Austin’s Retail Market Softens

EXECUTIVE SUMMARY

The Austin retail market softened in Q2 2026, with positive net absorption, low vacancy, and decreased leasing. Net absorption for the quarter was 260,323 sq. ft., up from 52,259 sq. ft. in the previous quarter. Vacancy rose 20 basis points but remains tight at 3.6%. New construction deliveries added 506,783 sq. ft. to inventory, and leasing activity was down 9.4% over the quarter. The construction pipeline is down 6.9% quarterly, with 3.2 million sq. ft. under construction. The average asking rental rate was up 1.6% quarter over quarter to $26.72 per square foot, with the Cedar Park submarket commanding the highest rates. Investment sales for the quarter totaled 1,055,946 sq. ft. across 61 closed transactions.

SUPPLY & DEMAND

KEY MARKET INDICATORS

MARKET OVERVIEW

Austin Economic Update

Austin posted the strongest relative job growth among the Texas majors, adding 14,900 jobs (+1.1%) for total nonfarm employment of 1.42 million in May 2026. Professional and business services (+3,000), financial activities (+2,700, +3.0%), and health care (+2,200) led gains, while information (−1,600, −3.2%) continued to contract. Office-using employment of 428,400 grew 4,100 jobs (+1.0%) — the fastest office-using growth rate of the five metros. Unemployment remained the lowest of the Texas majors at 3.4% (April), up 30 basis points from a year earlier.

Austin’s $207.5 billion real GDP (2023) grew 4.5% year over year and has compounded at 6.8% annually over five years, the fastest of the Texas metros. Population stands at 2.55 million with the highest median household income of the group at $99,897. Home prices declined 0.8% year over year (Q1 2026) — the only Texas major in negative territory — and residential permitting fell sharply, down 29.1% year-to-date to 8,240 units.

Market Overview

Vacancy Ticks Up to 3.6%
The average vacancy rate rose 20 basis points over the quarter to 3.6%, up 40 basis points from one year ago. Over recent quarters, new deliveries outpaced demand. The total availability rate increased from 4.7% to 5.1% on a quarterly basis and is up 50 basis points from one year ago.

Positive Demand Increases

Net absorption, which is the difference between move-ins and move-outs, increased from 52,259 sq. ft. to 260,323 sq. ft. in Q2 2026. The strongest gain came in the Georgetown submarket at 229,286 sq. ft., while the Central submarket posted the largest decline at -82,258 sq. ft. Notable 2026 move-ins include Costco Wholesale moving into 160,000 sq. ft. at the intersection of U.S. Highway 183 and Seward Junction Loop and Target at Southeast corner of U.S. Hwy. 183 & State Highway 29 slated to open in Fall 2026.

Leasing Activity Slows

Leasing activity was down 9.4% during Q2 2026 at 0.5 million sq. ft., down from 0.9 million sq. ft. one year ago. Recently signed leases included Socceroof’s 35,200 sq. ft. lease at Austin Marketplace in Austin, Fever Originals’s 23,095 sq. ft. lease at 11000 N. IH-35 in Austin, and Monkey Town’s 20,890 sq. ft. lease at The Abby at Ben White in Austin. Also, Furniture Market signed a lease for 16,000 sq. ft. at San Gabriel Ridge in the Georgetown submarket.

CONSTRUCTION, DELIVERIES, AND INVESTMENT TRENDS

Deliveries Rose, While the Construction Pipeline Eased

Construction deliveries were up 151.5% for the quarter, adding 506,783 sq. ft. to Austin’s retail inventory. The construction pipeline stands at 3.2 million sq. ft., down 6.9% quarter-over-quarter and up 27.6% year-over-year, and roughly 72% of the space underway is already pre-leased. The largest projects include the 545,000-sq.-ft. Nebraska Furniture Mart in Cedar Park, the 250,000-sq.-ft. Bastrop 75 in Bastrop, the 240,000-sq.-ft. SCHEELS in Cedar Park.

Investment Sale Trends

Retail investment sales in the Austin market totaled 1,055,946 sq. ft. across 61 closed transactions in Q2 2026. By property subtype, Freestanding properties accounted for 37% of the space traded, Storefront for 8%, Storefront Retail/Office for 6%. Activity was concentrated in the Cedar Park (48%) and Hays County (14%) submarkets. The largest transaction was the 85,741-sq.-ft. 1890 Ranch in Cedar Park (part of a portfolio sale), purchased by Cohen & Steers Income Opportunities REIT, Inc. | Sterling Organization from Endeavor Real Estate Group. Also, Cohen & Steers Income Opportunities REIT, Inc. | Sterling Organization acquired the 71,128-sq.-ft. 1890 Ranch – U in Cedar Park as part of a portfolio from Endeavor Real Estate Group.

Rental Rate Increase