Five days in, everyone seems to have found the story for 2009. Crain’s published a story this morning about the imminent completion of more than 2,100 condos in the South Loop, more than 40 percent of which remain unsold. This afternoon, it followed up with a video version of that story (fast-forward to the 40-second mark) that includes some remarks from Gail Lissner of Appraisal Research Counselors.
In it, Lissner gets straight to the point about what we can expect beyond 2009:
What we’re seeing in 2010 is there is no more new development taking place. There will be zero units delivered in the South Loop in 2010, so anyone who is looking for new construction will really need to be buying one of these units that was delivered in 2009, because there is no more pipeline at this point.
Could you elaborate to an amature what Lissner / APC’s role in development? Who do they work for? It always appears that APC is reporting on behalf of the developer, giving rah-rah quotes, etc. What is their culpability in this mess, any why would she want to be telling people the need to buy. Shouldn’t their service just be reporting facts, and less conjecture?
They absolutely do not represent anyone, let alone developers. They strictly report facts about what is going on in the marketplace. For example the amount of new cosntruction, locations, concetration of new construction and things that are planned. She is simply saying that after 2009 there will be no more constrctuon in Chiag, (prpbably for a at leas several years in my opinion) and that once it begins again it will take 2-3 years to complete from the drawing board to residents moving in. So her point is that if you want to buy something that is not yelt built you will be waiting a long time to do so; probably closer to the olympics 2016. Therefore once the inventory of the most desirable units is deplted over the next 1-2 years all that will be left in regards to new cnstruction is the least desirable units.
Jeff,
Supplementing what Simon says.
Appraisal Research Counselors (ARC) is an independent appraisal / research firm. They’re hired by developers and by lenders to do feasibility studies and appraisals on individual projects, and to advise on pricing the units within a project. Developers, lenders and others pay for their market research studies.
ARC is absolutely beholden to no individual developer. It’s pretty ludicrous to describe Lissner’s positions as “rah-rah.” Take a look back at the many posts we’ve done on the ARC reports and you won’t find anything that fits that characterization.
ARC has been, along with Tracy Cross & Associates, the most respected analysts in this market for many years now. They’re as objective a source of info as you can find anywhere. I’m personally familiar with past situations in which their appraisals have made developers furious.
thanks for the responses.
It would appear from your dustbunny list though,(considering the number of “approved projects” on hold) that the time to market could be shorter than her comment projects.
I do have some questions, that in her ‘independent role’ , why she would not qualify hear statement as to “nothing in the pipeline”, with something like ‘assuming of course, anyone is foolish enough to buy at current prices’, etc. Her comments without qualification could be taken as leading and infering some need for ‘new home’ buyer urgency, considering the economic outlook, which is not merely pointing out facts.
Jeff,
I don’t read Lissner’s remarks the same way you do. As I see it, she’s making a simple factual statement: no South Loop projects are currently underway that will deliver units in 2010 and none are likely to start so as to deliver in 2010.
There’s no sense of urgency in what she says, which holds open the possibility that many of the 2009 and earlier delivery units will still be on the market in 2010 – or later.
Set your biases to the side and things become clearer.
The buyer urgency will come when people realize that just like individual homeowners, only the most liquid developers with lots of equity, the best locations and products are unable to get financing and that only new construction housing options that are availabe are projects which are already built. This will happen when prices begin to tick up in the resale market for the good units; in 1-2 years in my opinion. I read recently that prices for downtown Chicago condos are down only 6% from their peak, I bealive this was a case/shciller report which is a very accurate source.
sorry..able to get financing.
Simon,
We linked to the Case-Shiller numbers last week. They’ve received little attention since they don’t fit the prevailing meme of housing doom.
The decline through October was just shy of 6% from the peak in late 2006, and the number was for the Chicago condo market as a whole. I suspect subsequent numbers will show a greater decline. I’d also venture that the decline was shallower in prime downtown areas.
It is not a bias. I am saying that her comments exclude any big picture issues like economy, recent tax hikes and Daley/Stroger/ effect. Her comment about ‘nothing in the pipeline’ is innaccurate and misleading.
Look at the South Loop boom years. From 1995-2007 the boom went something like this:
1. 1995-2000 Condo & Loft Conversions – relatively short time to market.
2. 2000-2004 Mid rise and Townhome projects 2-3 years delivery
3. 2002-2007 – large scale high rises 3-4 year delivery.
Many of those projects, and with your experience you should know better than anyone, started from a starting point where developers had not yet done feasability review, land aquisition, or zoning/PD approval, initial architectural design, which was taking 1-2 years and more.
There are a crap load of shelved projects that can be picked up and ready to go in far shorter time than previous years. Examples include Central Station Museum Towers III, IV, and several other properties.
I fail to see the bias in pointing out the obvious.
Jeff,
You’re not “pointing out the obvious.” You’re flat-out distorting what she said. And, bizarrely, criticizing her for something she didn’t say that’s not relevant to what she did say.