A Deep Dive into Texas Multi-Family and Industrial Real Estate: Key Challenges and Opportunities

Texas continues to lead the nation in commercial real estate growth, with multi-family and industrial properties dominating the market. As economic and population trends fuel demand in these sectors, property owners are seeing rising valuations—and, with them, higher property tax burdens. While these upward trends present opportunities, they also introduce unique challenges that can impact property performance and tax assessments.

Here’s a closer look at what’s happening in these two powerhouse asset classes and how property owners can respond to protect their investments.

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The Multi-Family Sector: High Demand Meets Rising Challenges

Texas’s population boom, coupled with an influx of businesses, has driven unprecedented demand for multi-family housing. Cities like Austin, Dallas-Fort Worth (DFW), and Houston remain hotspots for apartment development and investment.

Key Opportunities in Multi-Family

1. Demand from Population Growth Texas gained over 470,000 new residents in 2023 alone, driving rental demand in urban and suburban markets. Millennials and Gen Z renters, as well as corporate relocations, have bolstered occupancy rates across many metro areas.
2. Rent Growth Trends While rent growth has slowed nationally, cities like Dallas and San Antonio still report modest gains of 3-5% annually.
3. Development Activity Texas leads the U.S. in new apartment construction, with over 130,000 units delivered in the last year.

Challenges to Watch

1. Market Saturation While demand remains strong, certain submarkets—particularly in Austin and parts of DFW—are experiencing oversupply. This drives down rents and increases concessions, particularly for Class A properties.
2. Operating Cost Increases Property owners face rising expenses, including insurance premiums, maintenance costs, and property taxes. These costs directly squeeze NOI (Net Operating Income), which should be reflected in property valuations.
3. Mass Appraisal Blind Spots Appraisal districts often fail to account for rent stagnation, increased vacancy, or rising expenses when valuing multi-family properties. As a result, properties may receive inflated valuations that don’t align with actual performance.

Example: A multi-family complex in Austin experienced increased vacancies due to new competitive supply. However, the appraisal district assigned a 10% valuation increase based on general market growth. Through appeal, a professional tax consultant adjusted the valuation downward to reflect real occupancy data, saving the owner $75,000 annually.

Owner Strategy: Multi-family owners should ensure their valuations account for submarket performance, rent concessions, and rising operating expenses. A thorough review of financial data can expose errors in the district’s assumptions.

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The Industrial Sector: TX Crown Jewel Faces Growing Pains

The industrial sector continues to thrive, with Texas serving as a national leader in logistics, distribution, and manufacturing. Markets like Dallas-Fort Worth, Houston, and San Antonio remain magnets for industrial development, fueled by e-commerce growth, reshoring, and population density.

Key Opportunities in Industrial

1. Record Demand for Warehouse and Logistics Space Companies like Amazon, Walmart, and other e-commerce giants have increased demand for distribution centers near major transportation hubs. DFW alone delivered over 40 million square feet of industrial space in 2023, with vacancy rates below 6%—a record low for a market of its size.
2. Reshoring and Manufacturing Expansion Texas’s central location and favorable business climate have attracted significant manufacturing investments, including tech and energy sectors. This has led to increased demand for specialized industrial spaces, such as cold storage and light manufacturing facilities.
3. Steady Rental Growth Lease rates for industrial properties in Texas have grown between 8-10% annually in key markets, creating opportunities for property owners to boost NOI.

Challenges to Watch

1. Oversupply Concerns in Certain Submarkets The industrial boom has led to record construction activity, particularly in secondary markets. While demand remains strong, certain submarkets now face rising vacancies as new supply comes online.
2. Valuation Overshoots Appraisal districts often apply blanket increases to industrial properties without factoring in: Lease rates specific to the property. Tenant turnover or concessions. Deferred maintenance or obsolescence in older facilities.
3. Rising Operating Costs Insurance, labor, and maintenance costs are squeezing industrial margins, creating discrepancies between appraised values and actual financial performance.

Example: A warehouse owner in Houston saw their valuation increase by 15% year-over-year, despite significant tenant turnover and rising operating expenses. Through appeal, a thorough NOI analysis reduced the valuation by 20%, saving $90,000 in property taxes.

Owner Strategy: Industrial property owners should focus on defending their valuations with:

• Accurate lease data and rent trends.
• Evidence of vacancy or tenant concessions.
• Expense data that reflects the true cost of property operations.

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How Property Owners Can Take Control

Both multi-family and industrial owners are in unique positions: thriving markets create value, but also bring challenges in the form of rising tax liabilities. Here’s how to stay proactive:

1. Conduct an Annual Valuation Review Partner with experts to review your property’s income, expenses, and local market conditions to identify valuation discrepancies.
2. Document Property-Specific Challenges Collect data on vacancies, deferred maintenance, and submarket rent trends to build a strong case for appeal.
3. Challenge Mass Appraisal Assumptions Don’t accept generic comparisons—ensure your property is valued based on its unique performance.

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Partner with Experts to Protect Your Bottom Line

At FirstPointe Advisors, we specialize in helping Texas property owners navigate rising valuations with data-driven strategies that deliver results. Our team has extensive experience in both the multi-family and industrial sectors, ensuring your property is assessed fairly and accurately.

From market analysis to appeal negotiations, we manage the entire process—so you can focus on maximizing your property’s potential.

Contact FirstPointe Advisors today for a complimentary property tax review and let us help you plan ahead for success.

James “Garrett” Cope

Senior Manager, Property Tax

FirstPointe Advisors, LLC

3201 Dallas Pkwy., Suite 200

Frisco, TX 75034

Main: 214.253.0056

info@first-pointe.com