Once for rent, downtown condos are back on the sales market

Once considered a shining example of urban revitalization, downtown San Diego’s burgeoning condo market quickly became a poster child for over-development following the mortgage meltdown in the summer of 2007.

Between 2001 and 2007, building cranes dotted downtown’s skyline as 7,640 new units came on line, according to the London Group Realty Advisors, which provides real estate analysis and economic consulting.

But after the housing bubble burst, many condo units that hadn’t sold were put into the rental market.

Now, however, the “for rent” signs are coming down.

Some developers say they’re experiencing renewed interest from prospective buyers who perceive prices are on the rebound after bottoming out. Also spurring demand, sources said, is the perception that demand for new units may soon outpace supply.

“An increase in foot traffic (downtown) started at the beginning of this year, but that did not translate into more sales until the late summer or the third quarter,” said Robert Martinez, director of research for MarketPointe Realty Advisors, a consulting firm.

According to MarketPointe, 368 condo units were sold or placed under contract for sale year-to-date through the first week in October - up from the 228 that were sold during a similar time frame in 2008.

In the first three quarters of this year the average per-square-foot price of units sold was a little less than $600, roughly the same as the first three quarters of 2008. But buyers are getting more for their money.

“The dollars are about the same, but the difference is the units sold in 2009 were about 150 square feet bigger, on average, than those in 2008,” Martinez said.

Richard Combs, a sales agent at the 178-unit Legend, a luxury condominium tower on Seventh Avenue overlooking Petco Park, said that buyers have expressed interest since the project opened in early 2008, but there’s been a change in attitude.

“Prospective buyers are not nervous like they used to be,” he said. “Their mentality is different. Now they see value.”

Indeed. A 927-square-foot condo that was originally priced at $616,000 is now going for $464,000. The Legend’s homes range in size from 807 square feet up to 1,894 square feet.

Dennis Serraglio, director of sales and marketing for Canadian-based Bosa Development, which built the Legend, said that as of mid-November, 160 units were sold, and of the 18 that had been rented, six were back on the for-sale market. The 12 remaining rentals would also be listed for sale as soon as their leases expire. Home prices range up to $760,000.

Bosa also developed Bayside at the Embarcadero, a 36-story luxury condo building, and owns three other parcels of land downtown, one of which is targeted to go under construction for a condo project in the third quarter of 2010, Serraglio said.

Serraglio predicted that demand is sufficient to absorb all of downtown’s condo inventory within the next 18 months. But he added that Bosa would not start another development until it’s “economically feasible.”

Evan Gerber, the project manager for Aloft on Cortez Hill, a 168-unit property developed by San Diego-based Oliver McMillan, said it has sold 69 units and rented out 70.

“But as the leases come due we will not be re-renting them,” he said. “We’re now seeing more traffic from prospective buyers and the quality of our leads has improved.”

Nonetheless, it’s tough for some people to acquire financing in the current economy. The federal tax credit for first-time homebuyers, which was recently extended through April and expanded to include second-time buyers, is helping “to bridge the gap” for some people, but not all, he said.

According to sources, homeowner fees can run as much as $700 a month or more in some projects.

Currently there are about 1,500 new condo units available for sale downtown, according to analysts, and nearly half are in one property, the 679-unitVantage Pointe, which encompasses an entire block between Ninth and Tenth avenues and A and B streets. While a south tower is open, a north tower is expected to complete construction in the next two months. Prices start in the mid $200,000s and go up to the mid $700,000s, sales manager Sheridan Mantor said. Approximately 45 units have been sold.

Vantage Pointe was developed by Pointe of View Developments of Canada and it recently realigned the project into five separate entities to satisfy a lending criteria for low down payments. The units range in size from 611 square feet to 926 square feet.

Not all condos saying good-bye to renters

Vantage Pointe has placed 240 units on the rental market.

Smart Corner, a 300-unit property at the corner of C Street and Park Boulevard has sold about 62 of them since it opened in early 2007 and has rented 140, said Sherm Harmer, president of Urban Housing Partners, a co-developer of the project.

Last month, 40 of the Smart Corner homes were sold at auction, but the sales prices of those units are not being released pending their December closing date. The units in the two towers range in size from 470 square feet to 1,550 and are currently priced from $149,000 to a high of $675,000.

Gary London, CEO of the London Group said that although there are “more people trolling around downtown looking for bargains on the theory that condo pricing will go up,” there is still a gap between the prices developers are asking and the prices potential buyers are bidding.

“Several projects have not sufficiently lowered prices,” he said.

As for any new development, he considers downtown to be in “virtual lockdown” from the standpoint of getting high-rises financed.

“I don’t expect to see another downtown project for the next four to six years,” he said, adding that a possible exception could be a Bosa development.

Connie Lewis is a contributing writer for SDNN.

Tags: Aloft condos on Cortez Hil, Bosa Development, Gary London, Legend condominium tower San Diego, London Group Realty Advisors, Petco Park, Pointe of View Developments, Richard Combs, Robert Martinez MarketPointe Realty Advisors, San Diego condos, San Diego real estate market, SDNN, Sheridan Mantor condos San Diego, Smart Corner condos San Diego, Vantage Point condos San Diego

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