In Terms of Multifamily Demand, Far Northeast DFW Has It All
In the world of multifamily development, it’s rare to find a market that quite literally checks every box. But in Dallas-Fort Worth’s (DFW) Far Northeast submarket, which encompasses Plano, Frisco, Allen and McKinney, that’s precisely the case.
In terms of fundamental demand drivers, Collin County is growing by about 80 new residents per day, one of the fastest rates in the country. The county’s population is expected to increase by nearly 800,000 over the next two decades, and to add more than 300,000 new jobs during that stretch as well.
The region also epitomizes the corporate relocations for which DFW has become renowned. The arrivals of Toyota North America, JPMorgan Chase, Liberty Mutual and FedEx have already brought thousands of high-paying jobs to the Far Northeast submarket. Just as important, these companies have established precedents for medium-sized companies to follow suit and keep the job growth train rolling.
The impacts of those demand drivers on multifamily growth in the region has been tremendous. But there’s more to the story of this area’s multifamily explosion than the increase in jobs and population.
While corporate relocations have brought swaths of millennials to the area — in Frisco, that group comprises more than a third of the population — high-income households are drawn to the region as well because it possesses excellent schools.
A recent report from Niche.com, a firm devoted to rankings and reviews across a variety of industries, found that the Allen, Frisco and Plano Independent School Districts all ranked in the top 25 in Texas.
But wait. Families with school-age children don’t typically rent apartments. While this is true, corporations looking to relocate value strong school districts in their decision to settle on an area to call home. In addition, millennials are attracted to good communities near their workplaces where they can see themselves establishing roots and possibly buying a home in the future. This drives multifamily absorption in the Plano-Frisco-McKinney triangle as well.
In addition, the Far Northeast submarket benefits from well-developed infrastructure and an abundance of land for new construction. Given how quickly the region is expanding, developers are snapping up buildable sites to deliver housing options to support the rapid rate of growth.
Lastly, today’s renters are drawn to the live/work/play lifestyle, which is why newer multifamily product features such a wide array of amenities at residents’ fingertips. But the live/work/play mentality truly characterizes the area as a whole.
As such, entertainment has become a centerpiece of life in these cities. Whether they’re looking to indulge their football mania at The Star, shop at Legacy, catch an FC Dallas soccer match or see the Frisco Roughriders Minor League Baseball team, single millennials, family households and baby boomers alike flock to the Far Northeast for entertainment.
With such a plethora of factors driving demand for multifamily product, it’s no wonder that the Plano-Frisco-McKinney triangle has seen such an uptick in development lately.
CoStar Group reports that there are currently about 7,700 apartment homes across 24 properties under construction in Plano, Frisco, Allen, Prosper and McKinney. This figure represents more than 20 percent of the metroplex’s total volume of new apartment homes in the pipeline.
Rent growth has slowed as more supply has come on line, but each of these individual metros still ranks in the top 15 metroplex submarkets for year-over-year rent growth. According to Axiometrics, occupancy across these metros has held around 94 percent in recent years. The average vacancy rate across these metros for Class A multifamily product is about 5 percent. Based on this data, the building boom is not slowing down due to the strength of the region’s demand drivers.
Rates of absorption are always subject to short-term ups and downs. But over the long haul, leasing velocity in the region has remained strong. In JPI’s case, we’ve executed an average of about 25 new leases per month per property in this market, a pace that has still allowed us to hit our rent projections.
Average rents for Class A multifamily apartment homes in the Far Northeast are somewhere in the neighborhood of $1,350. Given that in order to qualify for such a home, a resident typically spends about 25 to 30 percent of his or her income on rent, a renter need only earn about $55,000 per year to qualify. As of 2017, the average household income in Collin County exceeded $80,000 per year.
Far Northeast DFW is poised to emerge as a truly leading market for luxury multifamily development. Expect most new communities in the area to continue to target high-income renters and to run the gamut of amenities.
Good examples of such projects that are in some phase of construction include Skyhouse Frisco Station, a 332-unit community in by Novare Group and Batson-Cook; Jefferson at the Gate, a 425-unit property by JPI in Frisco; and The KINSTEAD, a 376-unit community by ZOM Living in McKinney.
—By Matt Brendel, divisional president, managing partner, JPI. This article first appeared in the October 2018 issue of Texas Real Estate Business magazine.