The Houston Commercial Real Estate Market

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Nationwide, commercial property buyers, sellers, and tenants are flocking to Houston commercial real estate to participate in the city’s fast-growing, resilient market.

The Houston-The Woodlands-Sugar Land MSA features a fast-growing job sector, business-friendly tax benefits, an increasing population, and sprawling mileage of attractive CRE inventory: all attracting owners and businesses alike to the region. Crexi empowers both entities seeking Houston commercial real estate for sale and the brokers who represent them with an all-in-one platform to buy and sell commercial real estate.

Buyers and tenants can instantly browse Crexi’s robust marketplace and refine their search, conduct in-depth research, and identify any one of thousands of Houston commercial property offerings to fit their needs.

On the other side of the transaction process, Houston brokers harness Crexi’s powerful listing and lead management tools to directly connect with buyers and tenants. Crexi’s suite of broker tools empowers commercial agents with time-saving features, allowing them to discover and communicate with well-qualified leads more efficiently.

To date, Crexi has facilitated the successful closing of over $440 billion in commercial property sales and marketed more than half a million properties worth over $5 trillion in total.  Crexi proudly serves Houston, Sugar Land, Missouri City, Pasadena, The Woodlands, and beyond as the region’s fastest-growing digital CRE platform.

The State of Commercial Real Estate in Houston

Houston is the fourth-largest city in the US and the largest city in Texas. Located in Southeast Texas near the Gulf of Mexico, it is the seat of Harris County and the principal city of the Greater Houston metropolitan area, the fifth-most populous metropolitan statistical area in the United States. Nicknamed “Space City” due to its role as a major center for aerospace exploration, Houston has a humid subtropical climate with hot summers and mild winters.

For residents and businesses alike, Houston offers plenty of growth opportunities. The city’s economy is powered by energy production, manufacturing, aeronautics, transportation/logistics, healthcare/biomedical research, and professional services. Additionally, there are numerous job opportunities available in various industries.

Real estate investors and tenants will find a strong market with plenty of growth potential. The metropolitan area continues to be one of the most desirable markets in Texas for investors looking for commercial properties or multifamily investments in Houston.

Houston Regional Breakdown

Houston has a history of solid population growth. Over the past decade, Harris County (where Houston is the county seat) has grown by approximately 16%, according to the most recent census. The Houston metropolitan area has seen steady growth, from 6.1 million in 2010 to 7.34 million in 2021, and the city’s population is expected to continue growing due to the abundance of job opportunities, affordable housing, and diverse cultural attractions. Houston is home to nearly 2.3 million, while Harris County boasts over 4.7 million residents.

  • Houston is the fourth most populous city in the US.
  • The Houston-The Woodlands-Sugar Land metropolitan area spans 8,269 square miles, an area slightly smaller than New Jersey.
  • In addition to Houston, the other large cities in the Houston metropolitan area are The Woodlands, Sugar Land, Baytown, Conroe, Deer Park, Friendswood, Galveston, Lake Jackson, La Porte, League City, Missouri City, Pasadena, Pearland, Rosenberg, Texas City, and Tomball.
  • The median age in Houston is 35.3, about 90% of the figure in the US.
  • Per capita income is $36,472, and median household income is $70,893, both figures a little higher than the amount in Texas.

Houston Job Market

Houston’s economy and job market are notable for their diversity and continued growth over the years. Its economy centers around multiple industries, including healthcare, energy, finance, retail, and more. 

The job market has seen rising demand in these sectors, making it a promising location for job seekers. Additionally, the city has a history of attracting major corporations and businesses, providing employment opportunities for people in various fields. Despite some challenges and economic fluctuations, Houston remains a hub for jobs and job opportunities.

  • Houston area employment in January 2023 was strong, with an average annual salary of $55,950, according to the Bureau of Labor Statistics.
  • The Texas Workforce Commission reported that Metro Houston created 19,900 jobs in March of 2023, which aligns with the twenty-year average.
  • Unemployment in Houston is 4.4% (March 2023).
  • The cost of living in Houston is 8% below the national average, based on data from PayScale.
  • GDP for Houston-The Woodlands-Sugar Land, TX (MSA) is over $463 billion and has increased by more than 57% over the past decade.
  • Key industry sectors include energy, advanced manufacturing and technology, aerospace and aviation, biotechnology and life sciences, distribution and logistics, finance, and medicine.
  • The city is also home to NASA’s Mission Control at the Johnson Space Center.
  • The top employers in Houston include Walmart, Memorial Hermann Health System, H-E-B, Houston Methodist, The University of Texas MD Anderson Cancer Center, Continental Airlines Inc., The Port of Houston Authority, Deloitte, Amazon, and Accenture.
  • Nearly 36% of residents hold a bachelor’s degree or higher, a figure about 10% higher than in Texas.
  • The top five colleges and universities by enrollment in the Houston metropolitan area are Rice University, University of Houston, University of St. Thomas (TX), Lone Star College, and South Texas College of Law – Houston, according to US News & World Report.

The city is served by two major airports – George Bush Intercontinental Airport (IAH) and William P. Hobby Airport (HOU), which provide flights to destinations across the globe. Major highways such as the I-10, I-45, and I-69 connect Houston to other key US cities, making it a key distribution point for goods and products. 

