Texas Metros Demonstrate Growing Appeal To Businesses, Investors

The challenging economic environment in 2020 has forced many businesses to re-examine their balance sheets to find ways to improve performance and cut costs. That’s leading more and more companies to consider Texas as a place to put their money.

Texas has long had a reputation for being a business-friendly state, thanks to comparatively low corporate taxes, availability of labor and an affordable cost of living. 

Endeavor Real Estate Group principal Ben Bufkin is based in Austin and said the surge of recent corporate relocations and expansions to Texas suggests the state is well-situated for long-term growth. 

He pointed to Tesla’s anticipated 1.1M SF gigafactory in southeast Austin, CBRE relocating its corporate headquarters from Los Angeles to Dallas and Charles Schwab Corp. planning to move its own corporate headquarters to Dallas as well.

“Those are all positive indicators that even though we're in this strange moment today, that we're poised for long-term success,” Bufkin said during a Bisnow webinar Nov. 11.

Rockstar Capital founder and CEO Robert Martinez said Texas has continued to do business during the coronavirus pandemic, and migration from the East and West coasts is still happening. All of those things point to more corporate relocations and increased demand for commercial real estate in the coming years.

“I think the secret's out, I think we're going see a new Texas over the next 10 years,” Martinez said.

IMA Financial Group National Construction Practice Director Michael Campo said that the firm is hearing from clients all over the country that Texas is where they want to be.

“Overall, I would tell you compared to some other states, the insurance community looks at [Texas] as a favorable, insurable state,” Campo said.

In terms of where commercial real estate investors should be looking to place their money in Texas, Bufkin and Martinez said large metropolitan areas like Houston, Dallas and Austin are good bets.

“I would say generally, the safe place is going to be in and around major metros. When growth returns, that's likely to be the places where you see growth,” Bufkin said. “My sense is we will continue to be focused on real estate fundamentals, the basics — location, access [to] amenities. So as we start to target the strategy for submarkets and places within Austin, those core fundamentals are going to continue to ring true. That probably puts us in and around the CBD, in and around more dense nodes in the northern area.”

He noted that both residential and industrial assets will be the focus of Endeavor Real Estate Group in the near future, as both have continued to perform well during the pandemic. 

Bufkin’s view of the future of the office sector continues to evolve, but he said corporate entities will always need space. Some users may increase their footprint to allow for better social distancing, while others will want to shrink theirs to accommodate more flexibility in the future.

Martinez said the office sector will look very different moving forward, as companies opt for smaller, more flexible workspaces.

“There's been a great reset this year. What killed Blockbuster? Netflix. What killed Sears and Toys R Us? The Amazon experience. What killed the taxi industry? Uber,” Martinez said.

“People are recognizing that you don't need all of that space. It's been a slow evolution. And office? What killed office? COVID. I predict it's never going to get back to the way it was again.”