Texas commercial real estate enters 2026 in a more interesting position than headlines suggest. Yes, cap rates have moved out from 2022 lows. Yes, office faces real questions. But beneath those well-known stories, the on-the-ground market across San Antonio, Austin, Houston, and Dallas–Fort Worth is more nuanced — and in some segments, more opportunity-rich — than at any point since 2015.
This piece walks through what we are seeing on the ground at CRECO, what we expect to play out over the next 12-18 months, and what we are recommending to clients across our retail, industrial, and office practice areas. It is not a forecast. It is a synthesis of the conversations we are having with Texas commercial real estate owners, tenants, lenders, and investors every day.
Texas industrial: still the strongest property type, but specs increasingly matter
Industrial remains the most fundamentally sound asset class in Texas commercial real estate. DFW, Houston, and San Antonio rank among the top 10 industrial markets in the United States by absorption. The I-35 corridor between San Antonio and Dallas is seeing record activity. Houston Ship Channel adjacency continues to drive logistics demand. The Austin/Round Rock chip-and-EV manufacturing corridor is generating its own industrial demand center.
But not all industrial is created equal. The bifurcation between modern, high-spec distribution buildings (32+ ft clear, ESFR sprinkler, abundant trailer parking, 277/480V three-phase power) and older Class B/C industrial is widening. Modern bulk distribution can lease at $9-12/SF NNN with concessions; older Class C buildings in the same submarket can struggle to get $6-7/SF NNN.
For tenants, this means specs are a bigger lever than rent. Two warehouses at the same nominal $/SF rate can be wildly different deals once you factor power capacity, dock-door ratio, sprinkler class, and yard area into your operating cost. For owners, modernizing existing industrial through targeted capex (LED lighting, ESFR sprinkler upgrade, dock-door additions, yard expansion) often unlocks meaningful rent uplift.
Texas retail: stronger than the headlines, with submarket selectivity
The "retail apocalypse" narrative continues to wildly oversimplify what is happening on the ground. Well-located Texas retail centers in growth submarkets are seeing strong demand and tenant retention. The categories driving leasing — quick-service restaurants, fitness, medical, specialty retail, services — are categories that survived e-commerce and have nowhere else to go.
Where retail is weak: oversupplied secondary submarkets, second-generation big boxes without anchor replacement, and centers with declining demographics. Where retail is strong: signalized intersections in growth corridors, walkable urban districts, dense Texas suburbs with daytime traffic, and centers with the right tenant mix.
Cap rates for stabilized retail have moved out 75-150 bps from 2022 lows. We are seeing 6.5-8.5% on solid Texas retail strip centers, with single-tenant net-lease investment-grade tenants (Walgreens, McDonald's ground leases) at 5-6%. For value-add buyers, this is a meaningfully better entry point than 2021-2022.
Texas office: bifurcation is the story
Office is the most polarizing Texas commercial real estate category in 2026. The pessimistic narrative — vacancy is up, sublease space is plentiful, hybrid work is permanent — is real. The optimistic narrative — Class A trophy office is in tight supply, top buildings are commanding premium rents, Texas is a net beneficiary of corporate relocations — is also real. Both can be true at the same time because the office market is bifurcated.
Class A trophy office in Austin's Domain, Houston's Galleria, and the Dallas Uptown / Frisco corridor: tight supply, rents holding or growing, tenant attraction strong. Class B suburban office in secondary submarkets: oversupplied, generous concessions, tenant negotiation leverage at multi-year highs.
For tenants, this is the best Class B office market in 15 years. Tenant improvement allowances of $40-80/SF, free rent of 6-12 months on a 7-year deal, rent abatement during buildout — all on the table for the right tenant. For owners of Class B office, the playbook is clear: meaningful capex investment to modernize, tenant retention focus, and patience. The capital markets are punishing distressed Class B office; well-managed Class B office is a different story.
Cap rates have moved out — but not uniformly
The 2022 cap-rate trough is well behind us. 10-year Treasuries at 4.0-4.5% have repriced commercial real estate across the board. But not uniformly. Industrial cap rates have moved least (50-75 bps wider). Retail and office have moved more (100-150 bps wider, with office wider still in some submarkets). Multifamily has moved 75-125 bps wider depending on submarket.
For investors with patient capital, this is a meaningfully better buying environment than 2021-2022. We are seeing well-located Texas commercial real estate trade at 7-8.5% caps on stabilized cash flow — vs 5-6% in 2021. For sellers, the lesson is that 2022-pricing comps are no longer relevant. Underwriting against current Texas market caps is the only honest way to price.
Themes to watch for the rest of 2026
A few themes we are tracking carefully:
- Insurance costs in Texas continue to rise — particularly in coastal and tornado-prone submarkets. This is increasingly a meaningful line item that shifts effective NOI and pricing.
- Property tax appeals are more important than ever. Texas appraisal districts are aggressive on commercial property valuations; well-executed appeals routinely save 5-15% off property tax bills.
- Insurance markets and lender requirements are converging on climate risk disclosure. Owners who can document mitigation and resilience increasingly get better terms.
- 1031 exchange volume remains strong — patient exchangers who can move within the 45-day window are finding good Texas replacement opportunities at the new wider cap rates.
- Owner-user financing (SBA 504) remains a powerful tool for entrepreneurs acquiring their own buildings. Long amortization, fixed rates, low down payments — economics that lease comparisons increasingly favor.
The honest summary: 2026 is a more nuanced year than the headlines. Industrial fundamentals are strong with growing spec sensitivity. Retail is stronger than the pessimistic narrative if you focus on the right submarkets. Office is bifurcated — Class A is fine, Class B is a tenant's market, both deserve careful underwriting.
For owners: focus on submarket selection, asset modernization, and disciplined hold/sell decisions on each individual asset. For tenants: take advantage of negotiating leverage in the segments where it exists (Class B office, Class C industrial, secondary retail). For investors: cap rates have moved out, off-market deal flow is real, and 1031 timing is favorable.
If you want to talk through how any of this applies to your specific Texas commercial real estate situation, get in touch. CRECO's practice spans every major Texas market and every property type — and we are happy to share our perspective without expectation, even if you don't end up engaging us.
Have a Texas commercial real estate question?
CRECO works retail, industrial, and office across Texas — for tenants, owners, and investors. Get in touch and we'll share our perspective without expectation.