Signs of Life for Condo Market

Photo by Joanne S. Lawton
Ramin Bassam, president of PERS Development, opened sales at the Mint Condominiums at 329 Rhode Island Ave. NE near the Rhode Island Avenue Metro station on Feb. 25. Five of the 21 units are already under contract.
 
 
March 2, 2012
Daniel J. Sernovitz
Staff Reporter- Washington Business Journal
 
 
 
Smaller, boutique buildings reporting brisk sales
Premium content from Washington Business Journal by Daniel J. Sernovitz, Staff Reporter
 
If you were interested in snapping up one of the new condominiums at 1020 Monroe, the for-sale residential building that opened Feb. 3 in D.C.'s Columbia Heights neighborhood, you are out of luck.
 
The 28-unit building, whose condos average $521 a square foot, has already sold out. So have the dozen units at Savannah Row in Logan Circle, which found their buyers in about 90 days. Units at the Evelyn in Capitol Hill are also off the market now.
 
After years of languishing sales and depleted inventories, local real estate developers are building condos again on a small scale and finding buyers almost as quickly. Most of the condos are springing up in emerging markets like D.C.'s Petworth and Eckington neighborhoods, although the trend extends to suburban pockets such as Arlington and Silver Spring.
 
"Two years ago, 'condo' was a dirty word. Today, it's something that you want to do," said Ramin Bassam, president of PERS Development LLC. "Demand is very high."
 
PERS began sales at its Mint Condominiums, at 329 Rhode Island Ave. NW, about five blocks from the Shaw-Howard University Metro station, on Feb. 25 and already has contracts to sell five of the building's 21 units.
 
The response has PERS on the hunt for other opportunities in the District, and Bassam said he is looking at two potential acquisitions.
 
These certainly aren't the go-go days before the recession, when developers were constructing luxury condominium buildings with more than 100 units and seven-figure sales prices. But real estate experts say the demand for smaller boutique developments is on the rise.
 
"In a market where everyone's focus is on rentals, the condo market is doing surprisingly well," said Andrew McCallister, executive director of MAC Realty Advisors in D.C. "It's certainly vibrant."
 
McCallister said that's not so surprising given the state of the region's rental market. Average rental rates for apartments in the Washington area now hover at just shy of $1,800, and the region's vacancy rate stands at about 3.8 percent, according to Alexandria research company Delta Associates Inc. Those numbers are prompting many Washingtonians to ask themselves whether it makes more sense to buy rather than rent.
 
Reflecting that trend, more than 3,500 new units are being marketed for sale or under construction in the Washington area. Delta Associates condo sales expert William Rich said that figure, for the fourth quarter of 2011, is the largest quarter-over quarter increase in new units since 2006.
 
What's more, there is now about 2.4 years of condo inventory on the market, down from the depths of the condo bust. But the inventory number varies greatly from neighborhood to neighborhood.
 
There are plenty of developers still favoring rentals over for-sale units, of course.
 
In November, for example, The JBG Cos. and Grosvenor Americas announced an about-face with their planned development at 14th and S streets NW, which was going to be developed into a for-sale condo building called the District Condos. JBG Principal Kai Reynolds said that although there was a "substantial amount of interest" in the for-sale units, JBG decided to change its concept to a 125-unit apartment building, called The District, because of what it senses is a stronger demand for rentals.
 
Even so, Urban Pace LLC President Lynn Hackney said many prospective buyers are bullish about the economy in Washington and the housing market in general.
 
Keeping in mind that Washington is a city of transient residents and many of the new arrivals don't plan to stay, a lot of home seekers are willing to look at ownership as an investment again, she said.
 
"They're starting to feel like we're coming out of this long recession," Hackney said. "We're seeing consumer confidence for the first time."
 
Urban Pace, which markets new homes and condos for many of the District's condo developers, was behind some of the recent sales, including 1020 Monroe. Hackney said there is definitely a sweet spot for condo buildings with less than 80 units selling at a price of $300,000 to $500,000.
 
Most of those units average 800 to 1,000 square feet. The units at 1020 Monroe range from 675 to 1,100 square feet.
 
"What we're seeing for the first time in a long time is that we're seeing large amounts of traffic at the buildings we're marketing and we're seeing multiple offers on some of the units," she said.
 
One the recent buyers is Matt Leydig, who bought a unit at Savannah Row after living in Tysons Corner for the past nine years.
 
Leydig, who works in Eagle Bank's real estate financing division, said he was surprised at how few available condo units the District has and decided now would be the perfect time to buy. "There's not a lot out there, and there's certainly not a lot out there in the kind of price point I was looking for," he said.
 
Daniel J. Sernovitz covers commercial real estate.