Texas commands $199.93 billion in REIT-owned property across 44,079 assets. The state supports roughly 336,000 full-time equivalent jobs through REIT activity and generates $2.39 billion in property taxes annually.
With 19 REITs headquartered in Texas and 151 REITs owning property here, portfolio management demands specialized construction expertise. These assets span multiple property sectors, creating diverse construction needs that require a construction partner for REITs in Texas capable of statewide delivery across civil, vertical, and maintenance scopes.
Which REIT Property Sectors Drive Construction Scope In Texas?
The Texas REIT landscape spans multiple property sectors, each creating distinct construction requirements. Tower assets dominate with 10,180 properties, followed by outdoor advertising at 8,650 units. Retail properties account for 3,855 assets, while self-storage facilities number 1,089 across the state.
Health care properties total 1,082 assets, representing significant opportunities for medical office buildouts, ambulatory surgical centers, and specialized facility improvements. Industrial assets, at 890 properties, typically require loading dock modifications, warehouse expansions, and distribution center upgrades. These sectors drive the majority of construction activity we coordinate across Texas.
Residential properties include 354 multifamily assets plus 17,328 single-family rentals, creating demand for unit renovations, common area improvements, and exterior maintenance programs. Office properties number 178, often requiring tenant improvement buildouts and building system upgrades. Specialty assets total 222 properties with unique construction needs.
Smaller but significant sectors include lodging/resorts (141 properties), mixed-use developments (86 assets), and data centers (24 facilities). Timberland holdings span 293,000 acres, requiring access road maintenance, erosion control, and infrastructure development. Each sector presents specific construction challenges that require tailored approaches.
Retail construction projects typically focus on facade updates, parking lot improvements, and tenant space modifications. Health care construction demands strict compliance with medical codes, specialized HVAC systems, and phased delivery to maintain operations. Industrial projects emphasize structural upgrades, utility capacity increases, and site circulation improvements.
Mixed-use developments require careful phasing to coordinate residential, commercial, and retail components while maintaining occupant access. Office properties need systematic approaches for tenant improvements, building modernization, and technology infrastructure upgrades. Data centers require specialized power, cooling, and security systems with zero-downtime construction execution.
Self-storage facilities often need expansion projects, security system upgrades, and climate control installations. Single-family rentals require turnover renovations, exterior maintenance, and periodic system replacements across geographically dispersed portfolios. Lodging properties demand guest room renovations, common area updates, and facility system improvements with minimal operational disruption.
What Capabilities Should A Construction Partner Provide For REIT Portfolios?
REIT portfolios benefit from construction partners who can deliver multiple project types across Texas markets. Core delivery methods include general contracting, construction management, design-build, and preconstruction services. Each approach offers different advantages depending on project scale, timeline, and risk allocation.
General Contracting And Construction Management
General contracting provides direct accountability for project execution across retail centers, industrial facilities, and health care properties. We coordinate all trade activities, manage schedules, and ensure quality standards throughout construction. Construction management offers cost transparency and contractor selection flexibility, particularly valuable for phased renovations and tenant improvements.
Both delivery methods require statewide coordination capabilities. REIT portfolios often include properties across multiple Texas markets, from Houston industrial parks to Dallas-Fort Worth retail centers. Managing consistent standards and scheduling across geographic regions demands local knowledge combined with centralized project controls.
Design-Build Services For Integrated Delivery
Design-build streamlines project delivery by combining design and construction under a single contract. This approach reduces schedule risk and improves cost certainty for ground-up facilities and major renovations. Design-build works particularly well for standardized building types like self-storage facilities, retail prototypes, and industrial warehouses.
Design-build in Texas requires coordination with local permitting authorities and utility providers. Early engagement helps identify site constraints, zoning requirements, and infrastructure needs that could impact project costs or schedules. The integrated approach also facilitates value engineering opportunities during design development.
Civil Infrastructure And Site Development
Civil construction expertise becomes critical for REIT properties requiring site improvements, drainage solutions, and transportation access. Bridge maintenance and construction support properties adjacent to major transportation corridors. Channel restoration and concrete structure work address aging infrastructure on industrial and mixed-use sites.
Erosion control systems protect property values and ensure regulatory compliance across Texas climates. Drainage construction and repairs manage stormwater for retail centers, industrial parks, and residential developments. Pond construction and restoration serve both functional drainage needs and aesthetic requirements for office and mixed-use properties.
TxDOT coordination proves essential for properties requiring access improvements, utility crossings, or work within transportation right-of-way. Understanding TxDOT procedures and maintaining established relationships helps expedite permits and minimize disruptions to adjacent roadways.
