Population growth is being spurred by job growth. The latest numbers from the state show the Texas unemployment rate at 5.7%, which is significantly below the national average of 6.7%. One of the first states to rebound after the 2007-2009 recession, Texas surpassed its pre-recession employment peak in late 2011. Many other states have yet to reach that level, let alone surpass it.

“Job growth of this magnitude is about much more than just attractive statistics on a printed page; it means more choices and better options for Texas job seekers, stronger families and communities, and brighter futures for our children,” Gov. Rick Perry said in a statement when the February unemployment numbers were released.

Today, Texas is leading the nation in the creation of jobs at all pay levels. According to a report from the Federal Reserve Bank of Dallas, “Texas has succeeded in producing broad-based job growth in the context of job and wage polarization nationally.”

This increase in both residents and jobs has lead to a number of new developments in the office, multifamily, retail and hotel sectors. And due to its job-friendly policies, many companies have been looking to locate in Texas, some even going so far as to move their headquarter facilities from other states.

“The culture here tends to be very business friendly and that attracts a lot of people who are interested in being in that kind of environment,” says John Turner, principal of Rockstreet Partners. “The industries that are a staple of our economy are very strong, but there is also a lot more competition between states from a regulatory viewpoint. You get a large amount of relocation by companies and individuals from states like California and Illinois to Texas.”

Over the past three years, nearly 1,900 companies have expanded in Texas, according to Sara Rutledge, director of research and analysis in Texas for CBRE. And that trend, thanks to population growth, will only continue to expand.

“We are on this wave that is really going to be sustained, and it's going to be sustained by the type of jobs that are growing in Texas. Especially if you believe the metric that office space demand lags actual job growth by a couple years,” says Kevin Roberts, Southwest president for Transwestern. “We're running on our fourth year of well-beyond-historic job growth.”

Industry leaders point toward companies like State Farm and ExxonMobil as prime examples of firms looking to take advantage of Texas' business-friendly environment. Both companies are in the process of building massive corporate campuses, which are driving the entire surrounding real estate markets.

With more than two million square feet in leases, State Farm will anchor the 186-acre master-planned CityLine in Richardson, TX, which is being developed by KDC. As GlobeSt.com reported, this project will include six million square feet of office space, two hotels, 3,925 multifamily residential units, 300,000 square feet of grocery, restaurant, entertainment and retail space and three parks. The site will eventually house 8,000 State Farm employees in the more than two million square feet the company is leasing.

ExxonMobil is in the midst of a similar project. The Houston-based firm is building a 385-acre campus south of the Woodlands. The project, which is expected to open in 2015, will include 20 office buildings that will house more than 10,000 employees. Exxon has also signed leases for 478,000 square feet at Hughes Landing, a 66-acre mixed-use development at the Howard Hughes Corp.'s 200-acre Lake Woodlands.

The Exxon campus “is almost instantly creating another submarket for office, retail, multifamily, single family,” Roberts says. “The impact is tremendous and we're only going to be able to measure it over time.”

Developers are taking advantage of these new corporate villages to step in with projects of their own. For instance, Woodbine Development Corp. has plans in place to build four hotels near the ExxonMobil campus. The first, a 128-key Residence Inn, is expected to open by next summer.

Houston's Changing Landscape

While office development throughout most of the country is constrained, in Houston 1.2 million square feet of space came on line during the first quarter of 2014. Even with all this new development, the city's vacancy rate is 9.2%, according to CBRE numbers.

And construction isn't stopping there.

“There are so many companies that have expanded or moved to the area,” Rutledge says. “Almost every energy company is taking space or expanding in the Houston area.”

In addition to the Exxon Mobil campus, Apache, BHP, Phillips 66 and Shell all have projects in the pipeline. Houston now has more than 15.1 million square feet of new office space under construction, according to a Colliers International office report.

Even with all this new development, industry experts say there is enough demand to meet the supply coming on line. Roberts, who is tracking seven million square feet of new office development in the Houston CBD, says that 80% of it is already pre-leased.

