Texas is one of the most thriving commercial real estate markets in the country. In 2022, commercial real estate in Texas is expected to continue to grow. The state is home to some of the largest and most prosperous cities in the country, and this is reflected in the commercial real estate market. In particular, the office market in Texas is booming, with vacancy rates dropping and rents rising. Texas’ commercial real estate is experiencing a resurgence.
Houston is the commercial real estate capital of Texas, and it is expected to experience the most growth in 2022. The city’s downtown area is seeing a resurgence of activity, with new office buildings and retail developments popping up all the time. Dallas is also experiencing healthy commercial real estate growth, thanks to its strong economy and diverse mix of businesses. Overall, commercial real estate in Texas is poised for continued success in 2022.
Overview of the Texas Economy
Employment growth continued through the first quarter of the year. Economic activity within Texas improved during 1Q2022, although joblessness in the Lone Star State was still higher than the national average. The variance in unemployment rate performance between the state and the nation is largely explained by the outsized recovery of Texas’ labor force participation rate relative to the country’s as a whole. Oil industry activity accelerated as oil prices increased, and global economic recovery continued.
Texas nonfarm employment added 166,300 jobs through the first quarter. Total nonfarm employment in Texas has now continued well past the pre-COVID peak of just under 13 million jobs to just over 13.2 million jobs.
Austin added 12,900 employees, continuing a strong recovery as the metro benefits from its substantial high-tech sector, which can socially distance and has prospered during the pandemic.
Employment increased in Dallas and Fort Worth, gaining 56,700 and 16,600 jobs, respectively. Hiring in Houston again saw strong growth, adding 32,400 jobs during the first quarter. However, payrolls remain below pre-pandemic levels. San Antonio registered a quarterly increase of 5,300 workers.
Texas’ goods-producing sector gained 38,900 jobs during the fourth quarter following a gain of 26,500 positions in the previous quarter. Amid increasing oil prices, energy-related employment rose by 8,900 jobs. Recovering global economic conditions supported the state’s manufacturing industry, which added 13,800 employees, while durable-goods payrolls recorded an 8,400 job gain. Construction payrolls expanded this quarter, adding 16,200 jobs.
Texas’ service-providing sector added 166,500 workers. Leisure/hospitality recouped 44,500 jobs, but arts/entertainment/recreation payrolls remained almost 10 percent below pre-pandemic levels. On the other hand, the transportation/warehousing/utility industry added 29,800 positions, with total employment now surpassing pre-pandemic employment by 4 percent.
As it has become increasingly clear that inflation is not so transitory and the Federal Reserve has continued raising rates, the cost of capital has begun to rise. The ten-year U.S. Treasury bond yield quarterly average increased to 1.95 percent through the first quarter, up from 4Q2021’s 1.53 percent and 4Q2019’s 1.7 percent. The spread between apartment capitalization rates and the ten-year Treasury yield decreased through the quarter. This was due to an increase in the yield for the ten-year Treasury bill. Overall apartment cap rates for Houston and San Antonio remain the highest, followed by DFW and Austin.
Texas’ unemployment rate decreased to 4.6 percent, still greater than the national rate of 3.8 percent. The size of the state’s labor force expanded while the labor force participation rate reached 63.4 percent. Texas’ major metros reported lower unemployment rates than the statewide average, except in Houston where joblessness fell to 5.1 percent. Unemployment fell to 3.8 percent in DFW and to 4 percent in San Antonio. Joblessness remained lowest in Austin, where unemployment slid to 3.1 percent.
Texas Market Trends
The commercial real estate market in Texas is expected to experience strong growth in 2022. The economy is booming and there is a lot of investment activity in the state, which is driving demand for commercial property. Office vacancy rates are low and rents are rising rapidly. Retail space is also in high demand, as the population of Texas continues to grow.
Is it a Good Time To Buy Commercial Real Estate in Texas?
Investors are positive about the Texas commercial real estate market and for good reason. The economy is strong and there is a lot of investment activity in the state. This is driving demand for commercial property, which is likely to lead to continued growth in the market.
