Condo sales lag in hot downtown apartment market

New apartment projects carrying premium rents are popping up all over downtown, but the strong demand for urban living isn't providing much of a boost for the condo market.

Downtown condominium sales remain slow, and only a handful of new units are on the drawing board thanks to low demand and still-difficult financing, market watchers say. Even the conversion into apartments of large condo projects including The Maxwell and 707 E. North St. hasn't provided much of a boost to the remaining for-sale inventory.

In Center Township's northeast quadrant, where most downtown condos are situated, only six condos sold in February out of 142 offered for sale—the equivalent of a 23-month supply, said F.C. Tucker Co. President Jim Litten. The average price was about $305,000.

Even that was an improvement over January, when only three condos sold out of an inventory of 133—a 44-month supply. Both months were down by at least half from the same periods in 2010, a drop Litten blamed on the expiration of homebuyer tax credits.

In the city's northwest quadrant, which has about 20 condos on the market, one condo sold in January and one sold in February, F.C. Tucker numbers show.

One reason for slow sales is that downtown condos have a more limited set of potential buyers than suburban homes, Litten said. And young professionals or corporate executives are more likely to opt for rentals in an uncertain market. The cost of building new units or converting old buildings also is higher in the city, leaving less wiggle room on price.

"Demand should return," Litten said. "It's only a matter of time."

Meantime, developers are launching several new apartment projects, encouraged by high occupancy levels and growing rents.

Buckingham's North of South project is poised to add more than 300 apartments, Flaherty & Collins Properties is planning 160 more units for the wildly successful Cosmopolitan on the Canal project, and Milhaus Development and Gene B. Glick Co. are preparing to build 250 units at The Residences at 451 E. Market St.

One of the few downtown condo projects under construction is The Shelton at 825 N. Delaware St., where the first move-ins are scheduled for late April or early May.

Developer Klaus Wittern has sold seven of 15 units—a result he sees as disappointing. Units range from one-bedrooms for $139,000 to penthouses for about $220,000. Every unit can be customized for no extra charge, an option that's rare for condos in that price range.

"We have had a lot of people ask us what the 'real price' is, and we tell them 'it is what it is,'" said Wittern, who is investing about $3 million in the rehab project. "We didn't start high, then scale back."

The experience of getting low-ball offers is familiar to Todd Maurer, whose Halakar Properties is a partner in the 3Mass condo project. The building has been about 60 percent sold for more than a year.

The developers of 3Mass are building out two units that recently sold and plan to finish three more in the hope of taking advantage of buyers who need to move in immediately.

"I feel very good about our project, and when the market turns we'll be well positioned," Maurer said.

Please enable JavaScript to view this content.

Story Continues Below

Editor's note: You can comment on IBJ stories by signing in to your IBJ account. If you have not registered, please sign up for a free account now. Please note our updated comment policy that will govern how comments are moderated.