1.0 Market Overview & Key Performance Indicators

The Brownsville-Harlingen retail market is at a strategic inflection point, defined by near-term softness in leasing fundamentals and a countervailing wave of public and private investment. For investors and developers, understanding the core performance indicators is critical to navigating current challenges and capitalizing on the region's significant long-term growth catalysts. As of Q4 2025, the market exhibits clear signs of softening, a trend reflected across its key performance indicators.

The current vacancy rate of 5.9% is elevated compared to the region's historical averages of 5.0% (five-year) and 4.9% (ten-year). This 90-basis-point spread above the five-year average indicates a clear market softening, driven by a recent imbalance between supply and demand.

Performance diverges sharply across different retail subtypes, with neighborhood centers facing the most pronounced vacancy challenges.

• Neighborhood Centers: 12.2%

• Power Centers: 5.5%

• Strip Centers: 5.4%

• General Retail: 5.0%

• Malls: 0%

These high-level statistics provide a clear picture of current market conditions. The following sections will provide a deeper analysis of the underlying economic and development factors driving these trends.

2.0 Economic Landscape & Regional Development Drivers

A region's economic health and strategic development initiatives are the fundamental drivers of real estate demand and value. A growing labor force, rising incomes, and targeted public and private investments create the necessary conditions for a thriving commercial sector. This section analyzes the core economic indicators and pivotal projects that are actively shaping the Brownsville-Harlingen market's future trajectory.

Economic & Demographic Snapshot

The Brownsville-Harlingen labor market is currently navigating significant headwinds. The local unemployment rate stood at approximately 7.3% in 2025, an increase of 150 basis points over the past 12 months and well above the statewide average. Despite this, job growth is occurring in key sectors, including healthcare, education, manufacturing (automotive and aerospace), retail, food service, and construction. This sectoral strength, however, is contrasted by sluggish wage growth, which presents affordability challenges for many residents.

Key demographic trends for the metropolitan area include:

• Current Population: 430,929

• Median Household Income: $55,905

• Total Labor Force: 195,451

Pivotal Public & Private Investments

A wave of coordinated investment from both public and private entities is poised to reshape the region's economic base and infrastructure, creating powerful tailwinds for the commercial real estate market.

Brownsville's Modernization The City of Brownsville is undertaking a significant "Smart City" transformation, backed by a $27.8 million investment in an Intelligent Transportation System (ITS). This initiative will modernize traffic signals and improve road safety and efficiency. Mayor John Cowen Jr. emphasized the goal of building a "more connected and responsive citywide transportation network." This is complemented by a partnership with NTT DATA to establish a private 5G network, a foundational step toward establishing Brownsville as a regional technology hub.

Downtown Revitalization A strategic partnership between Cameron County and the City of Brownsville has been formed to support the Expanded Downtown Tax Increment Reinvestment Zone (TIRZ) No. 3. This collaboration will fund critical infrastructure, historic preservation, and new commercial development. County Judge Eddie Treviño, Jr. stated the goal is to "strengthen economic development," while Mayor John Cowen, Jr. aims to make downtown a "vibrant hub for culture, dinning, and entertainment."

Harlingen's Growth Initiatives The City of Harlingen is experiencing a surge in development activity. Key projects include a major mixed-use development near the medical district designed to create a "live, work, and play environment," the Harlingen Terrace culinary hub, the Skyline District logistics park, and the $75 million Dixieland Crossings development featuring new homes and a 30,000-square-foot commercial plaza.

Major Corporate Expansions The diversification of the region's industrial base is a critical tailwind, with major new investments in the aerospace support and advanced manufacturing sectors promising higher-wage job creation. Linde, a global industrial gas manufacturer, is building an air separation unit plant in Brownsville to support the growing space industry. In Harlingen, ConsultingPoint, a manufacturer of industrial motors, generators, and components serving the wind power, hydro, locomotive, and nuclear submarine sectors, is relocating from Brownsville and making a $2.1 million investment to expand its operations, increasing its payroll from 80 to 147 employees.

These large-scale economic and development initiatives are foundational, creating new jobs and improving regional infrastructure, which will directly impact the performance and long-term potential of the commercial retail market.

3.0 Retail Market Performance Analysis

This section provides a detailed, data-driven assessment of the Brownsville-Harlingen retail market's core performance in leasing, rental rates, and construction. A granular look at these metrics is critical for owners, investors, and tenants to evaluate asset performance, identify market gaps, and make informed strategic decisions.

3.1 Leasing, Absorption, and Vacancy Trends

The market's leasing dynamics reflect a period of adjustment. Over the past 12 months, the market recorded a negative net absorption of -150,000 square feet. This occurred alongside the delivery of 100,000 square feet of new retail space, resulting in a 1.1% increase in the overall vacancy rate over the past year.

Despite the negative net absorption market-wide, several significant leases were signed, primarily concentrated in the Greater Harlingen and Greater Brownsville submarkets.

Top Leases (Past 12 Months)

3.2 Rental Rate Analysis

Asking rents in the Brownsville-Harlingen market have demonstrated resilience, with growth slightly outpacing the national average. The current average market rent stands at $18.70 per square foot.

