The long-dormant condominium market is beginning to show signs of thawing, with two large projects on drawing boards downtown and renewed interest in sales at existing developments.
Racked by the recession and the housing collapse, condos became nearly impossible for developers to finance and fell out of favor, replaced by trendier apartment projects. Apartments were particularly popular downtown and with the millennial crowd that prefers to rent.
But now there seems to be enough confidence to prompt developers to at least dip their toes into the market.
“I think if we delivered product right now it would sell,” said Jake Dietrich, Milhaus Development LLC’s director of development. “That’s not to say we would go out and build a 200-unit condo project. But if it’s smartly built and designed, it will absolutely sell.”
Milhaus is one of two developers, along with Chase Development LLC, pitching downtown condo projects that could be among the few built in the past five years. Construction finished on the 48-unit 3Mass Condos at the head of Massachusetts Avenue in late 2009.
Milhaus presented plans for the first time Aug. 12 to the Indianapolis Historic Preservation Commission to build 84 units on a one-acre property between 10th and 11th streets bordered by Broadway Street and Park Avenue.
The multifamily developer whose downtown apartment projects include Artistry and Circa needs to demolish a church and vacant warehouse before work can start in the Chatham Arch neighborhood.
The northern property fronting 11th Street was owned by Irish & Sons Realty LP and formerly housed operations of The Frank E. Irish Co., a large Indianapolis mechanical-contracting firm that closed in 2008. The southern parcel fronting 10th Street was owned by Park Avenue Church of Christ.
Kurt Flock, who operates the downtown Flock Realty Group with his wife, Kate, welcomes any construction that would add to the dearth of for-sale inventory.
“There’s very limited supply,” he said. “We just need more product. But it’s an expensive undertaking, and the last five to six years haven’t been the time to do that.”
Most of the existing condo units that sell fastest are priced between $200,000 and $375,000, Flock said.
Across 11th Street north of where Milhaus wants to build its condo project sits Myron Place, a development by Kendall Construction Group consisting of 16 townhomes and four detached houses. It was finished in 2006, just before the housing market crashed.
The Flocks are listing agents for Myron Place, which took years to reach occupancy. Now, units that are reselling are in greater demand than when they were built. So much so that Flock said one unit recently attracted multiple offers and sold for full list price—in the $230,000 range.
“There’s been some depreciation,” he said, “but the values have been clawing their way back.”
To the south, in the Lockerbie Square neighborhood, Chase Development is proposing to build its four-story 500 Park residences featuring 12 condominiums with 21 ground-level parking spaces. Five of the units will be rooftop townhomes, or two stories, while the remaining seven will be flats.
The 12-unit condo building would be constructed at the northwest corner of East Michigan Street and Park Avenue and just west of TWG Development LLC’s 215-unit Lockerbie North apartment project.
To make way for the condos, Chase Development will buy and demolish the building at 534 E. Michigan St. The structure made of concrete block houses a mechanical contractor’s business and was built in three phases around an 1860s-era two-story home.
The preservation commission on Aug. 6 approved demolition of the structure, the first step to getting the project built.
In addition, Jacobs is proposing four duplexes to the west on Leon Street and a second phase, which likely will contain 30 to 40 condo units.
Meanwhile, partners of Newmark Knight Frank Halakar and Keystone Group, co-owners of 3Mass, are pleased with the uptick in sales there lately.
Eleven of the 48 units remain unoccupied, five years after the project’s completion. But 15 units have sold in the past two years and showings are on the upswing, said Meghan DeMars, Newmark Knight’s executive vice president of property management and construction.
“I wish we had more units to sell,” she said, “especially in that $400,000 to $500,000 range. That seems to be the sweet spot.”
The average unit is 2,500 square feet and prices range from $350,000 to more than $2 million. The unsold units are the more expensive, priced above $600,000, DeMars said.
Even so, sales are much better than they were when 3Mass finished in 2009. To get financing, project partners needed to pre-sell half the units, or 24.
They met the requirement, but as the recession took hold, some of the initial commitments fell through, recalled DeMars.
“Several of our owners were still trying to sell their homes or had lost their jobs,” she said. “We had to figure out the contracts where people frankly could not move on them. It was a tough time for us.”
Despite the recent run on apartment construction, watchers think demand for condominiums will begin to grow again. That’s because a portion of the younger crowd snapping up the apartment units will want to buy later but stay downtown.
“Maybe the American dream has changed the past 10 years,” Dietrich at Milhaus said, “but I still think there’s a strong contingency that wants to own.”•