Austin’s Retail Market Remains Tight with Low Vacancy
EXECUTIVE SUMMARY
Austin’s retail market activity slowed in Q1 2026, with a sharp drop in positive net absorption and a decline in leasing. Net absorption sharply declined but remained positive at 26,230 sq. ft. Vacancy rose by 20 basis points but remained tight at 3.6%. New construction deliveries decreased 60.7% over the quarter, and leasing activity was down 9.2%. The construction pipeline grew 5.2% quarterly and 7.3% year-over-year, creating new opportunities for retail expansion.
The average asking rental rate marginally decreased 0.3% quarter over quarter to $26.40 per square foot, with the CBD commanding the highest rates. Investment sales activity was down 18% over the quarter, with a cumulative 12-month volume of $144 million and an average transaction price of $288 per square foot. With a tight vacancy rate and limited supply, rents are expected to remain steady, positioning Austin’s retail market for continued growth in 2026.
SUPPLY & DEMAND
KEY MARKET INDICATORS
MARKET OVERVIEW
Austin Economic Update
Austin’s unemployment rate was 3.7% in January, up from 3.6% in December, but below the state and national rates, both at 4.3%. In the three months ending in December, the local labor force increased at an annualized rate of 1.3%. The most significant gains were in government, with 2,800 jobs; education and health services, with 1,500 jobs; and construction and mining, with 1,200 jobs. Sectors that declined include professional and business services, which lost 1,300 jobs, and leisure and hospitality, which lost 700 jobs. Average hourly earnings increased to $36.43 in December.
Market Overview
Demand Sharply Decreases, But Remains Positive
Net absorption, which is the difference between move-ins and move-outs, is at 26,230 sq. ft., down sharply 92.3% from the previous quarter. Notable first-quarter move-ins include Mega Furniture moving into 38,000 sq. ft. in Southpark Meadows, Crunch Fitness moving into 28,000 sq. ft. at Barrington Oaks in the Northwest submarket, and The Picklr moving into 27,000 sq. ft. at Oak Hill Plaza in the Southwest submarket.
Construction Pipeline Up and Deliveries Down
In Q1 2026, the under-construction pipeline increased 5.2% over the quarter and 7.3% over the past year to 2.8 million sq. ft. Deliveries decreased 60.7% quarterly to 194,632 sq. ft. Over 72% of the space under construction is pre-leased. Notable projects in the construction pipeline include a 160,000-square-foot Costco Wholesale in Liberty Hill, a 148,000-square-foot Target in Liberty Hill, and the 130,705-square-foot Georgetown Commons Shopping Center at 130 Old Bishop Rd.
Leasing Activity Increases
Leasing activity rose 1.9% quarterly, recording 553,311 sq. ft. in Q4 2025. Notable deals signed in the fourth quarter include Office Depot’s lease for 43,000 sq. ft. at Braker Lane Crossing in the Northwest submarket, and Crunch Fitness’s 33,000 sq. ft. lease at Plaza FAMSA in the Central submarket. Also, Melrose signed a lease for 12,000 sq. ft. at Boardwalk Shopping Center in Round Rock.
Investment Sales Trends
CoStar Capital Market Analytics reports a cumulative 12-month sales volume of $157 million for Q4 2025, a 63% increase over the previous quarter. Over the past year, 156 properties were sold, with an average transaction price of $290 per square foot and an average capitalization rate of 6.7%. A notable fourth-quarter transaction was the 99,453-square-foot, 7-property Lantana Place property portfolio located at 7415 Southwest Parkway, for a reported $57.5 million, or $578 per sq. ft.
Rental Rates Slows
Leasing activity decreased 9.2% quarterly, recording 502,376 sq. ft. in Q1 2026 and was down 20.5% annually. Notable deals signed in the first quarter include Crunch Fitness’s 44,000 sq. ft. lease at North Bluff Plaza in the Southeast submarket, and Zoocade’s lease for 33,000 sq. ft. at 11000 N IH 35 in the North/Domain submarket. Also, Furniture Market signed a lease for 16,000 sq. ft. at San Gabriel Ridge in the Georgetown submarket.
