Texas Commercial Real Estate Market Trends Analysis

Industrial buildings are a kind of commercial real estate that is utilized by businesses that serve other companies (B2B tenants). These businesses could genuinely manufacture the products, or they could be middlemen that disburse a manufacturer’s products to other companies.

However, at this time, there is an expanding group of industrial buildings whose renters are internet order fulfillment centers that disburse items straight to the purchaser.

Industrial properties are long-term hold investments that are valued by investors/landlords. These investments benefit from both revenue (rent) and the anticipated increase in the value of the asset. Their lease agreements could either receive pass-throughs like property insurance and taxes in one payment (gross) or individually (net).

Annual and 10 Year Population Growth

Industrial property investors require population statistics for purposes that are dissimilar from residential investors. A declining populace has a less direct effect on industrial properties by way of a shrinking tax base. If the local government cannot collect adequate taxes, it isn’t able to keep up its obligations to adequately maintain the infrastructure that industrial tenants need.

All property values, commercial as well as residential, are weakened in areas that are losing citizens. A significant consideration for industrial renters is the access to suitable workers. Significant industrial tenants will turn down regions that are losing citizens.

Property Tax Rates

Industrial investors use real estate tax data as a sign of the strength of a market, just like multifamily investors. Unstable tax rates indicate a market that most likely isn’t beneficial for your investment’s success.

Our articles on commercial real estate taxation along with commercial real estate tax reduction will inform you about taxation basics.

Accessibility

Industrial building tenants typically transfer significant amounts of products or bulky items. Large tractor-trailer trucks are utilized to move these products. Industrial properties need to be adjacent to major roads so that significant trucks can reach them without difficulty.

There are industrial businesses that utilize trains or airplanes to haul their products. This makes being near an interstate, which usually runs near air and railway hubs, a large plus for industrial properties.

Utilities

Manufacturing facilities often need significant amounts of electricity and water. If a property does not contain sufficient levels of these utilities, some companies will search somewhere else.

Retail facilities house renters that sell products or services to individuals. These stores may be in a structure by themselves (single-tenant) or in a property with additional occupants (multi-tenant). Recruited tenants for single-tenant locations are drug stores, automobile equipment stores, banks, and restaurants.

A building that holds a few renters is multi-tenant property, as are “neighborhood” centers, “strip” malls, grocery anchored shopping, or malls with big national tenants called “big box” centers. “Lifestyle” retail centers might combine retail, office, and residential units.

Retail owners utilize “net” leases that obligate the tenants to additionally take care of the property’s taxes, insurance, and upkeep of the common areas including the parking areas. Retail renters also have to handle maintenance of the property.

Retail tenants have specific site criteria that retail investors follow when analyzing demographic data.

Population Growth

The total specific data and ratios for the complete area are just the start for retail property investors. The critical information will correspond to the specific trade area surrounding the marketed investment property. Clients have to be able to locate and easily reach your retail tenants.

A trade area that doesn’t already have enough “rooftops” will not do for retailers even if it is growing. Investors in retail properties will review all categories of populace data including population size, annual and 10 year growth numbers, and how many people are employed in the area.

Median Income

Income standards reveal to retailers where their consumers are. Bigger wages show an acceptable place for higher end retailers, whereas middle wages are good for middle income retailers such as automobile equipment stores.

Median Age

Age data is more important to retail investors than other investor types. Based on the type of center (grocery anchored, entertainment anchored, big box retailers) the age of the populace can help draw desirable retail lessees.

Property Tax Rates

The earlier illustration of how property tax rate data is used by industrial and apartment complex investors applies to retail investors also. Increasing taxes are passed on to their tenants which hurts their occupancy rates, and the worth of their property could be reduced over time.

You spend even a higher amount of money if the municipality’s tax office’s estimate of your property market worth was unfair. The best commercial real estate lawyers in Texas can help you with a property tax reassessment procedure.

Businesses lease premises for their workers in office buildings. Office areas can be large or tiny. Big corporations frequently rent office locations from others rather than use their company’s capital to buy or build space.

Office lease contracts are typically gross or “full service” deals. These types of leases add the owner’s expenses, including property tax and property insurance into the payment. The terms can be changed depending on the renter and owner’s requirements.

Office building investors keep these assets for a long period which generates revenues from both repeating rental income and the growing worth of the asset.

Population

The particular demographic data that office landlords use illustrates the number of desired office employees in the population. They search for the total populace number, their ages, and their education. Experienced office investors acquire property in places where their renters want to locate.

Property Tax Rates

A financially solvent municipality that provides a suitable living situation for office workers will have stable tax rates. Successful renters will look for that type of environment.

Incomes/Cost of Living

Higher incomes could signal an educated population that many office tenants need. The statistics also helps the renters estimate labor costs.

Education

Education levels are considered by office lessees and investors more than other property investors. Some tenants do not have to find college degrees while others do.

BRRRR, which means “buy, rehab, rent, refinance, repeat”, is an investment plan to increase your portfolio by leveraging the appreciated worth of the asset. These are long-term or Buy and Hold investments. The advantage is that the asset creates income while you hold it and can be sold later for a profit once its worth has increased.

Initially the investor obtains a rental property, then they rehab it and find a tenant. When a profitable income stream is documented, the landlord takes cash out of the property by refinancing their mortgage loan. This becomes the down payment on their subsequent investment, and they repeat it all again.

