Pushing Chip Manufacturing Has Add-On Multifamily Benefits
The minute you stimulate one part of the economy through an industry, other parts come in to complement it.
It seems almost impossible to stimulate an industry without creating broader complementary effects. One example has been the twin effects of the bipartisan CHIPS and Science Act, introduced by the Biden administration and signed into law in August 2022, and the Texas CHIPS Act. They’ve set off additional activity that resulted in a stronger CRE market.
The first law set aside $52.7 billion – including $39 billion in manufacturing incentives – for American semiconductor research, development, manufacturing and workforce development. The other act established the Texas Semiconductor Innovation Consortium (TSIC) and the Texas Semiconductor Innovation Fund (TSIF) and provided a $698 million fund to incentivize private businesses to expand semiconductor manufacturing in the Lone Star State.
Both came together and shook up the small Texas market of Sherman-Denison, which is 70 miles north of Dallas, according to RealPage. When governments stimulate jobs, some effects should be predictable, like employees needing a place to live.
Sherman-Denison has seen new semiconductor plants from Texas Instruments and GlobiTech, with an expectation of adding 3,000 jobs. Samsung is nearing completion of a $25 billion fabrication plant in Taylor with an expected additional 2,000 jobs.
In Sherman-Denison, there are currently about 6,800 apartment units in the region. As of the second quarter of 2024, 1,848 apartment units are under construction, expanding the current inventory by 27% on top of the additional 7% built last year.
RealPage notes that fundamentals in Sherman-Denison are stronger than in Dallas or Forth Worth. Effective asking rents in the suburb were up about 0.2% in June 2024 over the previous 12 months. Dallas and Forth Worth had seen asking rent cuts respectively of -3% and -2%. Demographic growth was also strong, with a total population growth of 2.1% in 2022 and 8.6% over the previous five years.
The analysis only looked at additional apartment units, but other parts of the CRE universe likely increased. Retail, particularly necessities like food, pharmacies, and retail. Plus, services like laundry and car repair. There will be schools and healthcare facilities.
The concept is really ordinary. These aren’t temporary workers brought in to do construction and then move on to the next job site. The jobs are — hopefully — permanently located in the areas. Infrastructure, including commercial real estate, needs to follow and provide locations for all the economic additions to come.