Suzy and Clay Smith looked seriously at downtown Seattle condominiums for about five years. Two weeks ago, they decided to buy in the Olive 8 building, under construction at Eighth Avenue and Olive Way. Nationwide real estate turmoil didn't make them hesitate, Suzy Smith said Thursday. "Frankly, what gave me second thoughts was the fact that there are so many new buildings going up."
The national real estate hangover spooked some Seattle buyers and the national lenders who fund condo projects, leading developers to shelve building plans. Others, however, insist the Seattle market will hold up. For example 83 percent of the more than 1,200 new downtown condo units that came on line in 2007 sold. All of the more than 1,400 downtown units built from 2000 through 2006 have sold, according to market research firm Realogics.
And the amount of building pales in comparison with cities like Miami, which had 60,000 condos in the development process at the peak of its boom and where people bought condos site-unseen with no intention of living in them, said Bryon Ziegler, developer representative for Williams Marketing, a Seattle company that works with developers. "We never even remotely had that kind of market in this area," he said. "We've got real jobs here supporting our growth."
But there was some evidence of a speculative frenzy in downtown Seattle in the past year, when investors in the newly completed 2200 Westlake and Cosmopolitan condo projects bought about one-third of the units in those two buildings, then immediately put them up for sale, said Dean Jones, president and chief executive of Realogics, another Seattle condo marketing firm.
Developers learned from those projects and other cities, however, and now cap investor purchases at 10 percent or less of units in new buildings, he said, adding that some are enforcing those limits with stipulations that buyers who sell their condos without living in them for at least a year must forfeit all or part of their profits.
Still, because of the national fallout, lenders are requiring developers who previously put up no more than a quarter of a project's funding to post as much as 40 percent and sell up to half the units before finalizing financing, Jones said. "We haven't seen presale requirements for a while."
Those changes add to project costs, leading some developers to build apartments instead, or to put plans on hold until market appreciation supports them, said Jones and Matthew Gardner, a Seattle land-use economist who works with developers.
Half of the approximately 1,600 condos Gardner expected to hit the market in 2010 still are looking for financing. Scaling back projects actually would lower the risk of overbuilding and help prevent Seattle from becoming the next Miami, he said.
The decrease in potential competition is one reason why downtown's high-end ESCALA building will increase prices 5 percent as of Dec. 1, said John Midby, a principal of developer LEXAS Cos. Midby cited a 40 percent increase in construction costs in the past 18 months, a relative lack of places to build in-city condos and Seattle's strong economy.
"You, in Seattle right now, probably have more dynamic corporate activity than any other place in the United States," Midby said. With completion nearly two years away, ESCALA has sold about one quarter of its 274 units. The project limits investors to 5 percent of the units. But since most of the buildings in the recent downtown condo boom aren't completed yet, it's difficult to bear out predictions about how many people will live in them.
Hard population counts come only every 10 years with the census, but the state Office of Financial Management estimates the population of downtown Seattle -- the commercial core, South Lake Union, Belltown, the Denny Triangle a
Source: Seattlepi.com