🔥 “Why Out-of-State Investors Are Fleeing California for Texas CRE 🚀🌵”

🏢 “Texas vs. California: Why Investors Are Choosing Texas Commercial Real Estate in 2026 🌟🤝”

Why Out-of-State Investors Are Leaving California for Texas CRE

California has long been seen as the “gold standard” for real estate wealth — but over the past few years, a massive shift has been unfolding. Investors from Los Angeles, San Francisco, San Diego, and Sacramento are selling their properties and redirecting money straight into Texas commercial real estate.

This isn’t a temporary trend. It’s a structural migration driven by tax strategy, affordability, better returns, and business expansion opportunities. Texas now ranks among the most popular destinations for 1031 exchanges, corporate relocations, industrial expansions, and owner-user real estate acquisitions.

Here’s why investors are betting big on Texas CRE — and why this trend is accelerating into 2026.

1. Texas Delivers Higher Cash Flow and Better Cap Rates

California cap rates for industrial, retail, and multifamily have compressed for years. In many markets, 3–4% cap rates became the norm. Texas, however, still offers 5.5%–7%+ cap rates, depending on the asset class and metro.

For investors who need cash flow — not just appreciation — Texas delivers significantly better returns.

Texas markets outperform on:

·Net operating income (NOI)

·DSCR loan qualification

·Cash-on-cash return

·Rent growth stability

·Tenant demand diversity

2. Texas Has No State Income Tax

For high-income investors and business owners, this factor alone is a game-changer.

A California investor can pay 13.3% in state income taxes — the highest in the country.
Texas investors pay zero.

That difference dramatically improves:

·1031 exchange rollover value

·Asset holding returns

·Depreciation benefits

·Passive income performance

When investors run the math, Texas wins almost every time.

3. Lower Operating Costs Create Stronger Investment Performance

Everything costs more in California — insurance, utilities, labor, permitting, impact fees, and contractor availability.

Texas gives investors:

·Faster development timelines

·Simpler planning approvals

·Lower rehab and construction costs

·Better landlord-tenant laws

·More business-friendly policies

For builders and developers, this is the difference between a project working — or failing.

4. Explosive Population & Corporate Growth in Texas

Texas is absorbing population faster than any other state. The growth of Katy, Fulshear, Houston, San Antonio, Dallas–Fort Worth, Austin, and surrounding suburbs is driving:

·New industrial demand

·Retail expansion

·Medical office development

·BTR and multifamily growth

·Land value appreciation

California continues losing population — which directly impacts occupancy rates, rent growth, and long-term investor confidence.

5. 1031 Exchange Buyers Get More for Their Money

In California, a $2M property might produce $60K–$80K NOI.
In Texas, that same $2M can generate $120K–$150K+ NOI.

When exchanging out of a low-yield market into a high-yield market, Texas is the clear upgrade.

Katy, Fulshear, West Houston, and surrounding markets have become hotbeds for 1031 replacement property buyers seeking newer buildings, triple-net tenants, and significantly stronger returns.

6. Texas Industrial and Retail Markets Are Outperforming the West Coast

Even with the national slowdown, Texas remains the top destination for logistics, manufacturing, and distribution growth.

Major drivers include:

·National reshoring of manufacturing

·Port of Houston growth

·Corporate relocations from California

·AI, semiconductor, and tech expansions

·Strong housing growth supporting retail

The West Coast continues to face regulatory pressure, development restrictions, and high costs that limit growth.

Final Takeaway

California is still a world-class market — but when investors want better cash flow, stronger returns, lower taxes, business-friendly policies, and long-term growth, Texas CRE is simply the better deal.

If you're a California investor considering a move to Texas:
Let’s talk replacement properties, industrial sites, 1031 timelines, and financing options.

https://www.houstonrealestatebrokerage.com/

https://www.houstonrealestatebrokerage.com/houston-cre-navigator

https://www.commercialexchange.com/agent/653bf5593e3a3e1dcec275a6

http://expressoffers.com/[email protected]

https://app.bullpenre.com/profile/1742476177701x437444415125976000

https://author.billrapponline.com/

https://www.amazon.com/dp/B0F32Z5BH2

https://veed.cello.so/FOmzTty6oi9

https://creplaybookseries.billrapponline.com

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© 2023-2024 Bill Rapp, Broker Associate, eXp Commercial Viking Enterprise Team