We know no other condominium projects that will break ground in the next year. As high-rise projects require two years to complete, we do not anticipate the completion of any new high-rise projects until atleast 2011 or possibly 2012.
There are two factors that impact the future supply of condominiums downtown:
- First is the near absence of financing and equity capital-a situation abetted by the financial struggles of the major banks and investment institutions.
- Second, and of equal importance, is the rising costs of construction. The condominiums that are newly completed downtown, like The Mark andf The Legend, were bid out in 2004-2005. Since then, as a result of international demand for concrete and steel, the cost of construction has increased between $125-150 per square foot. New high-rise condominiums started today would in all likelyhood cost #350-400 per square foot.
To put that in context, a 1,500 square foot condominium in a newly completed building that sells today for $600 per square foot, or $900,000 would have to sell for as much as $1,100,000 if started today. As construction continue to rise, it is likely that the next round of condominiums downtown would be far more expensive.
Further, the supply of high quality condominium sites is near exhaustion, a situation that will make it even more difficult for developers to justify the type of pricing that will be necessary to build new product.
It is likely that most new condominium product in the forseeable future will be low-rise as the cost to produce that producxt would be significantly less than high-rise.
Therefore, it is highly probable that only high-rise condominiums in waterfront or inland premier locations will be built, as it is the only type of product that will generate the price per square foot necessary to warrant development.
We take position that until new high-rise condominiums can justify the heady pricing necessary for financial viability, there will be no new construction.
It also means that buying a condominium unit today makes economic sense because any new condominium to be built in the future will be priced far higher than the one bought today.
In 2006-2007 timeframe, almost 50 condominium projects were built downtown. Today, there are four projects under construction with none in the pipeline.
On balance, it is the opinion of Market Pointe Realty Advisors, and us here at 92101 Urban Living that downtown will continue to accelerate as a popular residential venue with demand outstripping supply over the next few years.
**all information/graphs provided by Market Pointe Realty Advisors**