Texas is thriving. The value of its economy, the companies it hosts, job growth, population growth—they’re all exceptional. Demand for housing is keeping pace, too, making Texas one of the best states to consider when investing in real estate.
Economic Drivers Suggest Texas is One of the Best States to Invest in Real Estate
In July, CNBC named Texas the country’s Top State for Business in 2018, citing 350,000 jobs added in the past year and an economy worth $1.6 trillion. The U.S. Bureau of Economic Analysis noted that same month that Texas has 8.9 percent of the country’s total economy, ranking second after California. The state also saw 2.9 percent GDP growth (Texas ranked sixth nationwide) in the first half of the year.
The future looks bright, too. In a May interview, Robert Kaplan, president and CEO of the U.S. Federal Reserve Bank of Dallas, credited population growth for Texas’s rosy economic future. The state has over 28 million people today and that number could rise to 40 million in the next 25 years. “At a time where the rest of the country is challenged by aging populations, slowing workforce growth and a loss of working age population, with this population growth, Texas is bucking a lot of those trends,” Kaplan said.
This prosperity extends to all of the state’s four major metropolitan areas, although for different reasons. Multifamily vacancies in Houston were down half a percent in the first quarter of the year to 6.2 percent, while rents rose 6.1 percent year-on-year. The Houston multifamily market is poised for growth, thanks to the recovery of the oil industry and the ripple effect it has caused in related industries. As deliveries slow in the city, which was severely oversupplied a year ago, demand is outpacing it. Businesses are contributing to Houston’s prosperity as well. International carrier DHL, for example, has opened a new distribution facility in north Houston.
While Houston’s recovery is impressive, Dallas–Fort Worth is by far the national leader in multifamily housing growth. The area is adding 27,000 new units this year to keep up with population growth. Much of that growth is occurring in suburban areas, especially to the north of Dallas. Affluent Frisco, for example, expects to see 1,500 jobs this year. That city will also be the site of a 2,544-acre mixed-use development on what is now the Headquarters Ranch. The rental market is becoming more competitive in the DFW metropolitan area, with occupancy up 0.40 percent to 94.6 percent and rent growth of 1.7 percent in Q2 2018.
Smaller Metros, Acquisitions Look Grand, Too
Smaller metro areas of Texas are growing as well. San Antonio added 18,800 jobs in the year leading up to March 2018, and added 47,700 residents in 2017, according to a Yardi Matrix report. This has contributed to a healthy development market, including luxury housing. Rents in Austin hit a record high in June 2018 at an average of $1,278. In the Austin metropolitan area, 7,641 units were leased in the first half of the year, compared to 5,891 in all of 2017. As of June, the occupancy rate for Austin area apartments averaged 93.2 percent. “We believe 2018 will be undersupplied by as much as 2,000 units [in Central Texas],” one property development executive commented.
The acquisitions market is healthy throughout Texas’s major metropolitan areas. Austin enjoys the advantage of newer housing stock and leads the state in multifamily sales prices with an average property price of $32.46 million last year across 59 transactions. DFW saw 231 sales with an average price of $23.62 million last year. Houston and Fort Worth were named top “buy” markets, at 1st and 4th places, respectively, by commercial real estate transaction platform Ten-X in August. Yardi Matrix noted the San Antonio value-add market is tightening.
With development and acquisitions opportunities of all sizes, Texas offers something for every multifamily real estate investor. The state’s population and economic growth should continue to stimulate the multifamily investment market.
At CWS Capital Partners, we are experts in investment and property management in Texas, with 67 communities across the four metropolitan areas. Our experienced staff can help you with all aspects of your multifamily property investment strategy in the state, whether you are looking to acquire existing properties or seeking to identify opportunities for development. We can also guide you through the 1031 exchange process. To learn about our Texas properties, please visit our affiliated CWS Apartment Homes website.
Please contact us to learn more about investing with CWS Capital Partners.
The information provided here is for your general informational purposes only. It should not be considered a recommendation or personalized advisory advice. CWS has made this third party information available from authors it believes are knowledgeable and reliable resources. However, its accuracy or completeness cannot be guaranteed and sentiment may change due to legal or economic conditions.
All investments involve risk including the possible loss of principal. You should familiarize yourself with all risks associated with any investment product before investing.
Advisory services are provided by CWS Capital Partners LLC, a registered investment advisor.
Securities offered by CWS Capital Partners LLC are through an affiliated entity, CWS Investments. CWS Investments is a registered Broker Dealer, member FINRA, SIPC.