Now may be a good time to buy commercial real estate in Texas. The market is hot, but there are still some opportunities to be found. Investors who are willing to do their homework can find good deals in this market. The only thing to be cautious about right now is rising interest rates and the economy. Texas commercial real estate has shown time and time again that it follows notable trends that often contradict the country’s general commercial real estate trends.
This fact has become more prominent lately, especially with markets recovering from the COVID-19-related economic downturn.
Texas Commercial Real Estate Trends for 2022
A successful commercial real estate investment lies in having a diversified portfolio. You don’t need to be a Texas resident to invest in commercial real estate in the state. The point is to make diverse and lucrative investments across the US to increase your ROI.
The following are Texas’ commercial real estate trends for you to consider when constructing your portfolio:
- Commercial Real Estate is Recovering Rapidly
Interestingly, the commercial real estate market has recovered rapidly within Texas, leaving several analysts stunned. There is speculation about the reasons for this rapid recovery, but a lack of consensus makes it difficult to pinpoint the actual drivers. Below are some of the prominent factors suspected of affecting the market:
- Less regulatory pressure for creating environmentally sustainable buildings,
- Increase in job opportunities and subsequent increase in population,
- Establishment of universities and similar infrastructure that support the overall economy.
While all of these factors might be contributing to the recovery, the fact is that Texas commercial real estate is booming, and right now is the time to invest.
- Warehouse and Industrial Properties are Booming
The e-commerce boom has affected Texas and has increased commercial real estate transactions for warehouse and industrial properties. This aspect is one of the few areas where the Texas market trends for 2022 resemble the general trend, primarily because it concerns an overall shift in consumer behavior.
- Boosts due to Tech Industry Expansions
Tech industry leaders like Apple, Oracle, and Meta recently expanded operations in Texas, increasing job creation. Their presence has also boosted the local economy, improving commercial real estate prospects in several regions across the state. This development will likely create long-term benefits for the Texas economy, leading to sustainable gains for the commercial real estate industry.
- Commercial Real Estate Boom Will Continue
There were concerns about the possibility of Texas commercial real estate heading toward a decline, but it seems the concerns were unfounded. The low-interest rates in the country led to a spike in borrowing, creating a bubble, but the same doesn’t hold for this state. Data shows that the Texas boom will likely remain stable in 2022, ensuring high returns for commercial real estate investors.
CONCLUSION
In short, Texas commercial real estate is lucrative, and you must include some properties from the region to boost your portfolio profitability. The future is bright for commercial real estate in the Lone Star State. Texas is business-friendly, family-friendly, and development friendly.
With a steady stream of Americans relocating to Texas, it is easy to envision cities and metro areas continuing to grow. This growth holds much promise for those involved in every aspect of the commercial real estate industry; developers, builders, brokers, and everyone in the supply chain.
As informed investors we should understand the risks associated with real estate investing and that there is no guarantee. Please do your due diligence.
Contact Estateserve today and realize your cash flow goals.
Is it a Good Time To Buy Commercial Real Estate in Texas?
Investors are positive about the Texas commercial real estate market and for good reason. The economy is strong and there is a lot of investment activity in the state. This is driving demand for commercial property, which is likely to lead to continued growth in the market.
Texas’ commercial real estate trends for you to consider when constructing your portfolio
- Commercial Real Estate is Recovering Rapidly
- Warehouse and Industrial Properties are Booming
- Boosts due to Tech Industry Expansions
- Commercial Real Estate Boom Will Continue
What are the key drivers of the TEXAS commercial real estate market in 2022?
The key drivers of the TEXAS commercial real estate market in 2022 include the state’s robust economy, a thriving tech industry, and a growing demand for industrial and logistics space, as well as office space and multi-family properties.
Why is Texas an attractive destination for businesses looking to expand or relocate?
Texas is an attractive destination for businesses looking to expand or relocate due to its favorable business climate, diverse economy, and growing population. The state also has a thriving tech industry and a robust energy sector, which makes it an attractive destination for companies looking to expand their operations.
Why are investors looking to invest in multi-family properties in Texas?
Investors are looking to invest in multi-family properties in Texas due to a growing population, a thriving economy, and a favorable business climate. This has led to increased investment in the multi-family sector of the real estate market, as many investors look to take advantage of the growing demand for housing in Texas.
