FRISCO -- This summer, we have been exploring the extraordinary things happening in North Texas real estate. But the “hottest market ever” doesn’t just apply to owning.
Rents -- and new rental developments -- are rising fast, too.
We visited a 400+ unit project being erected in Frisco called Jefferson Stonebriar. Models feature more natural light and an unusually airy feeling for an apartment.
“Today, we have 10-, 12-, 14-foot ceilings," said Brad Taylor, the regional managing partner at JPI. And he says JPI is working on a project that includes apartments with even higher ceilings.
In addition, they are increasingly using premium finishes.
“These are all custom home features: Mosaic glass cut backsplash. These are quartz countertops, similar to what you would find in a custom home. Stainless steel appliance package,” Taylor said.
New apartments sure don’t look like they used to. But they don’t cost like they used to, either.
Taylor acknowledges that the new level of amenities fetches a new level of rent. Many of the apartment units under construction in DFW are considered ‘luxury’ developments. Because of that, Taylor says the lower priced ‘starter’ apartment is generally a developmental generation or two old.
The market is changing a lot. JPI is the largest apartment builder in North Texas right now, and that’s saying something, because North Texas is a standout in apartment construction.
“It is the number-one building center in the U.S.," said Greg Willet, chief economist for RealPage. He told us there are currently nearly 50,000 apartment units under construction here, which is a staggering figure.
“That’s is about one-in-ten of every apartment on the way across the country," Willet said.
He attributes most of the growth to workers moving here for jobs, “And newcomers do tend to rent before they buy.”
Even those who would rather buy are finding it’s not cheap.
“If you want to be in Frisco today, it is very difficult to find a home under $400,000," Taylor said.
Because of that, Taylor says there is minimal pushback from consumers on rising rents.
“Rent growth is the highest it has ever been; above the six-percent mark,” Willet said.
Data from Axiometrics shows rents have steadily climbed in recent years to record levels in North Texas:
Dallas-Plano-Irving Fort Worth-Arlington
July 2010 $827 $751
July 2011 $894 $799
July 2012 $934 $827
July 2013 $973 $858
July 2014 $1,015 $900
July 2015 $1,078 $963
July 2016 $1,134 $1,020
Part of the reason for the soaring rates is that only about four percent of North Texas' 750,000 apartments are vacant. That’s why JPI, which is currently constructing about 2,000 units, plans to start about 2,000 more by the end of the year.
And still, they say they’re not building fast enough to keep up with demand from those who are ready to move in. So they’re having to get creative to show prospective residents what they will be getting.
Prospective tenants who can’t go into active construction sites can now put on a pair of virtual reality goggles and see a development in all its splendor, even though, in reality, it’s still weeks and perhaps even months from completion.
Speaking of looking into the future, builders and analysts alike expect the blistering pace of apartment construction to cool off by the end of next year, but still stay above historic averages. And with so many new units coming online, they expect rent hikes will cool off some, as well -- but also stay above historic averages.