Q2 2022 | Houston Retail Market Report - THE TENANT ADVISOR

Abstract

Houston Highlights Houston's vacancy rate decreased 50 basis points from 5.6% to 5.1% over the quarter as more inventory was leased than new inventory delivered. Houston's retail sector recorded 1.3 million square feet of positive net absorption in the second quarter, pushing the year-to-date total absorption to 2.4 million square feet. Key Takeaways Vacancy continues to decrease Positive absorption recorded Rental rates increased 2.0% annually 2022 leasing activity up 24% annually Executive Summary The Consumer is Still Consuming - Retail Holding On Despite recent readings of consumer confidence dipping to the lowest level in seven years and a 40-year high inflation environment, the US consumer is still buying. "Regardless of the prospect of a downturn or whether it will meet the threshold of a recession, the consumer outlook over the next few months remains favorable, with most U.S. households continuing to have high levels of purchasing power. The economy is moving away from extremely strong growth toward moderate growth, but increased income from employment gains, rising wages and more hours worked is expected to support household spending." Houston's retail market has remained very strong, with a vacancy rate for retail space at 5.1% overall, the market is at historically tight levels. We are not building new retail as fast as tenants are leasing space, as a result, we expect vacancy rates to decline further in the next year. Consumers have been utilizing savings and credit cards to keep up their spending but eventually, their ability or desire to continue that behavior is likely to wane, negatively impacting the retail sector. While Houston's unemployment rate of 5.3%, is higher than the national average, that appears to be a factor more of workforce/population growth than job losses.