Northern Suburb Emerges As Hottest Industrial Market In The Metroplex

As Dallas-Fort Worth's outward expansion pushes population away from the region's longstanding industrial linchpins, one northern suburb has embraced the product type as it aims to become a regional transportation hub. 

After years of focusing on retail and residential growth, McKinney has become a premier industrial market in the Metroplex. The submarket has one of the smallest industrial footprints in the region, but it boasts the highest rents.

The Metroplex is on pace to surpass Chicago as the third-largest metro in the nation in 2030, and projections from the Texas Demographic Center show that growth is expected to continue for decades. That projected growth has created a premium on available space in the region’s northern counties, according to Citadel Partners Managing Partner Scott Jessen.

Much of the area earmarked for industrial around the McKinney National Airport won’t be developed because it sits in a flood plain.

“The amount of land that you're going to actually be able to build on is really not that much when you consider the overall growth of Collin County, Grayson County [and] Denton County,” Jessen said.

The Metroplex has a little under 100 SF of industrial space for each of its more than 8 million residents. With that population projected to reach 12 million by 2050, Jessen said a conservative estimate of 75 SF per new person means there will be a need for at least 300M SF of new industrial in the next 25 years.

That’s roughly three times the size of the South Dallas submarket, one of the region's biggest industrial areas.

Citadel Partners has been directing industrial clients to McKinney for years and collaborated with the city's economic development corporation on establishing industrial spaces like the Core5 Logistics Center.

“Now everybody and their brother wants to be up there,” Jessen said.

The Allen-McKinney submarket’s $11.45-per-SF weighted average net rent is the highest listed in Cushman & Wakefield's third-quarter industrial report. It is also more than $3 per SF higher than the Metroplex's average and nearly double the $6.10-per-SF average in South Dallas. 

“Rents out by the airport are going to get nothing but higher,” Jessen said.

The closest trailing submarket is Richardson-Plano, another pair of north suburbs embracing industrial. 

Nearly 200K SF of new industrial space has been delivered in Allen-McKinney so far this year, moving its existing inventory up to 17.5M SF. But the 1.5M SF under construction gives Allen-McKinney the biggest pipeline outside of industrial stalwarts like Alliance, the DFW Airport and the Great Southwest submarkets.

Much of that development is happening around the McKinney Airport, which is set to undergo a $72M expansion. The project will add a 45K SF passenger terminal with four gates. 

The expansion isn't adding any cargo capabilities to the airport, but the convenience of being able to fly into McKinney is appealing to developers, Ascent Investment Partners co-founder Tom Dosch said.

Ascent picked up a 20-acre industrial development near the airport in September. Dosch said the airport expansion is increasing land values for the surrounding industrial developments. But the availability of land in McKinney is the other chief factor in the city’s rise to prominence in the industrial sector. 

“That might even be a little bit more significant,” Dosch said.

City officials have locked down a good portion of the land around the airport, but Dosch said the demand from industrial developers could limit the possibility of future expansions. Once the area around the airport is developed, it will create barriers for expanding runways and growing the airport. 

As the rooftops go north, industrial developers follow. But they still see emerging suburbs like Anna and Melissa as too far out, Dosch said. 

“Those are still frontier markets where there's just now starting to be some land speculation and developers buying land for future industrial development,” Dosch said. “But to date, the more established, successful projects have been off [U.S. Highway] 75 in McKinney.”

Highway 75 provides easy access from McKinney to Dallas and Houston to the south, as well as Grayson County and Oklahoma to the north. 

Grayson County is the focal point for the area known as Silicon Prairie that has become a global powerhouse in the semiconductor industry. With that growth, industrial development is expected to follow.

In addition to the convenient north-south access from McKinney, a nearly $8B expansion of U.S. Highway 380 and Texas Spur 399 will create easier east-west access from the area around the airport. 

Work on the Highway 380 project will create an eight-lane freeway through north McKinney as well as a six-lane highway through Frisco and Prosper. Future expansions will also connect to Princeton and Farmersville to the east. 

That future connectivity project has spurred a lot of the activity and industrial interest in the area, Dosch said. The lack of freeways has historically made east-west travel from McKinney difficult.

“The airport and the users connected to the airport are competing for land at the same time industrial developers are wanting to do development up here,” Dosch said.

McKinney's Business & Aviation District, as the area around the airport is known, has actually been earmarked for industrial uses for more than 40 years, McKinney Executive Director of Development Services Michael Quint said. It is expected to eventually have the largest concentration of businesses and industries in the city, according to McKinney’s comprehensive plan. The district's employment base is anticipated to grow by 11% by 2040. 

As to whether industrial uses could expand outside of the Business & Aviation District, Quint said that is up to the will of the city council.

Industrial uses generate less property taxes than residential and also less demand on city services. But industrial businesses also have a significant impact on the city economy by creating jobs at various skill levels, Quint said. 

“In McKinney, we believe that a healthy, sustainable community requires a wide array of land uses and asset classes,” Quint said in an email. “Each land use comes with its own demands on and contributions to our local economy.”