The Potential Benefits of Real Estate Investing in Texas
Commercial Real Estate
They say that everything is bigger in Texas. With a population of nearly 29 million and 267,000 square miles of land, Texas is one of the three states contributing to 48% of the U.S. population growth and is bigger than California and the entire country of France.¹
Investment real estate is also big in Texas. In this article we’ll look at the benefits of real estate investing in Texas, an economy that CNBC named in 2019 as #2 of “America’s Top States for Business in 2019”.²
While petroleum products remain the state’s largest export, many business sectors not usually associated with the Lone Star State are helping the economy in Texas to rapidly expand. A recent article from Business Insider entitled, “11 Mind-Blowing Facts About Texas’ Economy”, notes that:³
In its July 23, 2019 publication of “Texas Economic Indicators”, the Federal Reserve Bank of Dallas reports that employment in Texas is expanding at a healthy pace while unemployment hits a record low.⁴ With an annualized rate of 3.9% in June, job growth is widespread across all major metro areas in Texas, as is the decrease in unemployment.
In fact, the Dallas Fed reports that, for the second month in a row, the Texas unemployment rate is the lowest it has been since 1976. Employment growth in the goods sector rose to 6% in H1 2019, supported by job growth in the construction sector.
The commercial real estate industry in Texas supports nearly 380,000 jobs and contributes about $59 billion to the state’s GDP. This ranks the state’s economy, when measured by commercial real estate development, ahead of California.⁵
As Texas enters its ninth year of the business-cycle expansion, with payroll employment growing and unemployment remaining low, the Real Estate Center at Texas A&M University reports that forecast continued expansion through 2019 translates into a positive outlook for the commercial real estate sector in all major Texas Metropolitan Statistical Areas (MSAs).⁶ On the negative side, a declining trade environment remains the greatest headwind to the Texas economy, challenging some of the state's most productive industries. The trade war with China looms as a major potential headwind going forward. However, the Texas Nonresidential Leading Indicator, which measures potential future construction activity, indicates growth may slow going forward.
The Real Estate Center sees rising oil prices, declining interest rates, and the new trade agreements between the U.S., Canada, and Mexico as a boon for Texas. The state exports over $92 billion in goods annually to Mexico and about $25 billion each year to Canada.⁷ Texas has no individual or corporate income tax rate and ranks 13th in the collection of state and local property tax per capita.⁸
There are also potential challenges to future economic growth in Texas, including reduced commodity exports from trade wars and a slowing world economy. Although the Texas Consumer Confidence Index increased by 5.5 points in June 2019, concern about trade uncertainty is keeping future sentiment subdued, according to Texas A&M University Real Estate Center.⁹
The large and growing population of Texas, thriving cities with diverse economies, and world-renowned higher education and research facilities such as Texas A&M and the University of Houston help create demand for real estate and investment in Texas.¹⁰
The three largest cities in Texas are Dallas-Fort Worth, Houston, and San Antonio. Collectively, these three MSAs are home to over 17 million residents and generate over $1.3 trillion in combined GDP.¹¹
With a population of about 7.4 million residents, the Dallas-Forth Worth Metroplex (DFW) is home to two of the fastest-growing cities in the U.S. Both PwC and the Urban Land Institute have recently named the Dallas-Fort Worth metro area as the top real estate market in the U.S. for both commercial and residential investment, according to the Q2 2019 report by Avison Young. All but one of the top 10 business sectors reported positive employment growth year-over-year, with the biggest gains coming from the professional and business services, and transportation and utilities sectors.¹²
The following market data highlights are from the Q2 2019 Dallas-Fort Worth MarketView reports from CBRE:¹³, ¹⁴, ¹⁵
The metropolitan population of Houston has grown 2.2% year-over-year, and now stands at over 7 million people. The healthcare, technology, and import/export business sectors continue to expand. In fact, Houston is currently ranked as the #1 port by foreign tonnage.¹⁶
The following market data highlights are from the Q2 2019 Houston Multifamily and Office MarketView reports from CBRE, and the Q2 2019 Houston Retail Quarterly Market Report from NAI Partners:¹⁷, ¹⁸, ¹⁹
San Antonio lies between the south and central regions of Texas and anchors one corner of the Texas Triangle urban megaregion. Home to over 2.5 million people, San Antonio is committed to growing its core industries in the military, financial services, energy, healthcare research, and manufacturing business sectors.²⁰
The following market data highlights are from the Summer 2019 Multifamily Report from Multi-Housing News and Yardi Matrix, and the Q2 2019 San Antonio Office MarketView report from CBRE, and the Q2 2019 Retail Market Report from NAI Partners:²¹, ²², ²³
There’s a saying that goes “I wasn’t born in Texas, but I got there as fast as I could!”.
With nine years of solid business expansion and unemployment the lowest it’s been in over 40 years, it’s easy to understand how real estate investing in Texas can offer attractive opportunities. There’s no state income tax, and Texas promotes a business-friendly environment, recently being ranked as the second top state for business in the U.S.²⁵
For investors with a long-term, buy-and-hold investment strategy, markets with stable growth rates over the long run may offer better opportunities than those that rise quickly over a short period of time. The top three commercial real estate markets in Texas – Dallas-Fort Worth, Houston, and San Antonio – benefit from large and growing populations, thriving diverse economies, and world-class research universities:
Out of the 7 properties within our MogulREIT II portfolio, 5 are located in Texas. These 5 multifamily investments are structured as joint venture equity and comprise 64% of the portfolio.²⁶ RealtyMogul has a bullish outlook on Texas real estate investments and we continue to seek value-add multifamily acquisitions in the Lone Star State. Consider adding Texas to your portfolio by investing in MogulREIT II.
Investing in MogulREIT II’s common shares is speculative and involves substantial risks. The “Risk Factors” section of the offering circular contains a detailed discussion of risks that should be considered before you invest. These risks include but are not limited to illiquidity, complete loss of capital, limited operating history, conflicts of interest and blind pool risk. MogulREIT II’s multifamily investments can be subject to specific risks including changes in demographic or real estate market conditions, resident defaults, and competition from other multifamily properties. MogulREIT II’s multifamily investments can be subject to specific risks including changes in demographic or real estate market conditions, resident defaults, and competition from other multifamily properties.
Disclaimer: All information provided herein is for informational purposes only and should not be relied upon to make an investment decision and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. We suggest that you consult with a financial advisor, attorney, accountant, and any other professional that can help you understand and assess the risks associated with any investment opportunity.