The Port of Houston is one of the busiest ports in the world and the largest on the Gulf Coast. Houston also has a vast network of freight rail lines that help transport goods in and out of the city, including Union Pacific and BNSF Railway.

Houston Industrial Market

The Houston industrial market continues to expand despite a slight decrease in demand. Absorption remained positive with 4.5 million square feet in Q4 2022, resulting in a drop in vacancy rates. Manufacturing buildings sustained demand with higher rental prices for new construction. Even though absorption slowed at the end of last year, the market’s vacancy trend continued to decrease year over year. Here are the industrial trends in Houston, according to Cushman & Wakefield’s Q1 2023 report:

  • Total industrial inventory: 542,306,658 SF
  • Overall asking rent: $6.77/SF per year 
  • Overall vacancy rate: 6.0%
  • Net Absorption: 5,155,990 SF in Q1 2023, an increase of about 14% over the prior quarter
  • Key lease transactions by tenant: H-E-B Distribution 333,330 SF, Imperial Dade 293,715 SF, New Energy Equipment Company 262,612 SF
  • Under construction: 33,331,457 SF with nearly 7.4 million SF delivered in the current quarter
  • Key sales transactions by property: Cedar Point Distribution Center 405,600 SF, 1211 Kress Street 258,450 SF, 1020 Rankin Road 185,000 SF
  • Largest industrial submarkets: Northwest-Far, Southeast-Far, Southwest-Far

Discover Houston industrial property for lease.

Houston Office Market

Although there is a slight increase in vacancy rates, leasing activity of 2.9 million square feet for Q1 2023 and positive net absorption indicate the market shows healthy stabilization signs in the Houston office market. Landlords are working hard to keep pace with inflation by slowly increasing rental rates and offering tenants generous concession packages to attract and retain them. 

Investment activity is expected to mimic last year’s levels due to high inflation and a higher cost of debt. However, the market remains competitive and optimistic, given the market’s impressive long-term demand drivers and strong economic fundamentals. Here are the most recent trends from Newmark (Q1 2023):

  • Total office inventory: 241,953,673 SF
  • Average asking rent (all classes): $29.85/SF per year, full service gross, an increase of 0.4% year over year
  • Sublet asking rent: $23.48/SF
  • Total vacancy rate: 25.2% overall
  • Absorption: 584 SF (Q1 2023)
  • Key leases by tenant: MODEC International 116,161 SF, Kiewit Engineering 105,800 SF, Chord Energy 103,405 SF, Black Stone Minerals LP 55,082 SF
  • Under construction: 3,133,608 SF, with the majority in the Suburban submarket
  • Deliveries: 265,000 SF in Q1 2023
  • Investment sales by building: Omni Plaza, San Felipe Plaza, 20440 West Road
  • Largest office submarkets: Suburban, Central Business District, Energy Corridor, Galleria/Uptown 

Discover Houston office property for lease. 

Houston Retail Market

Houston’s retail market is a hotspot for investors, thanks to its positive growth potential in sectors like discount retail, pharmacy, home improvement, and beauty stores. With 3.4 million square feet of new retail space delivered in the past year and a vacancy rate of only 5%, landlords have much to look forward to. Mixed-use is a common trend in new Houston retail development, primarily in affluent suburban areas. For tenants, it’s a tight market with intense competition for the best locations. Here are the most recent retail trends in Houston from Matthews:

  • Total retail inventory: 307,321,500 SF
  • Overall asking rent: $18.93/SF per year, an increase of 4.5% year over year
  • Overall vacancy rate: 5.0% in Q1 2023
  • Deliveries: 3.4 million in the past 12 months
  • New construction: 4.2 million SF in 207 properties
  • Sales volume (12-month): $5.1 billion, marking the 2nd-largest total on record
  • Most active retail submarkets: Montgomery County, Far Katy North, Far South

Discover Houston retail property for lease.

Houston Multifamily Market

The Houston apartment market experienced two robust years but has recently slowed down to more sustainable levels, according to Multi-Housing News. Despite this, year-over-year rental rates grew by over 14%. Over $9.7 billion in multifamily properties were traded in Houston last year, and developers completed 17,676 units. Notably, most of these units were luxury assets. Here are the most recent multifamily trends in Houston, as reported by Transwestern:

  • Total multifamily inventory: 720,599 units in Q4 2022, an increase of nearly 15,800 units year over year
  • Occupancy rate: 90.6%, slightly above the 5-year average
  • Effective rent: $1,250, an increase of 14.2% year over year
  • Number of households: 2,601,401
  • Renter-occupied households: 57% (Zumper)
  • Completions: 716 units in Q1 2023  
  • Largest multifamily submarkets (by number of units): Willowbrook/Champions/Ella, Katy/Cinco Ranch/Waterside, Energy Corridor/CityCentre/Briar Forest

Discover Houston multifamily property for sale.

Get more in-depth Houston market data with Crexi Intelligence.

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Shanti Ryle
Shanti Ryle

Content Marketing Manager

Shanti leads Crexi's content marketing strategies with 7+ years of content development experience, creating everything from blog posts to award-winning podcasts. Previously, she worked on content teams at Snapchat, Weedmaps, and HopSkipDrive as well as developed copy, articles, and media for freelance publications.

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