Key facts
- Houston's retail market ended the second quarter with a record 95.2% occupancy.
- Demand for existing retail space is highly competitive due to population growth and limited new construction.
- Notable vacancies include a former Whole Foods in Midtown and a former Grand Lux Cafe near The Galleria.
- Leasing large, second-generation spaces without subdivision presents challenges.
- Average asking rental rates for Class-A space inside the 610 Loop are between $50 and $70 per SF.
Houston's retail market is experiencing a period of high demand, with occupancy rates reaching a record 95.2% by the end of the second quarter, according to a Weitzman report. This strong performance is attributed to robust population and residential growth, consistent retail demand, and a limited supply of new speculative construction.
Despite the overall competitive landscape, some prominent vacancies persist. The former Whole Foods store in Midtown, which closed nearly three years ago, remains a notable exception. Experts suggest that leasing this 40,000-square-foot space in its entirety could be challenging, potentially limiting the pool of suitable tenants to large-format fitness, entertainment, or medical office concepts. The location's grocery market dynamics, with only one remaining grocer (Randalls) in Midtown, also play a role.
Similarly, the former Grand Lux Cafe space at 5000 Westheimer Road, across from The Galleria, has been vacant since January. Filling this 13,000-square-foot, second-generation restaurant space without subdivision poses a challenge, according to CBRE's Thomas Nguyen, as large-format restaurants are less common than in previous years. However, the same development is set to house an Eataly food hall.
Other recent backfills include the former Sears at Willowbrook Mall now occupied by Primark, a former Kroger in Dickinson becoming a Crunch Fitness, former Party City and H-E-B spaces becoming Sprouts, and a former Randalls in Meyer Park now housing Floor & Decor.
Rental rates for Class-A space within the 610 Loop averaged between $50 and $70 per square foot in the first half of the year, while space outside the Loop ranged from $39 to $50 per square foot, reflecting high landlord and tenant expenses.