Latest Quarterly Snapshot

Houston's office market is beginning to stabilize after several difficult years, with positive net absorption reaching a 10-year high and vacancy declining from its 2025 peak. The market-wide vacancy rate now sits at 19.9%, but newer office buildings are performing significantly better, highlighting a strong "flight to quality" trend. Demand is concentrated in high-end, amenitized buildings located in strong submarkets such as Katy Freeway East, The Woodlands, and parts of the CBD. While recovery is uneven and older commodity office buildings still struggle with elevated vacancy, the market appears to have reached an inflection point as previously vacant space begins to backfill and supply pressures remain limited.

The Houston retail market ended 4Q25 in a stable position, supported by limited new supply and steady demand for well-located properties. The vacancy rate remained close to 5.2%, while construction activity declined significantly, with 450,000 SF delivered in the quarter and approximately 2.6 million SF completed for the year, which is well below recent averages. Net absorption remained positive at just over 500,000 SF, although leasing activity slowed as retailers grew more selective amid economic uncertainty. Asking rents rose slightly to approximately $24.57 PSF NNN, driven by limited supply and continued demand from essential and service-oriented retail. Overall, market fundamentals suggest a stable outlook, particularly for high-quality centers with strong tenant mixes.

Houston's industrial market closed the 4Q25 on solid footing, supported by ongoing tenant demand and rental rates that continued to reach new highs. While vacancy edged up to 7.2% and leasing activity slowed on a quarterly basis, annual leasing volume remained higher year over year. Development activity continued to build, with the construction pipeline expanding compared to both the previous quarter and last year, despite a slight dip in quarterly deliveries. Average asking rents increased quarter over quarter and year over year, reinforcing strong pricing momentum. On the investment side, improving capital market conditions, including easing interest rates and firming cap rates, have contributed to a more optimistic outlook.