Year-over-year, market asking rents grew by 1.9%, compared to the national average of 1.8%. This resilience in asking rents, even amidst rising vacancy, suggests that landlords retain pricing power, particularly in higher-quality assets. It also indicates that underlying demand, though outstripped by recent deliveries, remains fundamentally stable. Rent growth was positive across all major retail subtypes.

• Neighborhood Center: 2.0%

• Power Center: 2.1%

• Strip Center: 2.1%

• Mall: 2.5%

• General Retail: 1.8%

3.3 Supply and Construction Pipeline

New construction activity in the market is currently subdued. There are four properties under construction, totaling 54,312 square feet of new retail space. This figure is notably below the market's 10-year average of 83,000 square feet of inventory under construction, indicating a conservative development posture in the face of current market softness.

The table below details the retail properties currently in the construction pipeline.

When you don’t, the property starts telling you what to do instead.

The current market performance reflects a period of recalibration, setting the stage for an examination of how these trends are influencing investor activity and asset valuation.

4.0 Investment & Sales Market Analysis

Sales transactions, pricing, and capitalization rates are the ultimate indicators of investor confidence and market valuation. An analysis of this activity reveals how capital is flowing into the Brownsville-Harlingen retail sector and provides crucial benchmarks for asset pricing.

Over the past 12 months, the market saw 83 retail properties trade hands. These transactions represented 690,000 square feet of inventory and a total sales volume of $30.2 million.

Valuation metrics for the Brownsville-Harlingen retail market remain attractive compared to national benchmarks. The estimated retail market price is $207 per square foot, below the national average of $245 per square foot. The estimated market cap rate is 8.3%, compared to the national average of 7.2%. The 110-basis-point premium over the national average cap rate reflects both the higher perceived risk associated with a non-primary market and a significant opportunity for investors seeking higher yields than are available in more compressed national markets.

The following table highlights the five largest sales transactions by price over the last 12 months.

Recent Significant Sales

These investment trends provide a market-wide perspective, which can be further refined by examining the distinct characteristics and performance of the region's individual submarkets.

5.0 Submarket Deep Dive

While market-wide data provides a broad overview, a submarket analysis is essential for identifying localized opportunities and risks. The Brownsville-Harlingen region is composed of distinct retail zones, each with its own performance characteristics. Understanding these differences is key to developing a targeted investment or leasing strategy.

The following table provides a comparative summary of the key performance indicators across the region's five primary retail submarkets.

A clear divergence in performance is evident. Greater Brownsville stands out as the market's top performer, boasting the lowest vacancy rate at 4.2% and being the only submarket to achieve significant positive net absorption over the past year (+119,042 SF). In contrast, Downtown Harlingen is facing the most significant challenges, with a vacancy rate of 14.5% and negative absorption of -28,075 SF. Outlying Cameron County also experienced substantial negative absorption (-100,214 SF), signaling weak demand in the market's peripheral areas. This underperformance in the urban cores highlights the strategic necessity of the public-private initiatives detailed earlier, such as Brownsville's TIRZ No. 3 and Harlingen's culinary hub development, which are designed to inject vitality and reverse these negative trends.

This submarket data provides critical context for the current state of the market and serves as a foundation for a forward-looking perspective on its future potential.

6.0 Future Outlook & Conclusion

The Brownsville-Harlingen retail market is at a pivotal moment. While current performance indicators reflect near-term softness, a powerful wave of strategic public and private investment is poised to reshape the region's economic fundamentals and drive future growth. The confluence of major infrastructure upgrades, targeted downtown revitalization efforts, and significant industrial investment provides a strong foundation for long-term health and absorption in the commercial real estate sectors.

The following catalysts are expected to be the primary drivers of future growth:

• Public Infrastructure Investment: Brownsville's $28 million "Smart City" initiative will modernize its transportation network, improving connectivity and efficiency. The collaborative TIRZ No. 3 will inject vital capital into the revitalization of the city's downtown core, attracting new retail, dining, and entertainment uses.

• Strategic Economic Development: Harlingen is actively fostering growth through a slate of new logistics, mixed-use, and residential projects. These developments will increase population density and commercial activity, creating significant ancillary demand for retail services and amenities.

• Industrial and Technology Expansion: The arrival and expansion of major employers like Linde (aerospace support) and ConsultingPoint (advanced manufacturing) are diversifying the region's economic base beyond traditional sectors. This industrial growth, particularly in the high-tech aerospace field, will create higher-wage jobs and stimulate broader economic activity.

In conclusion, the Brownsville-Harlingen market is a study in contrasts, where lagging near-term fundamentals are set against a backdrop of transformative long-term investment. While metrics like negative absorption and high unemployment cannot be ignored, they are being directly countered by foundational investments in infrastructure, economic diversification, and urban renewal. For the discerning investor, the current market softness presents a strategic entry point to capitalize on the demonstrable, multi-faceted growth trajectory poised to redefine the region's commercial real estate landscape.

Q: “What’s the #1 metric I should track every quarter?”

A: Your trailing 12-month NOI.

Everything ties back to it — valuation, refi potential, buyer demand, cap rate leverage.

If you want a clearer understanding of where your strip center stands today — or what opportunities you might be missing — feel free to reach out.

I’d be more than happy to walk through it with you.

Thanks for reading. You’re always welcome to reach out with any questions or anything you need to better understand your investment. I’m here to help you make well-informed decisions with confidence.

— Ray Kang CCIM

Strip Center Investment Sales & Advisory