

Houston Retail Supply & Demand Dynamics

Source: CoStar Group, Inc.

 

Houston Demographics

Source: Oxford Economics

• Unemployment Rate: 4.6%
• Current Population: 7,996,188
• Households: 2,858,087
• Median Household Income: $83,624

Top Retail Leases

Source: CoStar Group, Inc.

• 22020 West Rd – 134,808 SF
• Center at Baybrook – 133,560 SF

Population, Labor Force, & Income Growth

Source: Oxford Economics

 

Houston Retail Construction

Development activity reflects confidence in the metro’s demographic expansion and the need for additional retail services in fast-growing residential areas. Houston had approximately 4.2 million square feet under construction at the end of the second quarter, creating a meaningful pipeline of future retail inventory. Builders have generally focused new projects in suburban corridors where household growth can support grocery-anchored centers, service retail, restaurants, and other necessity-oriented concepts. Only 3,700 square feet delivered during the quarter, leaving the market with minimal immediate supply pressure from completed projects. The gap between quarterly deliveries and the construction pipeline indicates that a larger volume of space could enter the market over coming quarters as projects reach completion.

SF Construction Starts

Source: CoStar Group, Inc.

 

SF Under Construction

Source: CoStar Group, Inc.

 

Houston Retail Sales

Houston recorded approximately $232 million in retail sales volume during Q2 2026 as investors remained active despite a challenging capital markets environment. Properties traded at an average $255 per square foot, reflecting investor demand for retail assets with durable tenancy and strong locations. The average cap rate measured 7.3%, offering a wider yield than investors typically accepted during the low-interest-rate environment earlier in the cycle. Higher financing costs continued to influence pricing and encouraged buyers to emphasize current cash flow, tenant credit, lease duration, and potential capital requirements. Grocery-anchored centers, necessity retail, and properties in high-growth suburban trade areas likely attracted the strongest investor interest as buyers prioritized predictable income. The wider cap-rate environment may also create acquisition opportunities for investors with available equity and longer investment horizons. Sellers, however, may remain reluctant to transact when current pricing falls below expectations established during the previous market cycle. This disconnect could limit transaction velocity even as investor interest persists.

Sales Volume

Source: CoStar Group, Inc.

 

By the Numbers

Q2 2026 | Source: CoStar Group, Inc.

• Sales Volume: $232M
• Price Per SF: $255
• Cap Rate: 7.3%
• Vacancy Rate: 5.5%
• Rent Growth: 1.9%
• Asking Rent Per SF: $24.96
• SF Under Construction: 4.2M
• SF Delivered: 3.7K
• SF Absorbed: -478K