Houston 2026 U.S. Real Estate Market Outlook Midyear Review

Executive Summary 

As we enter the second half of 2026, the Houston commercial real estate market continues to evolve in response to shifting economic conditions, technological innovation, and changing tenant preferences.

Office

Leasing activity through H2 2026 should concentrate in the 10,000-50,000 sq. ft. range within primary submarkets, as maturing return-to-office mandates have tenants prioritizing amenities, workforce proximity, and building quality. In Q1, 96% of leases over 10,000 sq. ft. were signed in Class A buildings. The flight-to-quality trend is apparent as tenants leave older space for newer product, which has resulted in increased competition among occupiers for prime space but could provide opportunities for cost conscience tenants going forward. This dynamic should persist through year-end, with lease expirations across older space becoming the dominant demand driver into 2027.

Industrial

Houston's industrial market recorded approximately 10 million sq. ft. of net absorption year-to-date through mid 2026, driven by continued strength from manufacturing, nearshoring, 3PLs, and e-commerce users. Demand is expected to remain robust through H2 2026, as a pipeline of with large occupiers will continue to drive leasing and positive absorption.

Retail

Fitness, restaurant, and wellness tenants will likely lead leasing activity through H2 2026, as their needs-based demand profiles remain well-aligned with Houston's population trends. Flat projected sales growth and rising occupancy costs will pressure neighborhood, smaller operators and moderate overall leasing activity, but demand from big box retailers will continue to underpin activity in high-performing corridors and suburban submarkets. Tenants are increasingly selective, concentrating expansion plans in trade areas with the strongest fundamentals.

Multifamily

Demand has been strongest in Downtown, Montrose, River Oaks, and the East Inner Loop, where absorption gains have been most pronounced and renter preference for walkable, amenity-driven product remains durable. Strong resident retention and increasing cost-consciousness among renters are expected to support steady occupancy through H2 2026, particularly in assets with strong lifestyle access and proximity to employment centers. This concentration of demand is expected to persist, reinforcing the competitive advantage of well-located assets throughout the remainder of the year.

Capital Markets

The Houston region remains positioned for steady job growth and modest increases in real estate values, supported by the breadth of its economic base. Legacy overleveraged assets continue to present challenges, with many requiring additional equity as interest rates have not declined as quickly as cap rates have adjusted. Despite these pressures, Houston's economic diversity is expected to buffer the market and support relative stability through H2 2026, even as broader macroeconomic and fiscal risks persist.