Q2 2025 Austin Retail Market Report
Market Overview
Austin’s retail market is experiencing tight market conditions due to strong demand and limited space. High demand for retail space has culminated owing to the market’s fast-growing population, rising household incomes, and robust consumption. These factors have garnered a significant among of attention from retailers. The market is ranked as one of the fastest-growing cities in the country. Majority of this growth is focused in the metro’s outer regions, a primary source of retail demand.
In Q2 2025, vacancy remained at historic lows despite the largest wave of move-outs since the beginning of the pandemic. The rate stood at 3.1%. Retailers such as Furniture Row, Big Lots, and Party City are continuing to close locations or have filed for bankruptcy, leading to a recent shift in the market’s absorption. Despite the cooling of absorption to 107,000 SF in Q1 as a result of tenant vacancies, Q2 saw a net absorption of 306,000 SF (over double the amount from the previous quarter).
Optimism remains strong regarding demand for the remainder of the year. The recent vacant space as a result of store closures can potentially aid in easing pent up demand. A fairly new trend has also emerged for Austin, with occupancy at delivery decreasing to average 67% over the last 12 months. This is the lowest rate in more than a decade. Increased availability of newly constructed space may also help meet future demand. Projects completed since 2024 or currently under development account for 23% of total available space, totaling 1.4 million SF.
Given the attention Austin has received from retailers, increased rents are projected in the long run as a result of limited supply and strong demand.
Supply & Demand Dynamics
Source: CoStar Group, Inc.
Market Asking Rent Per SF
Source: CoStar Group, Inc.
Under Construction
Source: CoStar Group, Inc.
By the Numbers
- Sales Volume: $27.1M
- Rent Growth: 0.5%
- Vacancy Rate: 3.1%
- Cap Rate: 6.1%
- Market Asking Rent Per SF: $30.59
- SF Under Construction: 2.7M
- SF Delivered: 432K
- SF Absorbed: 306K | Q2 2025 | Source: CoStar Group, Inc.
Sales
Austin’s retail investment market remained sluggish as sales activity continued to be constrained by a challenging financing environment and a widening valuation gap between buyers and sellers. Despite strong tenant demand and historically low vacancies, property owners have grown increasingly hesitant to sell amid softening values and elevated interest rates. As a result, transaction volume stayed muted, with the market posting just a 1% turnover rate, well below the historical 4.1% average, and on pace for the lowest annual sales total since 2012.
Smaller, freestanding properties under 10,000 SF remained the most active segment, with cap rates averaging in the mid-5% range, about 50 basis points higher than in 2022. Larger assets, particularly strip centers, are now trading above 6%, reflecting a 50 to 75 basis point rise since the Fed began increasing rates. Uncertainty around future resale opportunities is causing many owners to hold properties longer, and valuations are expected to remain under pressure through the remainder of the year.
Austin Retail Sales Volume & Price Per SF
Source: CoStar Group, Inc.
