When it comes to commercial property loans in Texas, there are a variety of financing options available for different types of real estate. Whether you're looking to invest in multifamily properties, office buildings, industrial warehouses, retail spaces, self-storage facilities, or hospitality properties, understanding the current state of the economy and real estate market in Texas is crucial for making informed financing decisions.

In this article, we'll provide an overview of the economy and real estate markets in Texas, as well as financing options for each property type.

Economy in Review

According to the Bureau of Labor Statistics, Texas had an unemployment rate of 6.8% as of December 2020, which is slightly higher than the national average of 6.7%. However, Texas has a diverse economy with strong industries such as energy, healthcare, and technology. The state also has a growing population, which has contributed to a strong housing market.

Despite the challenges posed by the COVID-19 pandemic, Texas has shown resilience and is expected to continue to grow in the coming years.

Multifamily Market

The multifamily market in Texas has been strong in recent years, with high demand for rental properties and low vacancy rates. According to the U.S. Census Bureau, the homeownership rate in Texas was 62.8% as of Q3 2020, which is lower than the national average of 67.4%. This indicates that there is a large population of renters in Texas.

Financing options for multifamily properties in Texas include conventional loans, FHA loans, and Fannie Mae and Freddie Mac loans. These loans typically require a down payment of 20-30% and have varying interest rates and terms.

Office Market

The office market in Texas has been impacted by the COVID-19 pandemic, with many companies transitioning to remote work. However, Texas has a strong business climate and is home to many large corporations, which has helped to mitigate the impact on the office market.

Financing options for office buildings in Texas include conventional loans, SBA loans, and CMBS loans. These loans typically require a down payment of 20-30% and have varying interest rates and terms.

Industrial Market

The industrial market in Texas has been strong in recent years, with high demand for warehouse and distribution space. According to CBRE, the industrial vacancy rate in Texas was 6.6% as of Q3 2020, which is lower than the national average of 7.5%.

Financing options for industrial properties in Texas include conventional loans, SBA loans, and CMBS loans. These loans typically require a down payment of 20-30% and have varying interest rates and terms.

Retail Market

The retail market in Texas has been impacted by the COVID-19 pandemic, with many retailers closing their doors or transitioning to online sales. However, Texas has a large population and a strong economy, which has helped to mitigate the impact on the retail market.

Financing options for retail properties in Texas include conventional loans, SBA loans, and CMBS loans. These loans typically require a down payment of 20-30% and have varying interest rates and terms.

Self-Storage Market

The self-storage market in Texas has been strong in recent years, with high demand for storage space. According to CBRE, the self-storage vacancy rate in Texas was 9.7% as of Q3 2020, which is lower than the national average of 10.5%.

Financing options for self-storage facilities in Texas include conventional loans, SBA loans, and CMBS loans. These loans typically require a down payment of 20-30% and have varying interest rates and terms.

Hospitality Market

The hospitality market in Texas has been impacted by the COVID-19 pandemic, with many hotels experiencing low occupancy rates. However, Texas is a popular tourist destination and has a strong business travel market, which has helped to mitigate the impact on the hospitality market.

Financing options for hospitality properties in Texas include conventional loans, SBA loans, and CMBS loans. These loans typically require a down payment of 20-30% and have varying interest rates and terms.

Commercial Real Estate Loans by Purpose

There are many types of loans available for commercial properties in Texas, and the best fit for you depends on your investment strategy. Here are some broad categories of financing available.

Permanent Financing

Permanent financing is a type of loan that remains in place for an extended period of time. It's commonly used to finance the acquisition of commercial properties or to refinance existing debt. Types of permanent financing include bank loans, loans from government-sponsored entities like Fannie Mae and Freddie Mac, HUD loans, credit union loans, loans from life insurance companies, commercial mortgage backed securities (CMBS) loans, and other types of loans depending on the specifics of the commercial property.

Refinancing a Commercial Real Estate Property in Texas

I wouldn't quite call this a separate type of loan, but I have to mention refinancing in here. These are typically permanent loans (but not always) used to pay down an existing, partially amortizing or interest-only loan.

