Latest Quarterly Snapshot

Houston's office market remained one of the nation's strongest in 3Q25, ranking among only three major U.S. metros with positive absorption year-to-date. Construction activity is limited, with just 2.3 million SF underway, about 80% preleased, primarily for build-to-suit and medical office projects in north and west Houston. This lack of new supply is helping stabilize fundamentals, keeping vacancy near 19.8% and average asking rents above $30 pSF. With few groundbreakings and steady demand for high-quality space, Houston's office sector is positioned for continued gradual improvement into 2026.

According to Zonda, in 2Q25, the New Home Lot Supply Index (LSI) in Houston was up 21% from 2Q24, reaching 71.8, signifying that the Houston market remained significantly undersupplied. While the LSI was up year-over-year, builders slowed production due to economic uncertainty and oversupply of homes for resale. The overall housing inventory reached 59,492 active listings in July, the highest on record for Houston and a 27.2% increase from the previous year. The economic uncertainty and the slowdown in builder activity was felt across Texas in 2Q25 as softer demand and rising resale inventory reduced the pace of lot-to-start conversions throughout the State. One local silver lining is that Houston and Dallas accounted for nearly 80% of Texasa€™ new residential permits in May. Local or not, new residential permits being filed proved that even in the face of all the uncertainty, well-capitalized buyers and long-term investors continued to target strategic acquisitions.

Houston's retail construction pipeline remains robust, with approximately 3.4 million SF under development, primarily in the Far Northwest (Cypress, Bridgeland, Tomball and Magnolia), Far North (Conroe, Huntsville, Willis, and New Waverly), and Katy areas, driving an increase in upcoming supply. However, in 2Q25, a lack of absorption led to a 10-basis point rise in the overall vacancy rate, from 5.4% to 5.5%. This slight increase in vacancy is due to new spaces being filled by new construction rather than the absorption of existing vacancies. While supply and demand had been in close balance in recent quarters, with most of the net absorption going into newly delivered properties, the market is now adjusting as retailers take a more cautious approach amid economic uncertainties. As tenant absorption lags behind the influx of new space, vacancy rates are rising, suggesting potential shifts in leasing strategies and tenant demand moving forward.