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Spotlight on Allen, TX

CoStar Market Insights: Northern Dallas Suburb is a Hotbed for Commercial Development
May 11, 2018
The northern suburban town of Allen, TX has garnered plenty of headlines lately. Most recently, Howard Hughes Corp. announced its Monarch City project, which along with Hines’ Strand development and a number of other deals in planning, will put a major mark on this corner of the metroplex in the coming years.

At this week’s annual CoStar/Allen Economic Development Corporation state of the market event, more than 50 commercial real estate professionals discussed a snapshot of the Allen-specific trends.

Multifamily

Allen/McKinney has delivered more than one-third of its apartment stock since 2010, or more than 6,000 units. Lease-up has slowed on the most recent round of deliveries, but new properties are still leasing at a faster rate than the metro average.

Concessions have risen year-over-year, but that increase is almost entirely comprised of units built in the last three years. The increase in concessions is less than the metro average increase.

Of deliveries this cycle, mid-rises command a 10-cent per square foot premium over garden-style and low-rise deals. There were no mid-rises in the Allen/McKinney submarket before 2009--now there are 10 such properties with more than 3,000 units.

Rent growth has slowed since the peak in 2015, and has underperformed the metro average over the past two years. However, rent growth in 4- and 5-Star assets in Allen/McKinney has consistently outperformed the metro average this cycle (see chart).

Office

There is a lack of large blocks of available office space in Allen. As of the second quarter of 2018, the submarket has only two contiguous spaces larger than 50,000 square feet. In comparison, East Plano has 10 buildings with that much space and Richardson has a whopping 20 buildings that fit the criteria. Therefore, large office users seeking to tap into the highly educated population and demographic growth in Allen need to either resort to a build-to-suit, or wait for a sizeable speculative project to deliver.

Speculative construction is seeing plenty of leasing activity. The newest spec delivery, One Bethany at Watters Creek East, delivered in April 2018 and is already 70 percent leased. In comparison, new spec projects in Frisco and Richardson have seen slightly lower leasing velocity in recent months.


CoStar Market Insights provides a snapshot of recent real estate trends. The CoStar Market Analytics team monitors commercial and multifamily real estate across 390 metro areas, with a granular understanding of the projects, players and economic trends that move these markets.

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