Foreclosures in Texas’ multifamily real estate sector are rising, according to experts at the Connect CRE Texas Multifamily conference held in Dallas. The event began with positive news about strong population growth in major Texas cities, which has helped absorb a large supply of new apartments. However, panelists warned that the market is entering a period of increasing distress.
Recent months have seen a significant jump in foreclosures. In July, $400 million in commercial real estate loans were headed for auction; by September, that figure had surpassed $700 million. At Harris County’s August auction, operator Fercan Kalkan faced foreclosure on 3,000 units linked to at least $140 million in loans.
“We’re in the early stages of this,” said Rob Walton of Trimont during the panel “How Distress is Rewriting the Texas Playbook.”
Conference attendees heard that landlords are offering generous concessions—often six to eight weeks of free rent—to attract and retain tenants. Kimberly Byrum from Zonda Advisory noted that spending on marketing has increased more than any other expense category for operators over the past year.
Kai Pan from JLL described an “amenities arms race” among Class A apartment owners who are adding features like golf simulators and pickleball courts to encourage tenant retention. He also pointed out that Austin now leads U.S. cities in rental affordability: local renters spend just 16.8 percent of their income on rent due to falling prices and high salaries.
Austin’s outlook remains relatively strong thanks to robust economic fundamentals; over the last decade, its population grew by 30 percent and jobs by 48 percent—both above Sun Belt averages.
Interest rates remain a key concern for investors and operators across Texas. “Everyone’s watching for Fed cuts,” said Matt Hiller of George Smith Partners.
Steve Pumper from Transwestern highlighted interest rates as a core problem driving distress: “That’s where the problem exists.” James Shevlin from CWCapital added that $19 billion in CMBS loans tied to Texas multifamily properties will mature over the next five years. “It’s trouble,” he said.
Panelists agreed that smaller investors who focused on value-add properties have been hit hardest by higher interest rates and declining rents. Many cannot afford necessary updates, leaving aging buildings vulnerable to foreclosure or special servicing.
“A drop in interest rates and cap rates will help,” Walton concluded.
Texas continues to see mounting pressure as more debt comes due amid challenging conditions for property owners.
