Recovery Rolling, But Where Have All The New Downtown Condos Gone?
The housing recovery may be rolling along in the Windy City, but where have all the new downtown condominiums gone?
If you are shopping for a brand new condo in the Loop, West Loop, South Loop, Streeterville, River North, River West, Gold Coast and Near North Side neighborhoods, this housing type virtually has become an endangered species.
Until CMK Development started construction in the spring for 2014 for the 144-unit 1345 South Wabash project, ground had been broken on no new high-rise condo buildings in seven years.
“Clearly, there has been a sales recovery in the existing condo market downtown,” said Gail Lissner, vice president of Appraisal Research Counselors Ltd., Chicago’s top condo appraisal firm. “However, with the limited new-development activity occurring sales volume in new buildings is extremely modest.”
Only 415 new condos were built downtown in 2015, a slight improvement over 400 units built in 2014, reported Appraisal Research’s “Downtown Chicago Benchmark Report” covering the fourth quarter of last year.
On the positive side, for developers at least, condo resale prices downtown have rebounded from the depths of the Great Recession. Average downtown condo prices rose to $421 per square foot in the third and fourth quarters of 2015, up a hefty 25 percent from $388 per square foot at the bottom of the market in the first and second quarters of 2012, according to Appraisal Research’s survey of 65 buildings which were sold out by 2007.
“There are significant price gaps in developer inventory which is available for sale in the downtown market,” said Ron DeVries, vice president of Appraisal Research. “At the present time, the new inventory which began marketing in 2014 and 2015 is priced in the $300-per-square-foot range or the $700-per-square-foot range with no inventory in between,” DeVries said.
“With an expanded range of condo product type, there would certainly be the potential for increased sales,” he said.
Appraisal Research’s report noted the following developments in the marketplace:
• Affordable condos scarce. One of the few examples of condos targeted to first-time buyers and listed with average prices of $335 per square foot is The Guild, a 14-story tower at 1555 W. Wabash in the South Loop. Sixty percent of the 176 units are now sold or under contract in this five-year-old project which was caught in the Great Recession. Original unsold units were rented.
“To compete in today’s market, the original units have been extensively renovated with new finishes, including new hardwood floors, cabinets, appliances and quartz countertops,” Lissner said. The building’s common areas also are being upgraded.
• Boutique projects. While few developers are beginning large condo buildings, the smaller boutique project with less than 50 units will most likely be favored in the near term.
• Condo pipeline growing. There is a growing pipeline of proposed condo projects which have not yet been launched. “Numerous projects are being pursued by developers, all in varying stages of the pre-development process including the entitlement process which can be lengthy,” Lissner said.
For example, One Bennett Park is planned by Related Midwest overlooking a 1.7-acre park in Streeterville. Vista Tower, a 410-unit condo/hotel, is planned by a joint venture of Magellan Development and Wanda Development in the Lakeshore East community south of the Chicago River. Marketing recently started for Vista Tower.
Related also has acquired the failed Spire site on the eastern edge of River North. Earlier plans for this site called for a 1,200-unit luxury condo high-rise. “Related is in the process of developing a plan for this high-profile site, which likely will include a condominium component,” DeVries said.
• Condo resale prices rise. With little or no new condo inventory being added to the downtown market, and developer-owned inventory being sold, prices of resale units are beginning to rise.
“Condo resale prices were up 5.5 percent on a year-over-year basis for the period of third and fourth quarters of 2015, compared with the same period 2014,” Lissner said.
During the same period, Appraisal Research reported that the greatest resale condo price increases were posted in the Loop (up 11 percent), West Loop (up 9 percent), Gold Coast (up 7 percent) and South Loop (up 4 percent). Two percent increases were posted in Streeterville and River North.
Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. For more information, visit www.escapingcondojail.com.