Calculate cap rates and net operating income for commercial properties in Texas. Compare your results against Texas's primary market benchmarks sourced from CBRE H2 2025.
Unfamiliar with any terms? Glossary of Terms
Explosive Sun Belt migration and sustained corporate relocations have fundamentally transformed Texas into a primary commercial hub. While this massive population influx drives exceptional tenant demand across the logistics and housing sectors, investors must also underwrite the state's historical sensitivity to energy commodity cycles. The sheer volume of new construction remains the primary counterbalance to its otherwise runaway rent growth.
Texas has no state income tax, which meaningfully improves after-tax cash flow for CRE investors compared to high-income-tax states — but that trade-off shows up on the expense side: Texas property tax rates run notably high nationally, since property tax carries a heavier share of the state's overall revenue burden. For cap rate underwriting, this means property tax is typically one of the largest operating expense line items in a Texas deal, and it deserves careful verification against the county appraisal district rather than the seller's trailing NOI.
| Property Type | Typical Low % | Typical High % |
|---|---|---|
| Multifamily | 5.0% | 6.5% |
| Industrial | 5.0% | 6.5% |
| Retail | 5.5% | 7.5% |
| Office | 6.5% | 9.0% |
Benchmarks sourced from CBRE H2 2025 Cap Rate Survey, JP Morgan, Matthews, and Cushman & Wakefield market data. Ranges represent typical stabilized assets — actual rates vary by asset quality, location, and market conditions.
Texas's multifamily high cap rate benchmark of 6.5% matches 11 other states (lower than 26 states and higher than 13); the national median is 7%.
This calculator computes cap rate and net operating income for commercial real estate in Texas, and benchmarks your results against current market data. Enter your property value, gross income, operating expenses, and vacancy rate — or work backward from a target cap rate to estimate implied property value. Results are compared against Texas's primary market benchmark ranges by property type, sourced from CBRE H2 2025. Use this to sanity-check an acquisition price, evaluate an existing property's performance, or estimate value for a refinance or sale.
Here is how the calculation methodology works using representative illustrative figures (hypothetical example only — see Texas's actual cap rate benchmarks in the sections above):
Cap rate becomes especially useful when working backward to estimate value: divide a property's NOI by the market's benchmark cap rate for that property type to get an implied value. A property generating $300,000 NOI in a market with a 6% benchmark cap rate implies a value of roughly $5,000,000. This is the same method commercial appraisers use in the income approach to valuation, and it's a fast way to sanity-check whether an asking price is in line with current market pricing — before commissioning a full appraisal. Keep in mind that cap rate benchmarks shift with interest rates and investor sentiment, so use current data, not historical averages.
To determine a property's Net Operating Income, investors subtract all daily operating costs from the total generated rental revenue. Because Texas is capturing explosive population growth across the Sun Belt, rapid tenant demand frequently creates above-average rent growth. This demographic tailwind makes forward NOI projections look highly optimistic, though new supply can introduce localized uncertainty.
Holding primary market status indicates that the Lone Star State is a core target for serious commercial investment. The unique duality of Houston's energy dominance combined with Austin's tech boom has successfully attracted massive institutional capital. This economic diversification provides a robust liquidity premium, allowing investors to target tighter yields with confidence in their eventual exit.
Market fundamentals in the state are actively reshaping investment yields. Phenomenal industrial absorption along the DFW logistics corridor is keeping warehouse cap rates tightly compressed. Meanwhile, strong corporate relocations into the state are buffering the office sector against the severe cap rate expansion seen in coastal markets.
Asset class performance varies dramatically depending on the specific metro economy. The state exhibits a fascinating duality where Houston's industrial and office demand is deeply tied to energy sector cycles. In stark contrast, Austin's commercial spaces rely heavily on technology hiring, meaning a tech downturn impacts Central Texas far more than the Gulf Coast.
Evaluating the spread between going-in and exit cap rates is a fundamental underwriting step in Texas. Buyers generally assume a higher exit cap rate to account for building depreciation and future economic unpredictability. Failing to model an appropriate cap rate expansion upon exit can drastically overstate the anticipated returns on a Sun Belt acquisition.
This tool is for informational and educational reference only and does not constitute real estate investment advice. Cap rate benchmarks are estimates based on published industry surveys and may not reflect current conditions in your specific market, submarket, or asset class. Actual cap rates vary significantly based on property condition, location, tenant quality, lease terms, and local market dynamics. Always consult a licensed commercial real estate broker, appraiser, or investment advisor before making real estate investment decisions.