Regular multifamily loans aren’t an option for buy and rehab projects. Conventional financing companies don’t approve this kind of projects deeming them too risky.

But lenders that might help you can be found in PropertyCashin’s directory of commercial real estate service providers containing the best Texas commercial hard money lenders as well as the top commercial rehab lending companies in Texas.

Also, don’t undervalue the professional knowledge of the best commercial real estate brokers in Texas. They will be happy to consult you about the important local property trends described below.

Median Gross Rents

Investors should understand the amount of rent they can collect and if it is probable that rental rates will increase later. Rent numbers are a critical factor in an investor’s choices.

Property Value Growth

If property values aren’t expanding, a buy and hold investor loses half of their investment plan.

Population

BRRRR investors will estimate the population growth rate. Without an increasing populace, rental units will sit idle and lose value.

Income

Multifamily property investors should find out the wage level of their prospective renters. An asset that does not meet the requirements of the market will have a high unoccupied rate.

Property Tax Rates

Unreasonable or rising taxes will harm an investment. Stable tax rates are a sign of a vibrant, growing economy.

This is even worse when your real estate is incorrectly valued by the local tax assessors. If that is the case, you may benefit from the expertise of the top commercial property tax protest companies in Texas and the top Texas commercial real estate valuation companies.

To a real estate professional, real estate development means the development of any commercial property or a complete residential neighborhood. A developer locates and buys acceptable land and prepares either parcels for purchase or buildings that are rented to occupants.

This involves suitable zoning, site work design by civil engineers, construction plans for buildings, and the okay from the local municipality. When all the submissions are approved, the site work and construction are done and purchasers or renters are found.

It can take one or two years from the start to completion of a development project. The economic picture or area regulations can change in a negative way before the project is done. That is why the most financially dangerous category of property investing is development.

Development may be stopped by different factors that cause a considerable delay before continuing construction work. If the construction workers are away from the site, the site can get damaged. You should seek help by the best commercial property insurance companies in Texas.

Insurance is a tool you may need to show lenders when getting approved for financing. The best commercial construction lenders in Texas may provide a list of firms they think are reliable.

Population

Real estate developers utilize the same demographic indicators that their possible purchasers and renters estimate to locate markets with acceptable standards of population size and growth, economic strength, and educational levels.

Income

Retail property developers consider wage rates to place their development where it will draw the customers that their desired tenants need. High-end retailers look for higher income regions, but moderate priced retail stores require middle class customers.

Information on incomes can help industrial and office tenants understand what they will be required to pay their employees in that market. Wage standards help developers see whether a place is good for industrial or office spaces.

Education

Businesses that occupy space in industrial and office properties have distinct education statistics in consideration for their sites’ population. Office property tenants frequently prefer potential workers with a college degree. Mid level employers are happy with high school grads.

Age

Developers look for a median age that indicates people who are active employees and taxpayers. These are the employees that office and industrial renters have to access. Active employees and their households buy from businesses and restaurants that lease retail buildings.

A working age populace additionally has the most involved homebuyers that residential investors seek.

Investing in mortgage notes involves paying a lower amount than the payoff amount for a loan that’s in place so that the note buyer becomes the lender. Lenders can liquidate loans to raise capital, but they typically sell them because they are not being paid as agreed.

The investor could restructure the loan with reduced payments giving them a long-term investment with interest income payments. The note purchaser is covered by the mortgage note that the borrower signed and could recover the asset if required.

Population

Loan note buyers, like other investors, want to discover the number of residents in the prospective market and if that number is growing or declining. This is an immediate “sniff test” of the financial viability of the locale.

Property Values

Growing real estate values are the most significant factor when promissory note investors assess a neighborhood. The rising value of the collateral lessens the liability of the investment.

Property Tax Rates

If property taxes rise consistently, borrowers who have problems making their debt payments will find it hard to stay current. This is not good for long-term investors, but good for those who expect to turn their investment around without delay by way of a sale of the collateral property.

Another method of investing in the purchase and operation of real property is to acquire shares in a REIT (Real Estate Investment Trust). Their revenue comes from rental payments and the occasional unloading of assets.

These trusts must disburse ninety percent of profits to shareholders as dividends. The ability to invest and withdraw your funds as your needs require make REITs a valuable way for a typical person to invest in real property.

People who invest in REIT shares have no input in which properties are purchased or the way they are managed — they are passive investors.

Real estate owners who want to become passive investors are interested in buying REITs. When you dispose of real estate, you can use the proceeds to acquire REIT shares.

A like-kind exchange is meant to benefit investors who consider doing so. Take a look at the following articles to learn how to benefit from it: Can You Do a 1031 Exchange to REIT Shares? and A-to-Z Guide to Delaware Statutory Trust (DST) 1031 Exchange.

A 1031 exchange accommodator is required by the IRS to work as a middleman in the procedure. Find them in our list of the best 1031 exchange companies in Texas.

One more investment choice that gathers funds from individuals to invest in real property is a real estate investment fund. These entities possess shares in companies that invest in real estate, including REITs.

Investment funds aren’t obliged to distribute their income to shareholders. The investor’s return is generated by the valuation of the fund’s stock.

Mutual funds, ETFs (exchange-traded funds), and high-end private equity funds are designated as real estate investment funds. Shares in real estate funds are bought and unloaded on the public market which is helpful for starting investors.

Fund share buyers don’t have anything to do with picking properties or markets, meaning they are passive investors.