SPRING, Texas - TelAve -- Executive Summary

Houston's retail market maintained healthy fundamentals during Q3 2026, supported by stable occupancy, continued rental growth, and positive tenant demand. Direct vacancy remained at 5.6% for the second consecutive quarter, while the average direct asking NNN rent increased to a record $22.03 per square foot, approximately 8.1% above Q3 2025.

Retail demand strengthened during Q3 2026, with net absorption reaching 551,122 square feet, a significant improvement from 39,756 square feet in the previous quarter. Leasing activity totaled approximately 1.75 million square feet, bringing year-to-date leasing activity to nearly 5.9 million square feet. Through the first nine months of 2026, Houston recorded more than 1.1 million square feet of positive net absorption.

Development activity emerged as one of the quarter's most notable trends. Houston's construction pipeline expanded to approximately 5.1 million square feet, the highest level since 2019, while quarterly deliveries moderated to approximately 449,000 square feet. New construction remains concentrated in expanding suburban growth corridors, where population gains, residential development, and household formation continue to create opportunities for additional retail space.

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Market performance continues to differ by submarket and retail format. Power Centers maintained particularly strong fundamentals, with direct vacancy measuring just 2.7% and approximately 317,000 square feet of positive year-to-date net absorption. Meanwhile, several established retail destinations and rapidly growing suburban submarkets continued to command asking rents above the citywide average. Retail investment pricing also improved during the quarter, reaching an average of $129.75 per square foot.

Houston enters Q4 2026 with a growing consumer base, expanding suburban development, and generally healthy retail fundamentals. As development activity increases, the balance between new supply and tenant demand will become increasingly important. Well-positioned retail properties in high-growth corridors should remain attractive to tenants, while market performance will continue to reflect differences in location, retail format, and surrounding population growth.

- Mary Doetterl, Research Director

Read the full report here: https://www.lee-associates.com/houston/2026/11/03/houston-retail-market-report-2026-q3/