Preconstruction Planning And Risk Management
Preconstruction services provide cost estimating, value engineering, and constructability review before construction begins. These services help REIT managers evaluate renovation versus replacement decisions for aging properties. Early cost analysis supports investment planning and budget development for portfolio improvements.
Risk assessment during preconstruction identifies potential issues with existing conditions, environmental concerns, and code compliance requirements. This analysis helps prioritize capital improvements and avoid unexpected costs during construction. Preconstruction planning also coordinates with property management schedules to minimize tenant disruptions.
Facilities Maintenance And Ongoing Operations
Facilities maintenance and renovations extend asset life and maintain property values across REIT portfolios. Preventive maintenance programs help avoid major capital expenditures by addressing building systems before they fail. Regular facility assessments identify opportunities for energy efficiency improvements and code updates.
Ongoing maintenance relationships provide responsive service for emergency repairs and tenant improvement requests. This continuity helps maintain occupancy rates and tenant satisfaction across retail, office, and industrial properties. Maintenance programs can be structured to support REIT reporting requirements and capital planning processes.
How Do REIT Compliance And Financial Testing Shape Project Delivery?
Construction programs need structured alignment with REIT compliance requirements. We coordinate project phases with distribution testing schedules to ensure cash flow meets the mandatory 90% taxable income distribution threshold. REITs must maintain this distribution level annually, which means our draw schedules and milestone payments align with quarterly distribution planning cycles.
Prohibited transaction testing creates specific construction delivery considerations. REITs face a 100% tax penalty on gains from property sales that qualify as prohibited transactions. We document holding periods, capital expenditure ratios, and sales volumes to support safe harbor compliance. Projects involving property improvements must track expenditures carefully since total capital costs over two years cannot exceed 30% of net selling price if disposal becomes necessary.
Impermissible tenant service income testing affects how we structure tenant-related construction scopes. REITs can lose qualifying income status if service income exceeds 1% of gross income. We separate basic building services from specialized tenant conveniences during construction planning. Standard services like utilities, security systems, and common area improvements remain within REIT operations, while specialized services require documentation for potential taxable REIT subsidiary handling.
Quarterly asset and income testing requirements influence project cash flow management. REITs must maintain 75% of total assets in qualifying real estate at each quarter end. We structure construction financing and project phases to ensure compliance throughout development cycles. Asset classification decisions made during preconstruction directly impact these quarterly calculations and ongoing REIT status maintenance.
ASC 740 tax provision calculations within taxable REIT subsidiary analysis add complexity to project financial planning. TRS entities pay regular corporate tax rates on non-qualifying activities while supporting overall REIT compliance. We coordinate with TRS structures when projects involve hotel management, specialized tenant services, or property types requiring active operation rather than passive rental income generation.
Lease analysis integration supports construction planning by confirming qualifying income sources and tenant service boundaries. We review existing lease terms during preconstruction to identify potential compliance issues before construction begins. This analysis helps determine which improvements generate qualifying rental income versus services that might require TRS involvement.
Project cash flow and profitability analysis must account for REIT distribution requirements and testing schedules. Construction budgets incorporate the reality that REITs distribute most taxable income annually, leaving limited retained earnings for future projects. We structure payment schedules and financing arrangements to support both construction progress and REIT cash distribution obligations.
Bonding and surety relationships require documentation that supports REIT audit requirements. Performance bonds and payment bonds become part of the compliance record-keeping that REITs maintain for annual testing and potential IRS review. We ensure bonding structures align with REIT asset classification and don’t create complications for quarterly testing calculations.
Joint venture structuring considerations affect how construction projects integrate with REIT compliance. When REITs partner with other entities for development projects, we help structure arrangements that preserve REIT qualifying income and asset ratios. Partnership agreements must account for distribution requirements and ensure construction activities don’t jeopardize REIT status through prohibited transaction exposure.
Conclusion And Next Steps
The Texas REIT landscape presents significant opportunities with $199.93 billion in property value across diverse sectors from towers and retail to health care and industrial assets. We see construction needs spanning thousands of properties, each requiring different approaches based on sector demands and compliance frameworks. The scale demands a construction partner with comprehensive capabilities and deep Texas market knowledge.
Success in this market requires coordinated planning across multiple fronts. Start by mapping your Texas assets by sector counts and risk profiles to identify priority properties and common construction needs. Confirm civil and site requirements early, focusing on drainage systems, erosion control measures, and site access improvements that support long-term asset value. Select delivery methods like construction management, design-build, or traditional general contracting based on your project schedules and phasing requirements. Finally, align all project documentation with REIT compliance testing, lease analysis protocols, and cash flow planning to ensure seamless integration with your financial reporting and distribution schedules.
Ready to evaluate your Texas REIT construction needs? Contact EB3 Construction to discuss your portfolio requirements.
