Why Texas Is One of the Few Markets Still Building Industrial Real Estate

Across most of the United States, industrial developers have hit the brakes. Rising construction costs, cautious lenders, and an oversupply hangover from the pandemic-era building boom have pushed new starts to their lowest levels in years. But in Texas, the story is different. While the rest of the country pulls back, Texas keeps building and the data shows why that distinction matters.

A National Slowdown, With Texas as the Exception

Nationally, deliveries in 2026 will be down more than 70% versus the pandemic peak. In the United States, replacement cost rents are running roughly 20% above class A market rents, a spread that continues to curtail new supply in most markets.

Against that national pullback, Texas is doing something unusual. Only Texas and parts of the Southeast are recording an increase in starts, because demand in these locations is strong enough to support absorption of new buildings. The build-to-suit share of starts is also rising toward historical averages, approximately a 20% share, indicating emerging scarcity of suitable available buildings and strong demand for best-in-class, tailored facilities.

This is a meaningful signal. When most of the country is retreating from new construction because they cannot fill the buildings they already have, and Texas is still adding new supply at a growing rate, it tells you something specific about the underlying strength of demand in Texas markets.

Dallas-Fort Worth: The Epicenter of Texas Industrial Construction

Dallas-Fort Worth claimed the top spot nationally for industrial development, with 28.8 million square feet of space currently under construction. Nine of the 10 markets with the largest construction pipelines in early 2026 had more industrial space underway than they did at the same time in 2025, and DFW led that pack.

The scale of individual projects underway is notable. Samsung's 3.6 million square foot semiconductor facility is on track to become 2026's largest industrial project nationwide, with an opening expected later this year.

That construction rebound is occurring against a DFW vacancy rate of 11.4%, which is on the higher side compared to most other major U.S. markets. Developers are counting on DFW's scale and infrastructure to absorb the new space. Logistics facilities remain the largest category of projects underway in the Metroplex, but manufacturing and data centers are also driving a growing share of new starts. Data centers alone account for roughly 20 projects, or about 11% of the pipeline, and are central to Texas's push to overtake northern Virginia as the national leader in data center power capacity.

Houston's Rapid Rise Up the Construction Rankings

Houston is not far behind. Houston made one of the largest moves up the national rankings in the last year, jumping from fourth to second place with 21.5 million square feet now under construction, a 63% increase, representing a 3% expansion of total inventory.

That said, Houston's construction boom comes with a caveat worth tracking closely. The overall Houston industrial vacancy rate stands at 7.3%, about 100 basis points above the 10-year average. New supply has outpaced demand for five consecutive quarters, and the active construction pipeline means vacancy could edge up another 100 basis points by early 2027. Vacancy is not uniform across the market, however, new big-box logistics buildings of 100,000 square feet or more, built since 2023, are seeing roughly a 50% vacancy rate among properties in active development corridors.

That divergence underscores an important nuance: Texas is still building because overall demand fundamentals remain strong, but the newest, largest spec buildings are taking longer to lease than they did during the boom years.

What's Behind the Demand That Justifies New Supply

Why does Texas continue to support new construction when so much of the country has stalled? Several structural advantages stand out. Texas's business-friendly tax environment, including no state income tax, continues to attract manufacturers and distribution hubs relocating from higher-cost states. The state's strategic location offers quick access to Mexico, two major airports, extensive interstate networks, and robust rail connections; fundamentals that support long-term industrial demand, particularly in growth corridors like Northwest Houston, where population density and workforce depth continue to expand.

The underlying construction industry itself is also expanding to meet this demand. There are 1,249 businesses in the industrial building construction industry in Texas, growing at an average annual rate of 4.5% from 2021 to 2026. The market size of the industry in Texas has grown at an average annual rate of 3.6% over that same period, with employment in the sector also growing at 3.6% annually.

Statewide Forecast: A Measured, Balanced 2026

Looking at Texas as a whole, the construction and absorption picture for 2026 points toward stabilization rather than runaway growth. Total statewide absorption will be about 40 million square feet, or roughly 80% of deliveries - equal to about 2.5% of total inventory. DFW and Houston will see better supply and demand balance, while the San Antonio and Austin markets will see vacancy rates increase as they absorb less than what gets delivered.

Industrial market rents have been balanced between slowing construction and slowing economic growth. Statewide, rent will be up about 2% in 2026, with DFW and Houston buildings enjoying 3% rent growth. San Antonio rent will be roughly unchanged, while Austin warehouse properties will see rent decreases of about 2%.

Austin's More Cautious Approach

Not every Texas market is charging ahead at the same pace. Austin in particular is taking a more measured approach to new development. Industrial users in Austin remain deliberate amid rising vacancy, even as large-scale projects in technology, manufacturing, and health care continue to shape the region's long-term growth. Selective development continues where fundamentals and long-term growth drivers align; for example, a roughly 265,000 square foot flex industrial project in Cedar Park is targeting advanced manufacturing and R&D users specifically, rather than building speculative big-box space.

This selectivity is a useful model for understanding where Texas industrial construction is headed: less blanket speculative building, more targeted development aimed at specific tenant types and use cases with durable, identifiable demand.

What This Means for Developers, Investors, and Tenants

The fact that Texas remains one of the only states still expanding its industrial construction pipeline is a meaningful competitive advantage, but it comes with important nuance. The overall demand story in Texas, fueled by population growth, manufacturing reshoring, e-commerce, and the state's logistics infrastructure, remains strong enough to justify continued building. At the same time, the newest and largest spec buildings, especially in Houston and parts of DFW, are leasing more slowly than developers would like, and vacancy in those specific segments could tick higher before it improves.

For developers, this points toward a build-to-suit and targeted-use strategy rather than pure speculative construction. For investors, it suggests focusing capital on markets and submarkets where absorption is keeping pace with deliveries, such as DFW and Houston broadly, while watching Austin and San Antonio more cautiously. For tenants, continued construction activity means more options and, in some submarkets, more negotiating leverage than they have had in recent years.

Texas's willingness to keep building while most of the country pulls back is not a sign of recklessness. It is a reflection of genuine confidence, backed by data, that the state's industrial demand fundamentals remain among the strongest in the nation.