New development isn't only for the office sector. Retail is also seeing a boon when it comes to mixed-use lifestyle centers. “Our market is extremely strong,” says Nick Hernandez, managing director of retail sales at Transwestern. “There is a severe shortage of quality retail space and a lot of demand for new development right now.”

As GlobeSt.com reported, the Baybrook Mall in Friendswood is undergoing a 550,000-square-foot expansion, adding to the current footprint of 1.2 million square feet. Likewise, the 2.2-million-square-foot Houston Galleria is also in the midst of a renovation project that will allow it to house more than 30 additional stores.

Matt Keener, CBRE's SVP of retail brokerage, says part of the Galleria's renovation comes from its desire to compete with the nearby high-end River Oaks center.

“The essential Texas real estate landscape is best characterized by a lack of supply and very robust demand,” Keener says. “We've got a lot of retailers that want to be here but there hasn't been an equal measure of supply.”

The Super Bowl Effect

In addition to office and retail growth, the city of Houston is seeing a large amount of development driven, in part, by the 2017 Super Bowl, to be held at NRG Stadium.

“The minimum economic impact of the Super Bowl itself is expected to be $500 million,” Roberts says. “If you look at the projected development between now and the Super Bowl, there is going to be $3.5 billion in development.”

As of the start of April, there were plans in place for eight hotel projects; all of which will deliver before kickoff in 2017. These developments include: the Hotel Alessandra, a 225-key property being developed by Midway Cos.; JW Marriott, a 325-room redevelopment set to open in August; the 261-key Hyatt Place; a 168-room Hampton Inn and a 132-key Homewood Suites; SpringHill Suites, a 166-room redevelopment of the Humble Tower Apartments; the Holiday Inn Hotel, a 215-key redevelopment of the Savoy Hotel and the Aloft Houston Downtown, a redevelopment of the 10-story Stowers Building.

Perhaps the most anticipated hotel project of the moment is the 1,000-room Marriott Marquis. This $335-million hotel, which broke ground in April, will be tied to the George R. Brown Convention Center via a sky bridge. The hotel will also house 100,000 square feet of meeting space and 20,000 feet of ground-floor retail.

Beyond offering housing for Super Bowl attendees, the Marriott Marquis is expected to help put Houston on the map for convention planners since it will double the number of hotel rooms attached to the convention center. Mark Sallette, a CBRE SVP of debt and structured finance, hotels, says conventions will often choose San Antonio or Austin over Houston, but the city is trying to change that perception.

“The Super Bowl really focuses everybody on making sure that these projects are completed,” Roberts says. “It's going to have an incredibly meaningful and significant impact on Houston over and above the dollars that show up with the fans of the game.”

With more than 2,350 hotel rooms coming on line in the next three years, there are some in the industry who are worried about overbuilding and the sustainability of so many new hotels.

“There's probably going to be a flood of rooms needed for a short duration, but for how long is that going to last?” Salette asks. Yet, he adds, in Houston now most of the hotels are fully booked, which forces business people and tourists to stay outside the city in places like Sugarland.

Sustainable Growth

While the development in Houston is notable, it's merely an example of the robust cities in this southwestern state. Industry leaders are bullish on the future. They believe the steady, rising economy and continued population growth will continue to propel all the commercial real estate markets.

“Texas, in general, is riding a pretty significant wave and it's showing all signs of being very sustainable. Demand is still exceeding supply in most markets, with high levels of occupancy and high levels of pre-leasing in all property types,” Roberts says.

If anything changes over the next several years, it will be rent stabilization, especially in the office and retail sectors. With such high demand and very little current supply, Rutledge says rents are at a new high. As properties become available to meet the demand, the market should reach a point of equilibrium between supply and demand.

Turner expects the markets to continue the positive trend but at a slower pace. “In five years' time, I would be more inclined to see things slower than they are today, just because of where we are now,” he says.

While it's difficult to predict where Texas is in the market's cycle, many believe it is still heading toward the peak and can maintain similar metrics for years to come.

“It's a different economic base now than in any previous upswing of any previous cycle,” Roberts says. “Texas is in a better competitive place than it's ever been, perhaps because of its business-friendly environment or tax structures. It continues to paint Texas in a pretty positive light in relation to other areas of the country.”