West Texas, anchored by the thriving Permian Basin, continues to experience significant industrial growth driven by energy, fabrication, and emerging tech sectors. With increased demand for warehouse, yard, and logistics space across cities like Midland and Odessa, business owners are facing a critical question: should you lease or buy?
Choosing between leasing and buying can have major implications for operational flexibility, long-term costs, and investment strategy – especially in a market as dynamic and energy-dependent as this one. Leasing may offer the agility businesses need in uncertain times, while buying can build long-term equity and stability.
Here we will explore the pros and cons of each approach, backed by current market trends, to help West Texas businesses make smart, strategic real estate decisions in today’s ever-changing industrial landscape.
Understanding the West Texas Market
West Texas, particularly the Permian Basin region encompassing Midland and Odessa, remains a pivotal hub for the U.S. energy sector. The area’s vast oil and gas reserves have long driven industrial activity.
This energy dominance fuels demand for industrial real estate, including warehouses, equipment yards, and service facilities. The logistics sector is also expanding to support the transportation needs of energy production, leading to increased demand for distribution centers and freight terminals. Additionally, manufacturing, particularly in machinery and fabricated metals, thrives in the region due to its synergy with the energy industry. Texas Comptroller
In terms of commercial property trends, the industrial real estate market in West Texas is experiencing tight vacancy rates, with leasing activity outpacing new construction in several submarkets. Average lease rates have been on the rise, especially for properties with desirable features such as yard space and highway access. Land values are also increasing, adding complexity to decisions about leasing versus buying.
What sets West Texas apart is its unique combination of factors: the cyclical nature of the oil and gas industry, ongoing infrastructure development, and a growing emphasis on renewable energy. A notable development is the commissioning of the Matterhorn Express pipeline, a 580-mile natural gas pipeline that began operations in late 2024. This pipeline has added 2.5 billion cubic feet per day of capacity, alleviating bottlenecks in the Permian Basin and enabling increased oil production by reducing the need for gas flaring. Reuters
The expansion of pipeline infrastructure is crucial for the oil and gas industry, as it facilitates the efficient transportation of natural gas, a byproduct of oil extraction, to markets where it can be utilized or exported. This not only enhances the profitability of oil production but also contributes to environmental goals by minimizing flaring. The Texas Oil & Gas Association reported that Texas’s pipeline infrastructure expanded to 465,025 miles in 2024, reflecting the state’s commitment to supporting its energy sector. Texas Oil & Gas Association
Benefits of Leasing Commercial Property
In markets like Midland and Odessa – where demand can rise quickly in response to oil prices or infrastructure projects – leasing offers a strategic advantage for companies that need to stay nimble. Many businesses in the region are choosing to lease because it allows them to access prime locations without locking up capital or assuming the risks of ownership. According to ERES Companies’ Q4 2024 market recap, Odessa maintained a stable industrial vacancy rate of 8.0%, with consistent demand and balanced supply, indicating a resilient leasing environment. erescompanies.com
In the final quarter of 2024, Midland’s industrial market also saw an increase in leasing activity, particularly among service companies in the Permian Basin, setting up a dynamic market for 2025. Midland Times
Leasing allows businesses to access prime locations without the substantial upfront costs associated with purchasing property. This is particularly advantageous for companies in industries with variable revenue cycles, such as oil services and logistics, as it limits long-term financial exposure while providing access to functional, strategically located spaces.
Advantages of Buying Commercial Property
For businesses with long-term plans and stable operations, buying commercial property in West Texas can be a smart investment. Ownership provides the opportunity to build equity and benefit from property value appreciation, especially in high-demand regions like Midland and Odessa where industrial land continues to gain value (ERES Companies). With the Permian Basin fueling infrastructure projects and sustained energy activity, owning property can create significant long-term gains.
Ownership also gives businesses complete control over their facilities. This means the freedom to make structural modifications, invest in specialized equipment, or expand without needing landlord approval. For companies in manufacturing or heavy equipment industries, this level of control can lead to more efficient operations and greater productivity.
There are also tax advantages to buying, including deductions for mortgage interest, property taxes, and depreciation. These benefits can help offset some of the higher upfront costs associated with purchasing.
Key Considerations
Deciding whether to lease or buy starts with a business’s financial position. Companies should assess their current cash flow, credit profile, and ability to handle upfront capital requirements. Leasing is often preferable for businesses in growth phases, while buying might suit those with stable budgets and long-term site needs.
Business goals also matter. Companies needing flexibility to adapt to changing markets may prefer leasing, while those seeking permanence and operational independence may benefit from ownership.
Market conditions in West Texas are another critical factor. As previously discussed and according to a second Q4 2024 Texas Industrial Figures report by CBRE, the average industrial vacancy rate across major Texas markets was 8.2%, indicating a balanced market with steady demand. Additionally, year-over-year growth in rental rates was observed across most size categories, reflecting a healthy leasing environment. CBRE
Comparing leasing and purchasing costs over a 5- to 10-year horizon can help determine the more economical option. Leasing may offer cost savings and flexibility in the short term, while purchasing can provide long-term financial benefits through property appreciation and tax advantages.
Final Thought
Leasing and buying both offer distinct benefits, and the right choice depends on your business’s financial health, growth plans, and risk tolerance. Leasing provides flexibility and lower upfront costs, while buying offers control and long-term financial advantages.
In a region as dynamic and infrastructure-driven as West Texas, aligning your real estate strategy with your business needs is essential. Whether you’re expanding into the Permian Basin or repositioning your operations, making an informed lease vs. buy decision can directly impact your success.
Get in touch with our team today to speak with local experts who understand the industrial landscape of West Texas and can help you make the right move for your business.