Slowed by 9/11 terrorism and a sluggish economy for the past three years, the downtown Chicago condominium market finally is roaring back in 2004, real estate experts say.
According to Appraisal Research Counselors’ Downtown Chicago Residential Benchmark Report, overall condominium sales in the second quarter of 2004 – including new-construction and adaptive-reuse projects, conversions and townhomes – were stronger than in any quarter since the first three months of 2001.
“It was the strongest second quarter seen since we started tracking sales in 1997, surpassing even the ‘boom years’ of 1999 and 2000,” noted Gail Lissner, vice president of Appraisal Research.
A whopping 1,454 condominium units were sold downtown in the second quarter, boosting the total for the first half of 2004 to 2,848 units, compared with only 1,774 during the first half of last year and 2,078 in the first half of 2002.
“While developers tended to sit out 2003 in terms of bringing new projects to market, that trend appears to have been reversed in 2004,” Lissner said. “Already in 2004, developers started marketing 2,466 new-construction condominiums in the first half of the year.”
According to Appraisal Research, hot new-construction projects include Jameson Development’s 50 East Chestnut, an ultra-luxury Gold Coast highrise where nearly a third of the 34 condos (one per floor) ranging upwards from $2.2 million are under contract.
“Most of our buyers are empty nester families who are selling big homes on the North Shore and the western suburbs and moving downtown,” said Charles Huzenis of Jameson Development.
Another fast seller is Loftworks on Michigan, 1919 S. Michigan, where nearly two-thirds of the 39 units have been sold in the “environmentally friendly” condominium development by Frankel and Giles Real Estate. Prices start at $179,000.
The Regatta, a highrise development by Magellan Development and Near North Properties in the emerging Lake Shore East community, at Lake Shore Drive and the south bank of the Chicago River, also reported strong sales, with more than 60 percent of the 324 units under contract, according to Appraisal Research.
An easing of mortgage rates in the second quarter may have spurred many potential buyers to make a decision to purchase, experts said.
In late August, Freddie Mac’s Primary Mortgage Market Survey reported that the benchmark 30-year fixed-rate home loan averaged 5.82 percent, down from 6.30 percent in late May. Last year at this time, 30-year fixed mortgages averaged 6.28 percent.
The new downtown condo projects that started marketing during 2004 represent a broad range of housing styles and price points, from homes around $250 per square foot to more than $650 per square foot.
The Appraisal Research report also outlined the following trends in the downtown condominium market:
Condos for first-timers. Smaller units targeted to first-time buyers or as in-town residences for suburbanites continue to sell more rapidly than the higher priced residences, Lissner said. “Condos priced below $300 per square foot comprised 47 percent of the sales contracts during the second quarter of 2004, and 42 percent of the first quarter deals,” she said.
Adaptive-reuse boom. Four new adaptive-reuse projects, either former loft warehouses or office buildings being converted to condominiums, were added to the market in the Loop, West Loop and Near West Side during the second quarter of 2004. Most of these condos are priced below $300 per square foot.
Conversions heating up. American Invsco launched the conversion of Plaza 440 at 440 N. Wabash, the first condo conversion in 2004. “This River North building is located across the street from the proposed Trump Tower project,” Lissner said.
Buyers want views. “Many of the strongest selling condo projects were buildings that offer outstanding views especially those of Grant Park, coinciding with the official opening of Millennium Park,” Lissner said. “Buildings that offer desirable views of Lake Michigan or the Chicago River also are attracting knowledgeable buyers.”
High-end finishes. “Buyers continue to expect high-end finishes such as stainless-steel appliance packages regardless of price point, and developers are scrambling to offer better finishes to entice condo purchasers,” Lissner said. “This is one way to differentiate newly built condos from resale units which are generally finished to a lower level.”
Real estate columnist and media consultant Don DeBat has written about Chicago-area housing and mortgage markets since 1968. He is chief executive officer of DeBat Media, Inc., www.dondebat.net.