Reimagining Commercial Space with PACE Financing
Across Texas and the country, commercial property owners are facing a new kind of challenge: too much space and not enough tenants. What was once a thriving office market has shifted dramatically as more companies embrace remote and hybrid work. Vacancy rates in major Texas cities are at record highs to start 2026 with rates in Austin having reached 29%, with Dallas at 25.9% and Houston at 24.8%.
At the same time, many of these same communities are struggling with another urgent problem, a shortage of housing. What if one solution could help address both challenges?
That’s where the Texas Property Assessed Clean Energy (TX-PACE) program comes in.
A Smarter Path to Revitalization
Created by the Texas Legislature in 2013 (Chapter 399 of the Local Government Code), TX-PACE is a voluntary, market-based financing tool that helps commercial, industrial, and multifamily property owners fund energy and water efficiency improvements.
Here’s how it works:
Property owners partner with private lenders to finance building upgrades that lower utility costs and improve efficiency. The loan is repaid over time, often up to a 30-year term and securitized by a voluntary property assessment. In most cases, the energy and water savings exceed the repayment costs from day one, meaning the project pays for itself.
Since its inception, the Texas PACE Authority (TPA), the state’s nonprofit PACE program administrator, has helped 110 cities and counties adopt and administer PACE programs. Together, these local governments have enabled over $625 million in private investment in Texas buildings.
Now, PACE is proving to be more than just a solution for the costs of energy and water utility consumption, it’s becoming an important tool for adaptive reuse and redevelopment.
Turning Vacant Space into Opportunity
As vacancy rates rise, property owners and developers are rethinking how to use existing buildings. Converting underused commercial space into mixed-use or multifamily housing can revitalize neighborhoods, boost local tax bases, and add much-needed housing, all while breathing new life into empty or under-used properties.
Of course, these conversions come with challenges. Older office buildings often require costly upgrades to HVAC, plumbing, and electrical systems to meet residential standards. Many also need design changes for natural light, ventilation, and livability. That’s where PACE financing can help bridge the gap.
By funding improvements that reduce energy and water costs, like high-efficiency systems, insulation, lighting, and water reuse, TX-PACE can help make the numbers work for owners evaluating the feasibility of conversion projects. In short, TX-PACE can help turn an empty building into a thriving community asset.
Balancing Local Needs and Statewide Goals
The Texas Legislature also took notice of this growing issue. In 2025, lawmakers passed Senate Bill 840, designed to make it easier to convert unused commercial properties into residential and mixed-use developments in larger cities and counties. The bill gives property owners greater flexibility to repurpose space, while still allowing municipalities to guide development and ensure proper infrastructure and zoning.
With Texas facing an estimated shortage of more than 320,000 housing units, these changes couldn’t come at a better time. Converting existing buildings can be a cost-effective, environmentally responsible way to help close that gap, and TX-PACE provides the financial framework to make it happen.
PACE: A Proven, Practical Solution
Texas PACE Authority (TPA) is the nonprofit administrator for more than 100 local TX-PACE programs across Texas. TPA helps commercial, industrial, and multifamily property owners access long-term, fixed-rate financing for energy, water, and resiliency upgrades that reduce costs, improve building performance, and strengthen communities. Working alongside cities, counties, lenders, and contractors, TPA has facilitated more than $600 million dollars in new private investment statewide, contributing to economic growth without using taxpayer dollars.
For property owners exploring the idea of conversion, TX-PACE can be the missing piece that makes a complex project financially viable. To learn more about how TX-PACE can support commercial-to-residential conversions or other redevelopment projects, visit www.texaspaceauthority.org. You can also view a full list of completed PACE projects here.