Stock of unsold new units high downtown, but few completed condos are sitting empty

City Homes

Don DeBat

Despite gloomy rumors of unsold condominium units sitting empty downtown, there currently are only 177 new-construction high-rise condos, townhomes and adaptive-reuse lofts available for immediate occupancy.

That surprising ray of sunshine comes from Appraisal Research Counselors‘ latest study on the status of the downtown Chicago residential market.

“There are 6,507 unsold new-construction condos, townhomes and lofts in the pipeline, but only 177 of them are completed – less than 3 percent of the total new-unit inventory,” said Gail Lissner, vice president of Appraisal Research Counselors, and co-author with vice president Ron DeVries of the Downtown Chicago Residential Benchmark Report.

Most unsold units downtown are either under construction or not yet built. The report notes that 2,937 of the new unsold units are currently under construction, with deliveries expected between 2007 and 2009. “Ground has not yet even been broken for the remaining 3,393 unsold units, which are projected for delivery through 2011,” Lissner said.

A little more than 900 unsold condominium-conversion units are vacant and available in a bulging total inventory of 7,416 unsold units, according to the report, released after the first quarter of this year. It covers an area bounded by North Avenue on the north, Cermak Road on the south, Lake Michigan on the east and portions of Ashland Avenue and the Chicago River on the west.

Although condo sales have slowed, Lissner noted that an “extremely diverse” group of purchasers is still attracted to downtown homes.

“The older baby boomer is a very active segment of the market, either as a second-home buyer or empty nester moving their primary residence from the suburbs to the city,” Lissner said.

“The number of out-of-town buyers is an emerging market, especially residents from Indiana and Michigan who are looking for a second home. We also are seeing more interest from international buyers and purchasers from across the United States who have some sort of connection to Chicago,” she said.

In 2007, lifestyle amenities are the lure attracting buyers to the most successful projects, she added. “In the South Loop, at the X/O Condominiums development, Kargil Development has designed a particularly elaborate spa / lifestyle component and retained a New York spa operator to run it, offering an enhanced level of service.”

Lissner noted that Centrum Properties recently opened sales at the 41-story St. Clair at CityFront Plaza, a new Streeterville high-rise that features “a club amenity offering a food service concept” similar to the Residences at the Ritz-Carlton, a luxury Michigan Avenue high-rise condominium marketed by Rubloff Residential Properties.

The St. Clair also is marketing furnished “in-town suites” to lure suburban empty-nesters who want to spend time near the Magnificent Mile, noted Jennifer Arons, senior vice president of Centrum Properties.

While the selection of downtown condo units may never be better, some “buyers have a little sense of urgency,” said Lissner, noting that the flood of investors and speculator have retreated from the market.

What are those investors and speculators doing with their unsold units?

Deborah Server, rental apartment specialist with Rubloff Residential Properties, said many of the investor-owners are holding and renting their condominiums as an investment and plan to use them later as in-town residences or apartments for their college-age children who plan to attend school downtown.

Meanwhile, eager city developers are offering some of the best condo bargains in what may be the best buyer’s market since the recession of the early 1980s, veteran real estate brokers say.

At Lincoln Crossing, 35 new condos at 5588 N. Lincoln Ave., Lettvin Development is offering $20,000 to $40,000 off the list price of units ready for immediate occupancy, priced from the $260s to the $560s.

At Cornelia Court, 63 new homes at Cornelia and Sacramento avenues, Anchor General is offering price reductions of $10,000 to $20,000 to launch the opening of a new furnished model for Phase III, said agent Gale Goldstick of Coldwell Banker Residential Brokerage. The townhomes currently are priced from $475,000 to $649,900.

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.,

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