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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.

During the 2Q25, Houston's industrial market saw a substantial increase in new supply, with approximately 3.8 million SF of space delivered. This new inventory surpassed the 2.1 million SF of net absorption during the same period, contributing to a slight rise in the overall vacancy rate, which now stands at 7.1%. The development pipeline remains strong, with 19.1 million SF currently under construction, reflecting a 14% growth from the previous quarter. Despite the higher vacancy rate, the market remains resilient, supported by consistent demand across key submarkets and industries.

Houston's retail market remained balanced in 1Q25, with the vacancy rate inching up to 5.4%, just above the five-year average. This slight increase reflects a market settling into a stable rhythm, with supply and demand largely in sync. While 3.3 million SF of retail space is currently under development, about 40% remains available for lease. Still, brokers report that prime, first-generation space is quickly claimed before hitting the open market, offering little relief for tenants seeking new, high-quality options.