Hot market for high-end condos fuels downtown building boom
Thursday, 2005-6-9 --
by Tom Boyer / Seattle Times business reporter
City life | Suburban baby boomers, empty-nesters and fans of an urban lifestyle are buying downtown luxury condos almost as fast as developers can build them. But some fear the market may overheat.
They were camped outside the door on a Saturday morning like music fans in need of tickets. But this was to buy half-million-dollar luxury condos.
Alison Jeffries, marketing manager for Vulcan Real Estate, arrived at the company's visitor center three hours before it was supposed to open. Outside sat a man in a lawn chair, wrapped in a blanket, sipping coffee and reading the newspaper.
"What are you doing?" Jeffries asked.
"Can you tell me how many units are left?" he asked.
By the time the visitor-center doors swung open at noon, 38 people were in line. Vulcan and its partner, Milliken Urban, sold 45 units in a single weekend for a condo-and-hotel complex known as 2200, at Westlake Avenue and Denny Way.
With prices starting around $300,000 for a studio and ranging into the millions of dollars, the project's 261 units are now 92 percent sold — even though opening is a year away. The Cristalla, another luxury condo building a few blocks away in Belltown, sold almost as fast.
When developers see buyer enthusiasm like that, they get busy, and so it goes in downtown Seattle this year. At least half a dozen condo projects are in the works from the Pike Place Market area to South Lake Union. Seattle's planning director, John Rahaim, thinks 5,000 dwellings could be built downtown in the next five years.
"The consultants say 1,000 to 1,500 units a year can be absorbed," said Claudio Guincher, president of Continental Properties, one of the area's biggest condo developers. "But when you see 2200 Westlake selling all those units in one weekend, you think, well, maybe those consultants are being conservative."
Condos in the office district Seattle will soon see its most expensive condos ever. It could see its tallest ever. Condos are pushing ever deeper into the traditional Seattle business district, a move city planners welcome because it helps create a vibrant, 24-hour downtown.
Among projects in the works:
• A tower of about 100 units has been proposed for Fifth Avenue and Madison Street, across from the new Seattle Central Library — a rare residential foray into a forest of high-rise office buildings.
"There are people who think it's a little pioneering," developer Greg Smith said.
• Samis Land is asking the City Council for a zoning change that would let it build Seattle's tallest residential building. The 35-story condo tower — two-thirds as tall as the Space Needle — would top a planned monorail station at Second Avenue and Pike Street.
The Samis project and a similar tall condo Smith has proposed across the street may presage a new generation of taller, skinnier residential buildings that could bring thousands more residents downtown.
• Perhaps the most expensive homes (based on price per square foot) ever built in Seattle are planned as part of a tower that will also include a new Four Seasons Hotel at First Avenue and Union Street across from the Seattle Art Museum.
John Oppenheimer, managing partner of the project, said 50 condos were initially planned, but there was so much interest in larger, top-end units that the number was reduced to 26.
As expensive as mansions Condos at the Four Seasons are said to be priced above $1,500 a square foot, triple what luxury condos typically have sold for here. At that rate, a 1,200-square-foot unit would cost close to $2 million. But these will be larger, typically 3,000 to 4,000 square feet, making them as spendy as waterfront mansions.
"It's shocking how high those numbers are," said Guincher, whose company is building a 250-unit condo high-rise, the Cosmopolitan, at Eighth Avenue and Virginia Street near the new federal courthouse. "You're getting very high-end people buying. If those kinds of people want to live downtown, it's a signal to the rest of the community. I don't think you would have seen that five years ago."
Nor would anyone have envisioned a luxury hotel and condos at Westlake and Denny, a neighborhood without the Puget Sound views of nearby Belltown but one rich in car dealerships, parking lots and warehouses.
But Vulcan, with Microsoft co-founder Paul Allen's money behind it and control of 60 acres in the South Lake Union area, makes its own weather in the real-estate world.
To some extent, demand for upscale condos is being fueled by Seattle's congested freeways, which have some suburban baby boomers eager to give up their brutal commute to downtown law offices and financial centers.
"We had a person who said, `The dog is dead; the kids are gone; I don't want to have to mow the lawn anymore,' " Vulcan's Jeffries said.
But to a degree that has surprised the developers, a significant number of buyers are moving in from close-in Seattle neighborhoods such as Capitol Hill and Wallingford. They want to be even closer to downtown, with a nest of amenities.
Room service at home The three-tower 2200 will include a five-star Pan-Pacific hotel, from which condo owners can order room service. But the real coup may have been signing Whole Foods Market to anchor the retail portion of the project. For condo residents, the Epicurean grocery will be an elevator ride away.
Seattle architect Karen Gunsul, who has helped design some of the city's biggest office buildings, wanted to put down permanent roots after living for years in the upscale Capitol Steps apartments near Pike Place Market.
"I had this image of myself at 95, ordering dinner from the restaurant," said Gunsul, who bought a two-bedroom unit at 2200, where she will live with her 12-year-old son. "I don't ever have to move to a retirement home."
The question being asked in Seattle's real-estate community is how deep and long-lasting the demand for high-end condos will be.
Low mortgage rates and real-estate speculation have led to explosive condo development in Miami and Las Vegas, sparking fears of overbuilding and financial meltdown for buyers.
Seattle's condo boom has been modest by comparison, held back by Seattle's lengthy approval process and zoning rules that limit the height of buildings.
Developers of projects here say they try to limit sales to investors by aiming to sell 80 percent of units to people who say they'll live in them. Plus, they point out, prices here are high enough to scare away many investors: Luxury condos usually can't rent for enough to pay a $500,000 mortgage.
Risk of overbuilding? Still, Art Wahl, managing director for the real-estate brokerage firm CB Richard Ellis, said developers will always be tempted to overbuild, creating risk for them and buyers.
"At the end of the day, and nobody knows when that is, there's going to be a certain number of those guys who are going to wish they hadn't done the last building," Wahl said.
If it reaches the point of oversupply, "the whole market's going to get in trouble" because so many condos will be for sale at lower prices, he said.
For now, though, downtown Seattle has a lot going for it — robust job growth, skyrocketing home prices in surrounding neighborhoods, and the state Growth Management Act, which funnels housing into urban areas.
Reaching critical mass? But trying to gauge the depth of that demand "is inherently difficult because it's a lifestyle choice," said Matthew Gardner, a Seattle consultant who does market forecasts for the real-estate industry. "It's not being driven by home prices, job growth or anything else. It's invariably a choice of the kids have moved out, and they're selling the estate before the kids move back."
The baby boomers' move downtown has become a story in many cities across the country. What may help Seattle more is that retirees stay.
"There's something in the water in Seattle," Gardner said. "When people retire here, unlike other parts of the country where they disappear to the Sun Belt or California, they don't leave."
The optimistic scenario is that downtown Seattle is finally reaching critical mass, after years of lagging behind residential downtowns such as Vancouver, B.C.; San Francisco, and Portland. If that's true, condo and apartment development could accelerate through this decade and beyond.
"More housing begets more housing in an urban center," said William Justen, a developer and former Seattle city planner who for decades has lived downtown in projects he's developed.
"The more housing downtown occurs, the more desirable that lifestyle becomes because of the benefits that come from high residential density — better shopping, better restaurants, better safety."
Tom Boyer: 206-464-2923 or email@example.com