The rental market across the nation has seen changes throughout the last decade with more residents going against traditional home buying patterns. Generational changes, moving employment opportunities, student debt loans, smaller household sizes and larger down payments has shifted a large percentage of home buyers into the rental market. This market change is impacting both residents and developers who are both trying to keep ahead of the evolving industry demands.
The locations where these changes are occurring can shed light into the factors creating them. With one of the nation’s fastest growing states – Texas – reflecting the shift in its increasing relocated and renters pool, developers in city areas such as Dallas and Houston are tapping into the growing need for rental properties.
Looking into the local market changes, leading property firms such as DFW-based, Western Rim Properties, are tapping into where the real opportunities are in the state that are predicted to continue expansion into the future.
With the state recognized as holding the largest annual population increase of relocated residents since 2017, new residents have come to Texas from other locations in the US and across the globe at a rate that is double the national average. “Looking for housing and job opportunities, the influx of transplant residents stems from the state’s rapidly growing job market that has created well over 400,000 new jobs in 2017.” shares Texas entrepreneur Marcus Hiles, Founder and CEO of Western Rim Properties.
Fortune Magazine recently even recognized Texas in its 2018 report for having 48 of the nation’s leading fortune 500 companies headquartered in the state. That’s the 3rd most in the nation and reflects the thriving commercial community gaining interest from professionals worldwide.
More than attracting professionals looking for new jobs, other demographics are headed to the state for various other reasons. Young families in seek of affordable community living, new graduates lured in by the top market for first time talent, and green-conscious individuals looking to take advantage of the area’s growing environmentally conscious developments.
With Texas being the second largest state in the nation, honing into the area’s with long-term growth is critical to establishing sustainable investments in housing development. Areas such as suburban cities just outside of Frisco, The Woodlands, Conroe, Georgetown and McKinney are some of today’s hottest markets, growing at a rate 700% faster than the state’s older cities of Dallas, Houston, Austin and San Antonio. These cities in Texas are where both the city and high-quality suburbs meet, presenting the best of both sides in proximity to jobs, metropolitan shopping and restaurants and community lifestyles. Along with these locations fitting the needs of many new residents; the aspects of affordable living, higher average income households, better school systems and lower crime rates are another part of the allure.
With the increase in residents coming to the state for the growing pool of new job opportunities, the demand for housing has followed suite. “Statewide growth in residential property development has fallen behind the need – a gap that rental developers are working to fill.” shares Marcus, who has built more than 30,000 residential rental units throughout the state.
As seen in one of the top cities in the nation for economic and population growth since 2017, the metroplex of Dallas has added only about 60,000 housing units a year while approximately 130,000 new jobs per year are being created. This shortfall of housing developments has created depleting inventories and price spikes and has transitioned many would-be home buyers to look to the rental market; with nearly half of all current Texas residents in rentals.
After a few years of agony caused by the area’s weakened energy industry, the Houston apartment rental market is also growing strong. Investors have begun to notice the commercial and residential growth in the area and are developing and boosting shares in companies that are big owners in Houston apartments. Green Street, an industry leading real estate analyst, projects the metropolitan area of Houston’s apartment market will grow at a pace faster than any of the top 50 markets in US over the next five years and ranks the city as the #1 positioned for growth in the nation.
The decreasing supply levels of housing is not the only reason driving relocated populations to rent over buy. Lower risk for first-time Texas residents is one given that is pushing renting over buying as a better option for many. Also the locations of where housing vs rental developments resides is another. With jobs driving many new residents to the state’s top cities, the ability to find and afford housing properties close to employers is often not as possible as it is to find rental options.
Perhaps one of the biggest differentiators driving the rental market is in the relatively new trend where rental developments are growing outside of traditional city areas and expanding into suburban locations. A new wind of affordable, luxury apartment complexes like those of Western Rim Properties are moving into the outskirt communities offering renters city-like amenities with the comfort of suburban living. This change in housing style appeals to younger generations who are leaning more on rental options rather than long-term housing. According to CNN Money, Gen Xers are firmly staying in the rental market longer than expected while millennial home ownership rates have fallen at a faster rate than that of any other age group. The generational differences impacting the home buying cycle for younger demographics is due to factors such as higher student loans, fluctuating home prices and a lessened importance on home ownership and more focus on other areas such as career and travel.
Part of his vision when starting his firm over three decades ago, Marcus shares, “Helping job seekers and new households find top of the line housing in surrounding city suburbs, at about half the price per month of comparable luxury high rises, has become an increasing trend.”
By also tapping into areas that offer unique living amenities including those close to lakes, on golf courses, next to large parks and near top community shopping complexes; allows firms like WRP to increase the longevity of their new projects. Some areas include suburban North Austin, Lakeway, Georgetown, West San Antonio, Frisco, Little Elm, Rowlett, the City Line area in the Richardson / Garland market and Los Colinas, among others.
With apartment rents and occupancy expected to increase strongly over the next five years, it will be critical for the Texas market to continue presenting opportunities to businesses and workforces that are unsurpassed by other leading locations. That considered, the growing interest from not only new populations but also commercial entities, investors and developers who are expanding the state’s position in the national economy will continue to keep the state on the track and beating out the competition.