Homes & Gardens / January 2011 / Luxury condo glut

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Luxury condo glut

Prices drop, deals abound after local developers find that buyers are coming much slower than expected.

 

The sluggish economy seems to have rendered useless the Field of Dreams philosophy—if you build it, they will come—as many local developers look at an excess of new condominium units and rising costs to maintain them.

Blame the recession for bringing sales to a trickle and producing price reductions normally reserved for the aisles of discount retailers: “Save 30, 40, even 50 percent!”

“Everybody had to do some weathering of the storm,” says Corey Burke of Real Living HER.

He is a broker for The Jeffrey and the Metal Works projects in Italian Village that late in 2010 were offering one-bedroom quarters for around $100,000—about 40 percent of the original asking price.

It’s a story that’s repeated by many luxury condominium developers in and around downtown Columbus.

Several of the realtors interviewed estimated there are 3,000 condos on the market for sale. Of course, many don’t offer granite counters in bathrooms, gas fireplaces in each unit and a rooftop common area as does the eight-unit 1200 Grandview, at the corner of Grandview and First avenues.

Michael Young, president of Scarlet and Gray Realtors, says he is still working on the first sale in the three-story structure since Eaton National Bank & Trust took the deeds back from developer Santer Communities LLC in April.

 “The biggest problem is we have a number of really good buyers trying to sell their homes,” he says. “They’re mainly empty-nesters, professionals and they can’t get their houses sold in Upper Arlington or Muirfield. These are people who want to buy in our development but can’t get their existing homes sold. When you’re getting in the housing price range of $300,000 and above, housing sales are so far down and it’s only going to bring the price of their house down.”

Young says he has two units in contract and that others are starting to attract interest.

“We’ve reduced the prices significantly from the original development,” he says. “They were as high as $750,000 for one of the three bedroom units.” A top floor, 2,258-square-foot unit is now listed for $450,000.

There’s a reason Larry Ruben, president and COO of Plaza Properties, calls this “a buyer’s market.”

“We admit it. We promote it and we service it,” he adds. “We’re dealing with high finish, lots of value. Especially where we’ve had to adjust our pricing because of the economy in the marketplace it’s all beneficial to the buyer.”

His $24 million Bexley Gateway project on Main Street is not immune. In addition to 20,000 square feet of commercial space, there is The Alexander, a 33-unit condominium project that only recently passed the 50-percent-sold mark and three brownstone houses. None of the Park Three units has been sold.

The condominiums are a short stroll away from the Rusty Bucket restaurant, Jeni’s Splendid Ice Creams and Moshi Sushi Bar, and offer amenities such as a concierge service, a fitness center with a steam room, multipurpose rooms for meetings and parties, and a parking garage.

“The most important thing we do deliver is the 15-year tax abatement,” Ruben says.

Yet, the three-year-old project has been slow to fill and prices were cut in 2010. “We did run a sale [starting] around the middle of May and that netted us seven sales alone. That was very, very good,” Ruben says. “We ran a 40 percent sale. We still are in that. We’re still very aggressive in our marketing. We’re optimistic about this.”

“Our pricing starts under $300,000,” Ruben adds. “Our most popular has been our two-bedroom, two-and-a-half bath with a den. That unit has been selling for under $350,000.”

Back in Grandview, The Heights at Grandview and Third avenues had seven of 20 units available as of early November and a price reduction was also underway there. A two-bedroom, two-bath unit with 1,528 square feet plus a 321-square-foot terrace was down $164,000 from the original asking price to $325,000. 

Five of the unsold units were initially listed between $530,000 and $639,000 but are being advertised for less than $450,000. Even the 3,800-square-foot penthouse suite was reduced by $400,000 to $895,000.

Meanwhile, at The Jeffrey and Metal Works, about 10 percent of the combined 94 units are sold, says HER’s Burke. All of the remaining units are rented except for five being used as models.

“We’re transitioning toward owner occupancy,” Burke says. “We’ve got about single digit growth per year. We’re not going backwards but slowly forward. We’ve also been able to do some type of concessions such as closing costs reduction, which has helped as well.”

Young thinks that 1200 Grandview Avenue offers the best location and building in the area but knows those pluses can only carry so much weight when people are cautious about spending.

“This thing would have been sold out by now if we had been in a regular market and probably at a little bit higher prices,” he says. “We’ve brought the price down twice since we took over the project on April 1.”

If there is a bright spot it’s that Columbus generally handles a recession better than many cities and recovers quicker.

“There are probably worse markets to be in,” Ruben says.

With that in mind, the 14-unit second phase of Bishop’s Walk Condos at Neighborhood Launch on Gay Street between Fifth and Sixth streets is underway.

The developer, Edwards Companies, sold three units and had three more in contract among the original 13. A 704-square-foot garden flat goes for $195,000 while a townhouse is on the market in the upper $500,000s.

There still is a glut of luxury condos that likely won’t end soon but Young sees the market trending upward in 2011.

“We have some new prospects that don’t have to sell their homes that balances the decision for some of these people,” he says. “Realistically, in the first quarter we would hope to have at least four of these units sold.”

Burke says two units at The Jeffrey were sold last year. “Everything that I’ve seen and been reading says 2011 is going to be better than 2010 but I don’t see it being the same activity as 2005-2006. It will probably be a single digit increase off of 2010, anywhere from three to seven percent,” he says.

Ruben also sees improvement but with rough patches. “It’s still going to be a cantankerous market,” he says. “In the past when we’ve seen downturns, unlike Dayton, unlike Toledo, we seem to bounce back quicker here. I don’t think that will be any different this time.”

“I’m optimistic now that we’ve reached our 50-percent point (at The Alexander),” he adds. “I look at places in much sexier locations in Colorado or Florida. We’re light-years ahead at a 50-percent sell already. If I have to be anywhere in this economy at this time with this product, I’m very happy to be in Bexley.” 

Craig Merz is a freelance writer.