The downtown condo market has slowed from jet-propelled to a mere chug, chug, chug–but in the bigger real estate picture, that’s not such a bad thing.
“Right now, sales for newly constructed condos are down about 10 percent from last year,” says analyst Gail Lissner. She adds that statistic doesn’t really tell the tale because in 2005, the downtown market grappled with selling not only new construction, but also the conversion of 4,000 rental units to condos.
Lissner, along with colleague Ron DeVries of Appraisal Research Counselors, specializes in tracking the minutiae of the downtown market, and their firm’s current assessment, in her words, is that “downtown has done pretty well this year.”
But–and there’s always a “but” in the real estate market these days–Lissner told a recent gathering of the Chicago Real Estate Council that developers in the very broadly defined downtown market will need to measure their steps carefully as 2007 dawns.
“In 2006, we had about 2,800 new-construction condos delivered,” she said in an interview after the lunchtime presentation. “In 2007, we see about 2,900.” From this vantage point in 2006, that number seems manageable, she said.
But after that the pipeline really will start to spit out the housing units that have been promised. “In 2008, we’re looking at 6,200 [new condos downtown], providing that everything currently announced gets delivered,” she said. “That’s double the volume delivered this year. That’s a very, very big year.”
The anticipated new arrivals are “unprecedented in numbers,” she said to the real estate-oriented crowd.
“My advice to developers would be, you have to have a really good reason to bring [a project] on the market. You must be able to differentiate yourself. You’re going to have to work a lot harder.”
As she put it, more pointedly, after the presentation:
– The South Loop is the star submarket downtown, claiming 43 percent of all new-construction sales this year. “It’s more affordable [than many other parts of downtown]. Neighborhood groups there are friendlier [to large developments] and not opposed to density,” Lissner said.
– The majority of downtown condo sales activity this year has been between $300 and $399 per square foot, most of it clustered at $350, she said.
“There’s a growing market for the $400-per-square-foot units, but the $200s are going to be a thing of the past. You can’t deliver a high-rise product at that price point,” Lissner said.
– Segueing from the downtown discussion, DeVries said the suburban rental picture, after a long slump, is “doing very well.”
Net rents at large suburban properties, subtracting incentives that landlords have been offering, is averaging $1.08 per spare foot, up about 6 percent from last year, he said. And the “no vacancy” signs are going up, too: Occupancies at those same buildings is at 97 percent, up slightly from a year ago.
The market has improved (at least from a landlord’s point of view) because very little rental housing is under construction to replace the buildings converted to condos in recent years.
Plus, he said, employment, a bellwether of the rental market, is up, with about 52,000 more people employed in the Chicago area in August from a year earlier.
HB 4050 and a call to order
Earlier this month, a news conference to announce a hearing about a controversial housing law turned hostile, filled with catcalls, jeers and accusations of racism from residents and activists who would like to see an end to the law, HB 4050.
HB 4050 mandates financial counseling for home buyers and owners who are refinancing their mortgages in 10 Chicago ZIP codes if they meet assorted criteria. The law’s intent is to help curb high levels of predatory lending and foreclosures, but its opponents see it as a form of redlining. They claim that the complexities and expense of complying with the law have driven mortgage lenders from affected neighborhoods.
The conference was so boisterous that apparently it inspired the Illinois Department of Financial and Professional Regulation, which administers the law and is sponsoring the hearing Monday, to lay down some ground rules. According to a directive issued last week by the state agency, anyone who wants to speak at the hearing must fill out a witness slip; provide a written copy of their statement in advance of testifying; and limit their comments to five minutes.
The hearing will be at 1 p.m. Monday on the concourse level of the James R. Thompson Center, 100 W. Randolph St.
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Hear Mary Umberger on WBBM Newsradio 780 at 6:21 p.m. and 10:22 p.m. each Thursday and Friday and 7:20 a.m. each Saturday and Sunday.
mumberger@tribune.com
