Market Conditions: When Will the First New Condo Highrise Be Announced?
The Chicago Tribune reported over Memorial Day weekend that new condo projects are selling at a fast clip, including Trump Tower which started closings 4 years ago, just as the housing bust was picking up steam.
About 92 percent of the condominiums in the 4-year-old building are sold, and not at fire-sale prices. In fact, the building outsold all other downtown projects during the first quarter, with 24 closings at an average sales price of $623 per square foot.
Trump isn’t the only new downtown condo development that’s faring extremely well as the housing market begins to truly make its way back.
Before Belgravia Group even completed demolition or started construction this month on CA3, a third phase of its successful midscale condo project in the West Loop neighborhood, 39 of the 40 units went under contract.
Deliveries won’t start for a year.
New construction in other neighborhoods also is getting snapped up. Meanwhile, some condo developers who began renting out blocks of units they couldn’t sell during the market’s darker days are now canceling those leases as they come up for renewal and again marketing the units for purchase.
“I don’t see this as a blip,” Gail Lissner, a vice president at Appraisal Research Counselors, said of the market’s promise. “I see it as a new pattern.”
Now that the getting is good, how long before thoughts start turning away from the smaller, mid-sized buildings to the high rise?
“Once things started to turn for the good, (sales) have started to happen really fast,” said Alan Lev, Belgravia’s president and CEO.
“I’m a little surprised at the speed of the turnaround in the market. Certainly, there are fewer buyers in the marketplace than there were four years ago, but the buyers that are out there are extremely qualified.”
“There’s a tremendous amount of buyer confidence,” said Chezi Rafaeli, the Coldwell Banker Residential Brokerage agent who has the listing for the still-unsold $32 million penthouse condo at Trump.
Seeking to seize on that confidence, Belgravia continues to scout for additional good sites for midsize projects, and Lev finds himself frequently running into competitors.
The market still isn’t ready for the return of high-rises with hundreds of condo units, experts say, because of the presales that would be needed to secure financing and the several years it would take to deliver a building.
Developers and bankers remain wary.
“The longer the time frame on any project, the more likely you are to hit a bump in the road,” Lev said.
But, historically, many of the new “condo” buildings were first built as apartment buildings. How hard would it be to convert, say, The Streeter, or the new apartment building on Wells that just sold for record prices into $800,000 2-bedroom condos? The finishes are already “luxury”. They have stainless steel and granite. Maybe you have to swap out the refrigerator for an upgraded model and put up a backsplash.
Will the first step in this the “new” condo era be simply to convert one of the already built rental buildings?
Will it happen in 2013?
A ‘new pattern’ in downtown condo market [Chicago Tribune, Mary Ellen Podmolik, May 24, 2013]
“Certainly, there are fewer buyers in the marketplace than there were four years ago”
Not really true: http://www.chicagonow.com/getting-real/2013/05/chicago-home-buyers-sellers-inventory/
Owner of a CA23 property. Belgravia found a sweet spot and have taken full advantage of it. The West Loop was severely lacking in 3 bedroom units. What few were there were townhomes/rowhomes consisting of 2/3/4 floors.
“Now that the getting is good, how long before thoughts start turning away from the smaller, mid-sized buildings to the high rise?”
Quite awhile, in my opinion. Lots of people involved in the high rise business (developers, owners, buyers, associations, etc) got burned by the crash. I own a condo in a Lake Shore Drive building in Lakeview and lost 45% of the value, mostly due to an investor who owns a dozen of the units in my tier floorplan and went under. All of those units are now in foreclosure.
And then there’s my favorite, 235 Van Buren. Owners that bought at pre-construction prices, before the bust, have lost 30-35% across the board. Last I checked, I couldn’t find a resale in that building that made money, let alone broke even.
If you ask me, high rises have about one thing going for them: the potential for great views. But those views hardly outweigh the negatives.
Is it investors buying them? Or people planning on using them as a primary or in-town??
a little off-topic, but I need some simple advice.. I’m an architect with a managing broker’s license I have never used but have now decided to list my south loop 2B, 2B investment property. I have no idea where to get access to the MLS (I’m not sure this is due to the night before cramming I took for the exams, or my forgetful nature regarding info such as this), anyway, can someone tell me who to contact? Gary?
Google referral & brokers in Chicago – there are brokers who look for people like yourself to hang their license in the hope they generate one comission to share/ year.
“Is it investors buying them? Or people planning on using them as a primary or in-town??”
If you’re asking me this re: Belgravia, it’s primarily people using them as a primary residence and then a few stragglers for in-town. Zero investors. For CA23 / CA3, Belgravia refused to sell to investors. I’m under a rental restriction clause for the first year and cannot sell my unit for the first year.
Thanks Gramin!
jack – you gotta join NAR/CAR to be able to list on the MLS.
High rises never make much sense (or dollars for that matter) unless you are the top 5-10%. The HOA and special assts are usually over the top.
Perhaps new buildings will go up soon but probably a “conversion” is more likely. I was driving down 90/94 and was floored to see how huge the K2 apartment building is. This is a simple one that they can convert to condos if/when it makes sense.
I just don’t see any value in high rise condos right now. The South Loop, West Loop, and older buildings in Lakeview are filled with them.
jason posted: “…Perhaps new buildings will go up soon but probably a “conversion” is more likely. I was driving down 90/94 and was floored to see how huge the K2 apartment building is. This is a simple one that they can convert to condos if/when it makes sense…”
I drove by new K2 apt building this weekend – I don’t understand why this building was designed with entry on its west side (Halsted St) which seems much less desirable than its east side, near Jewel anchored retail, the other apt bldgs and feels closer to downtown? This stretch of Halsted is very depressing. I wonder how lease-up is going – I only saw 3 units lit on Sunday evening but don’t know if that means anything.
Seems like after all recovery is v shaped:
http://www.guardian.co.uk/business/2013/may/28/house-prices-rise-case-shiller?guni=Network%20front:network-front%20main-3%20Main%20trailblock:Network%20front%20-%20main%20trailblock:Position9
” I have no idea where to get access to the MLS… anyway, can someone tell me who to contact?”
Yeah, you have to join CAR and pay the dues and the MLS access fees and you have to be sponsored by a broker and then you have to know how to use the 100 MLS data fields and you have to shoot professional photos or it won’t show well and everyone on Cribchatter will make fun of you and you nee to sign a listing agreement with your broker and fill out the disclosures.
If you’ve never done this before it’s not worth the effort. It’s like changing your own oil. Sure you can do it.
“If you’ve never done this before it’s not worth the effort. It’s like changing your own oil. Sure you can do it.”
Don’t forget having insurance.
Yeah- I’m with Gary. If you’re not already affiliated with a company someway it’s not worth it to do it yourself. Best to just hire someone.
@Jack. Just list on Craigslist or domu. Rental agents are never fun for renters to deal with.
If I recall correctly the CA23 developer was going into foreclosure back in 09 or 10 only to be strategically bailed out by his father. Not sure what exactly happened but they are nice units and well designed and finished!
Just met the owner of the largest original unit. I was init during construction. Cool space with double sided unit that went for just under 1.4m. The good times are indeed back….at lest for the moment!
“Double wide” unit