It's true what they say. Everything really is bigger in Texas, including commercial real estate. Covering 267,000 square miles and home to almost 29,000,000 people, Texas is bigger than California—and much bigger than France.
Not surprisingly, two cities in Texas sit right in the bull's eye for foreign investments in the property sector. A recent 2021 survey by the Association of Foreign Investors in Real Estate (AFIRE) reveals that Austin ranks number one as the most preferred city for buying property in the United States and Dallas comes in at third place (following Boston).
In addition, Houston ranked number 14, and San Antonio ranked number 15. The AFIRE survey indicates investor sentiment and serves as a resource for many researchers who want to understand the impacts, goals, and challenges of international investments on real estate opportunities in the United States.
According to its results, the second half of 2021 should see commercial transactions pick up as business and leisure travel sectors rebound. More businesses start to operate at normal capacities, and more people are getting vaccinated against COVID-19.
The report also says that foreign property investors are partial to warehouses and apartment buildings, naming these two commercial asset classes as their favorite property types.
The investor outlook is positive overall. About 40% of investors expect real estate investment activity to increase in volume in 2021, and 60% are forecasting revenue growth.
The survey likewise says that our property market's success in the next 10 years will be anchored on geopolitical and economic stability, innovation, teen demographic forecasting, and friendly investment policies.
Texas continues to be one of the largest exporters of petroleum products in the US, but it's more than just about all oil. A number of business sectors are also causing the economy of the Lone Star state to expand rapidly:
In 2019, unemployment in Texas hit a record low, and job creation expanded at a healthy pace. With a 3.9% annualized rate by June 2019, employment growth seems to be widespread in major metro areas in the state.
The Texas commercial property industry supports almost 380,000 jobs and is estimated to contribute upwards of $59 billion to its GDP. Interestingly, commercial real estate development in Texas ranks ahead of California.
The Texas A&M University's Real Estate Center expects continued expansion and an overall positive outlook for the commercial property sector in significant metropolitan statistical areas. But it's not all rosy.
According to the same report, the biggest challenge to the commercial real estate industry in this state is a decline in the trade environment that may cause problems in some of its most productive industries. There are also concerns that the US-China trade war presents a major risk going forward.
Potential construction activity may also slow down. Despite these threats, however, there are opportunities on the horizon. The report lists declining interest rates and new trade agreements with Mexico and Canada as a boon for the state. After all, Texas exports $25 billion in goods every year to Canada and $92 billion to Mexico.
In addition, Texas has no corporate or individual income tax rate. It also ranks fairly high in terms of state and local property tax collection per capita. To invest in CRE in Texas, once can reach out to commercial hard money lender in Texas for commercial investment loans.
There's a healthy demand for real estate and property investments here, thanks to its growing population, world-renowned research facilities, world-class higher education institutions, and thriving cities. The two most popular Texas cities in terms of foreign commercial real estate interests are Austin and Dallas. Houston and San Antonio also fared well on the list.
A recent CBRE survey echoes the same result as the AFIRE survey that Austin is number one among metropolitan areas in the US for foreign investment prospects this year. The spot was previously held by Los Angeles.
The Dallas-Fort Worth metroplex is particularly interesting for many foreign investors mainly because of its large and fast-growing population of over seven million residents. Both the Urban Land Institute and PricewaterhouseCoopers named it as the number one property market in the United States for both residential and commercial investment.
Nine of the state's top 10 business sectors posted positive employment and job creation growth year-over-year. The biggest gains came from the utilities, transportation, and business and professional services sectors.
Retail occupancy also reached 94.7% in the second quarter of 2019—a record high for this part of Texas. Retail absorption and construction likewise increased during the same period. On top of this, the approval of the Collin Creek redevelopment program (worth $1 billion) is buoying investor sentiment.
The planning and zoning commission recently greenlighted the mixed-use project, which includes 2300 apartments, 500 homes, one hotel, 300,000 square feet of retail space, and 300 senior living units.
Multifamily rents showed a growth of 3% year-over-year, with the absorption exceeding supply. The same upward trend was seen in office spaces in the Dallas-Fort Worth area. Vacancy remained flat, and gross asking rents showed an increase from $25.01 to $25.26 per square foot.
Class A asking rents were particularly impressive, increasing from $30.95 to $31.37 per square foot. On top of all this, more than 4.3 million square feet of new offices will be constructed & almost half of them have already been pre-leased.
The Houston metropolitan population has shown an increase of 2.2% year-over-year. There's been continued expansion and the import-export, technology, and healthcare sectors.
Anchoring a corner of the urban megaregion called the Texas Triangle, San Antonio is home to more than 2.5 million people. Its core industries—including the military, energy, manufacturing, financial services, and healthcare research sectors-show impressive growth.
The commercial property sector in Texas sure is showing a lot of promise. If you're interested in commercial real estate investment opportunities in this part of the US, it might help to consult with a commercial property financing expert.
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