Austin’s Retail Market Remains Healthy in Q3 2025

EXECUTIVE SUMMARY

The Austin retail market remained healthy in Q3 2025, with positive net absorption up 48.4% over the quarter, and up 119.8% year-over-year. New construction deliveries decreased by 34.9% over the quarter but decreased 11.4% annually. Leasing activity dropped 25.6% in Q3 to 543,165 sq. ft. Some of the tenants that signed leases in Q2 2025 include Crunch Fitness, EoS Fitness, and TJ Maxx. Meanwhile, the construction pipeline grew 2.6% quarterly and 63.4% year-over-year, signaling renewed opportunities for expanding retail tenants after quarters of constrained supply. More than half of the deliveries are located in the Georgetown submarket.

Investment sales remained active, with a cumulative 12-month volume of $95.5 million and an average transaction price of $204 per square foot. Rents remained relatively flat in the quarter, rising by 1 cent to $25.96 per square foot, with the CBD commanding the highest rates. With a tight vacancy rate and limited supply, rents are expected to remain steady, positioning Austin’s retail market for continued growth in 2025.

SUPPLY & DEMAND

KEY MARKET INDICATORS

MARKET OVERVIEW

AUSTIN ECONOMIC UPDATE 

Austin’s unemployment rate was 3.7% in August, up from 3.5% in May, but below the state and national rates of 4.1% and 4.3%, respectively. In August, the local labor force increased at an annualized rate of 0.7%. Austin employment increased at an annualized rate of 2.2% in August, surpassing the 1.9% growth rate in July. In the six months ending in August, employment grew 1.4%, faster than Texas and the U.S., which rose 1.2% and 0.6%, respectively.

The most significant gains from December to August were in government (3,900 jobs) and education and health services (3,200 jobs). Sectors that declined include construction and mining (-3,000 jobs) and professional and business services (-1,300 jobs).

Average hourly earnings rose to $36.41, reflecting a year-over-year increase of 5.1%. At the same time, apartment rents in Austin fell 4.1%.

VACANCY INCHES DOWN

The overall vacancy rate in the DFW retail market fell 10 basis points over the quarter but was up 10 basis points annually to 3.3%. This small decrease is most likely due to increased demand. The vacancy rate is extremely low compared to the historical highs of 9.0% to 10.0% in 2009 through 2013. 

MARKET OVERVIEW 

DEMAND INCREASES BY ALMOST HALF

Net absorption, which is the difference between move-ins and move-outs, is at 416,566 sq. ft., up 48.4% from the previous quarter, pushing the year-to-date total net absorption to 806,337 sq. ft.  Notable third-quarter move-ins, dominated by Big Box concepts led by grocery stores, include Walmart moving into 120,000 sq. ft. in Lockhart, H-E-B moving into 110,000 sq. ft. at 10110 Ranch-to-Market Rd. 2338 in Georgetown, and ALDI moving into 24,000 sq. ft. in Cedar Park Plaza. 

CONSTRUCTION PIPELINE CONTINUES TO INCREASE

In Q3 2025, the under-construction pipeline increased by 2.6% over the past year to 2.7 million sq. ft. This is positive for the market, as the limited supply over recent quarters has limited growth opportunities for retail tenants looking to expand. Notable retail completions in the third quarter include a H-E-B pm Ranch-to-Market Road 2338 in Georgetown, Sprout’s Farmers Market in The Shops at The Brick & Mortar District, and Williams Drive Retail Center in the Georgetown submarket.

LEASING ACTIVITY DECREASED OVER THE QUARTER

Leasing activity dropped 25.6% over the quarter, recording 543,165 sq. ft. in Q3 2025. Notable deals signed in the third quarter include a 40,000 sq. ft. Crunch Fitness in Lohman’s Crossing Shopping Center in Lakeway, EoS Fitness’s 40,000 sq. ft. lease at 12707 N Mopac Expressway, and a 32,000 sq. ft. TJ Maxx located in The Shops at Tech Ridge.

INVESTMENT SALES TRENDS  

CoStar Capital Market Analytics reports a cumulative 12-month sales volume of $95.5 million for Q3 2025. Over the past year, 179 properties were sold, with an average transaction price of $204 per square foot and an average capitalization rate of 6.8%. Notable third-quarter transactions include the 61,100-square-foot Lee Wrangler Outlet property located in the Hays County submarket, for a reported $4.4 million, or $71.99 per sq. ft. Also, the 22,970 square-foot Shops at Greenlawn was purchased by CenterSquare Investment Management from Mathias Partners for an undisclosed amount.

RENTAL RATES FLAT OVER THE QUARTER, DOWN YEAR OVER YEAR

Austin’s average asking rent currently stands at $25.96 per sq. ft.—flat over the past quarter but down by 0.6% annually.  The CBD submarket had the highest average rate at $38.08 per sq. ft., while the North Domain submarket had the lowest average rate at $22.90 per sq. ft.  With near-record-low vacancy rates and a limited retail pipeline, rates are expected to remain near record highs.

For More Information, Contact:

Steve Triolet
SVP of Research and Market Forecasting
tel 214 223 4008
[email protected]