Often you may be able to time a refinance to happen after an interest rate drop — an ideal solution — but if your loan is maturing during a period of higher rates, you shouldn't stress too much about this. We'll work with you to find the best loan terms for your commercial property by reaching out to potentially thousands of lenders. Just complete the form below, and we'll get to it.

Construction Financing

Construction financing, also known as interim financing, is used to finance the cost of construction for commercial properties. It is usually a short-term loan that covers the cost of land development and building construction. Once construction is completed, the borrower can typically convert this into a permanent loan or pay it off with a new loan.

Bridge Loans

Bridge loans are a type of short-term loan that can be used to cover costs in the interim period between the end of one loan and the beginning of another. They are typically used in commercial real estate to finance the transition between construction financing and permanent financing. Bridge loans generally have higher costs than most other financing options and are often interest-only and non-recourse.

Commercial Real Estate Loans by Type

Depending on the purpose of your loan, you will have several financing options available to meet your investment goals. Read below to learn more about specific loan types.

Bank Loans

Bank loans are a common financing option for commercial real estate in Texas. They can offer competitive interest rates and flexible terms, but the specifics can vary greatly from bank to bank. While they may not always be the best fit for larger, more complex projects, they can be an excellent option for smaller, simpler properties.

Life Company Loans

Life company loans are typically used to finance high-quality assets in major markets. They generally have lower loan-to-value ratios than most other loan types but offer competitive interest rates and long terms. However, they may not be suitable for riskier projects or properties in less established markets.

Agency Loans

Agency loans, offered by government-sponsored entities like Fannie Mae and Freddie Mac, are typically used for properties that are mostly multifamily. They offer attractive loan terms, low, fixed interest rates, and are non-recourse. However, there are restrictions on the amount of income that can come from other commercial uses.

HUD Loans

HUD multifamily loans are government-backed loans that are primarily used for the construction, substantial rehabilitation, purchase, and refinancing of multifamily properties. These loans offer long-term, non-recourse financing with competitive interest rates but have extensive requirements for qualification.

CMBS Loans

Commercial Mortgage Backed Securities (CMBS) loans are a type of mortgage-backed security backed by commercial real estate loans. Lenders focus more on the strength of the property than the borrower's credit, making them a good option for properties with strong cash flow.

SBA Loans

Small Business Administration (SBA) loans, such as the SBA 7(a) and SBA 504, offer attractive financing options for small businesses. However, the maximum amount for an SBA 7(a) loan is $5 million, while SBA 504 loans can go up to $20 million. They cannot be used for multifamily properties and are only available for properties that the business owner occupies.

Mezzanine Loans

Mezzanine financing is a hybrid form of financing that combines elements of debt financing and equity investment. It is typically used in commercial real estate to fill a funding gap between the primary loan and the total cost of a project.

Commercial Property Insurance in Texas

This part isn't about loans, but it's just as important to your investment's success. Let's talk (quickly) about insurance.

Insurance premiums have skyrocketed in the past few years, as I'm sure you know. While multifamily gets a lot of the attention, rates for insuring anything from office buildings to shopping centers have jumped significantly.

Janover Insurance Group is dedicated to finding the best insurance solutions for your commercial real estate assets in Texas. Click to get a free insurance quote for your property — no obligation.

By City

• El Paso
• Dallas
• Houston
• San Antonio
• Fort Worth
• Austin
• Corpus Christi
• Arlington
• Lubbock
• Irving
• Laredo
• Plano
• Garland
• McKinney
• Frisco
• Grand Prairie
• Amarillo
• Brownsville
• Killeen
• McAllen
• Pasadena
• Waco
• Mesquite
• Denton
• College Station
• Round Rock
• Pearland
• Midland
• Abilene
• Carrollton
• Lewisville
• Beaumont
• League City
• Richardson
• Sugar Land
• Allen
• Tyler
• Odessa
• Edinburg
• Wichita Falls