Even if math wasn’t their best subject in school, the search for value in a new house in Chicago’s competitive real estate market has buyers crunching numbers.
Of course, they may be calculating interest rates, down payments, ceiling heights, monthly assessments and a host of other figures, but the primary number cited in comparing places to live is price-per-square foot.
It is reached by dividing the purchase price of a condominium, townhouse or single-family houseby the number of square feet (this sentence as published has been corrected in this text).
“I’m constantly looking at price-per-square-foot,” says Joe Hirsch. “If I can find the interior design level that I want in the standard price (of the unit) than I’m going to extract more value in my price-per-square-foot.”
Hirsch, his wife, Cassandra, and son, Zachary, 3, are in the market to purchase a three-bedroom condominium or townhouse in Chicago. They currently live in a two-bedroom unit at Kinzie Park, a 325-unit building at Kinzie and Canal Streets.
“I look at my purchase as an investment. There’s so much inventory on the market that I want (to use it as a way to) to know what I am getting. That’s important to me,” says Peter Venetsanakos of Chicago.
In January, Venetsanakos bought a two-bedroom, two-bathroom unit at 933 W. Van Buren St.
The 22-story building has one-, two- and three-bedroom homes priced from mid $200,000’s to $450,000. The price-per-square-foot in the building is $225, said Roger Mankedick, executive vice president of sales and marketing for the developer, Concord Homes in Palatine.
The company also is developing Parc Chestnut, a 262-unit building at Franklin and Chestnut Streets, where the price-per-square-foot comes to $275.
“It’s a very good value,” said Mankedick. “Every block you walk going toward Michigan Avenue (from Parc Chestnut), the price-per-square-foot at other buildings goes up by $40 a square foot.”
While Mankedick can readily cite the price-per-square-foot at these buildings, he and other builders caution that buyers should not be not be entirely driven by price-per-square-foot in their house search.
“You need to ask about the whole package,” said Mankedick. “It’s more than just bricks and sticks that comes out to so much a square foot.”
Price-per-square-foot is generally not touted by the developers of single-family houses in the suburbs. That’s because these properties vary greatly, from varied floorplans to the size and configuration of lots and whether the developer purchased the land as a cornfield without amenities or with curbs and gutters already in place.
It’s more meaningful, builders agree, to make a comparison between units in urban buildings that are in the same neighborhood or on the same block than it is to make a comparison between single-family homes, possibly in different subdivisions or school districts.
However, as much as they may warn against relying too heavily on price-per-square-foot, Terri Whitaker, sales director for Lakeside on the Park in Chicago, acknowledged that developers adhere to the practice of using price-per-square-foot as a way to market properties. Buyers have picked up on it.
“I think developers have been using it as a way to say, `This (property) has more value’,” she said. “And it caught on. Now it’s the thing for buyers (to ask about).”
Chicago-based Legacy Development Group developed the 14-story Lakeside on the Park. It has 167 units and is located at 13th Street and Indiana Avenue in Chicago. Base prices for the one, two and three-bedroom units range from $198,900 to $589,900. The price-per-square-foot is $233.
It’s not surprising that buyers have picked up on price-per-square foot as a tool, Mankedick said.
“Consumers are very smart. This is the way we all shop. We’re all trying to figure out what’s the best value,” he said.
Price-per-square-foot certainly does not count intangible elements such as the airy look of volume ceilings. It does not reflect the caliber of the builder or the level of commitment to finish a project on time.
Two condominiums may have the same total square footage, but their floor plans and room sizes may be as different as night and day. Which unit would suit you is going to depend on your lifestyle. Do you like entertaining friends and need a large kitchen? Or, are you more inclined to laze about on a Sunday morning, drinking coffee and reading newspapers on the balcony?
“These issues all need to be considered when comparing the price-per-square-foot of one property to another,” Whitaker said.
In distant suburbs, homes may be priced at around $120 a square foot, or a bit higher. But builders warned about making overly simple comparisons.
Because suburban single family houses can vary in design, dimension and in other ways, price-per-square-foot is rarely used to sell single family suburban homes, said Amy Capista-Meyers, vice president/sales manager for Phoenix Developers in Joliet.
“We give a price-per-square-foot if they want to add square footage,” she said. “Sometimes people want to bump out or add a room.”
Phoenix Developers is constructing Aspen Falls at Caton Farm and County Line Roads and Autumn Field at Caton Farm and Ridge Roads, both in Joliet. Each subdivision will have 260 homes priced between $170,000 and $220,000.
When it comes to total square footage, Christopher Shaxsted, executive vice president of Lakewood Homes in Hoffman Estates, said he would advise buyers to ask how a developer is calculating the figure.
“You need to verify square footage when somebody gives it to you. Ask `What is the square footage and how was it calculated?'”
Buyers, he said, will find that developers reach this figure by different methods. Some may measure the outside perimeter of the building; others may count only heated space.
Typically, suburban developments exclude square footage in the basement and garage. In the city, however, some developers may include garage space in townhouse square footage and balconies in the square footage of some condominiums.
If price-per-square-foot is touted in single-family suburban subdivision, Mankedick said it would be more likely to occur in outlying suburban areas where affordability may be more of a priority.
“When you get into more affordable areas on the edges of a city, that’s where it’s more price driven,” he said. “That’s where buyers are more willing to make accommodations on amenities and location because they want to get into that first home.”
Venetsanakos said his price-per-square-foot looked better when he got $10,000 in upgrades included in the price of his condominium.
“That helps bring value back to me,” he said.
Tim Anderson, president of Northfield-based Focus Development, said, “Buyers can only pay attention to a homes’ price-per-square-foot when they are making an apples-to-apples comparison.”
Which features are offered as standard also must be considered.
For instance, Anderson said granite countertops are being offered as standard at The Residences of Sherman Plaza. The 25-story, mixed-use high rise is planned for Sherman Avenue and Davis Street in Evanston.
It will offer one, two and three-bedroom units ranging in size from 768 to 4,000 square feet. Base prices range from $264,000 to $1.7 million including garage parking.
“Granite counters would cost the buyer around $5,000 at other projects in Evanston,” Anderson said. “So if the unit is $1,250 square feet, that translates to a $4 per square foot price adjustment. Buyers have to keep things like that in mind.”
Not having to go to the expense of making upgrades later is one reason why Hirsch is looking to get as much as he can in a standard package in the unit he hopes to buy.
“It’s going to be cost-prohibitive to do it later,” he said.
Anderson said that buyers who are price-conscious can get a better price-per-square-foot at a condominium high-rise in an inner ring suburb like Evanston or Oak Park than at a similar development on the North Side of Chicago.
If Hirsch hopes to get as much as he can in a standard package — and thus eke out more value in the price-per-square foot in his next home–his timing may never be better, said Keith Keating of the Keating Development Group in Chicago.
“The city is pretty saturated (with housing product) now,” he said. “I believe every buyer in the city reads the newspapers and knows there’s a lot of product out there. They know they can go in there and say what they want.”
His company developed Platinum Tower, a closed-out, 97-unit building at 700 W. Van Buren St.
At first, Keating said his company did not have to consider making concessions to buyers’ demands for upgrades not included in the base price. That changed, however, as the market has evolved.
In the first phases of selling Platinum Tower, “We’d tell buyers, `Sorry. There’s no negotiation (on upgrades or concessions),'” said Keating. “By last summer, we were more willing to negotiate.”
His company also is developing Marquette Estates, a 306-unit subdivision planned for Romeoville. It will have townhouses priced from $140,000 to $160,000 and single-family houses from $170,000 to $220,000.
