Downtown Chicago condominium market sizzles again After a couple
of years on the back burner, the downtown Chicago condominium market
is sizzling again, real estate experts say. According to Appraisal
Research Counselors’ Downtown Chicago Residential Benchmark Report,
condominium sales in the first quarter of 2004 were “the best
in nearly two years” for all property types – including
new construction, adaptive reuse projects, conversions and townhomes. A whopping 1,394
condominium units were sold downtown in the first quarter, compared
with only 776 during the same period last year and 911 units in the
first three months 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 early 2004,” said
Gail Lissner, vice president of Appraisal Research. “Although
developers started marketing 1,267 new-construction condominiums during
2003, sales were started for more than 1,000 new units in the first
quarter of 2004.” New projects range
from such ultra-luxury highrises as Jameson Development’s 50
East Chestnut, with 34 full-floor condos starting at $2.2 million,
to Loft Works On Michigan, a 39-unit “environmentally friendly”
condo development by Frankel and Giles Real Estate at 1919 S. Michigan,
priced from $179,000. The prospect of
increasing mortgage rates may have spurred many potential buyers to
make a decision to purchase in the first quarter, Appraisal Research
said. Mortgage rates have increased a full percentage point since
late March. In early June, Freddie Mac’s Primary Mortgage Market
Survey reported that benchmark 30-year fixed-rate home loans averaged
6.28 percent, down slightly from 6.32 percent a week earlier. Last
year at this time, the 30-year fixed mortgage averaged 5.26 percent. The new downtown
condo projects that started marketing during 2004 represent a broad
range of housing styles and price points, ranging from approximately
$250 per square foot to more than $650 per square foot. Appraisal Research
also reported that condo deliveries during 2003 outnumbered any in
recent years and will surpass the projected deliveries for both 2004
and 2005. “With nearly
4,200 units delivered in 2003, we are only projecting 2,300 units
delivering in 2004,” Lissner said. “However, 2005 has the
potential to be another big year, if all of the proposed projects
actually break ground soon. If this happens, we could see nearly 3,700
units delivered in 2005.” The Appraisal
Research report also outlined the following current trends in the
downtown condominium market: •Sales
incentives. “Free parking spaces valued at $25,000 to $35,000
may be replacing free upgrades as the most popular sales incentive,
particularly in the River North market,” Lissner said. However,
developers are now offering an array of incentives including a price
discount, lower deposits at time of contract and no payments on mortgage,
taxes and assessments for a specified period of time. •Small
units. “Buyer sensitivity to price continues to drive demand
for the smaller and less expensive units in typical developments,”
Lissner said. One-bedrooms and one-bedrooms with dens continue to
sell out prior to the larger residences. Sales of two-bedrooms continue
to trail the one-bedroom units. Expensive penthouses are experiencing
slowest sales pace. •Premium
views. “Buildings that offer particularly desirable views
(of Lake Michigan, Grant Park or the Chicago River) are attracting
knowledgeable buyers who are rapidly purchasing the prime view units
at the start of the sales program,” Lissner said. •High-end
finishes. Because of heavy competition, developers are increasing
the level of standard finishes being offered. “We are continuing
to see developers adding stainless-steel appliance packages as standard
now that the market expects this amenity,” Lissner said. “This
is one way to differentiate newly built condos from resale units which
are generally finished to a lower level.” |