Scrapped Plans
The fallout is evident from coast to coast. In condo-cluttered Philadelphia, Brown Hill Development scrapped its plans before it broke ground on a planned $40 million loft building because of low pre-construction interest from potential buyers.
In Boston, the average price of the waterfront condos that crowd the harborside plummeted from $902,644 to $564,944 during the first quarter of this year, according to the Listing Information Network. And Northeast Apartment Advisors estimates that there is almost a year’s supply of $2 million-plus condos waiting for buyers in the Boston/Cambridge market.
Washington, D.C.-based Monument Realty junked its plans for a three-building, 574-unit apartment complex in Alexandria, Va., and Wood Partners of Atlanta, which was constructing a new building in Annapolis, Md., will rent those 300 units rather than sell them as condos. Likewise, Greenbelt, Md.-based Bozzuto Homes changed its plans to sell units in a new Baltimore building because “we couldn’t make sense of it from a condo standpoint,” says President Thomas Baum. Instead, the building will house rentals.
The dark clouds haven’t skipped smaller cities: In Minneapolis, more than 2,000 units are under construction as sales are slowing, according to Maxfield Research, and The Ryan Cos., reacting to poor presales and a glut of high-priced condos, nixed plans for a 600-unit luxury condo project on the East Bank of the Mississippi River.
In Providence, R.I., Cathedral Development Group is downsizing a condo project from 82 units to 24, as increasing construction costs threatened to push the selling price out of the reach of local buyers. In nearby Warwick, R.I., Toll Brothers withdrew a plan to build 395 condominiums on the site of a former amusement park. New Port Richey, Fla., officials made no secret of their delight with a Ryland Homes plan to build 500 condos with parking, a fitness center, and swimming pools in six nine-story buildings. But in August, Ryland Homes pulled the plug on the project. And Rhode Island-based Procaccianti Group has scaled back its vision for a $110 million hotel and condo complex on the site of a former meat packing plant in Portland, Maine and will feature “significantly” fewer than the originally planned 92 condos.
And then there is Las Vegas, where eight megaprojects, including those backed by Clooney, Jordan, and Trump, stalled in quick succession over the past year.
Advertised on the Vegas Strip as a “return to the rat pack,” Clooney’s vision for the $3 billion, 11-tower Las Ramblas fizzled when construction costs sent the price of the condo and hotel project soaring. “Every time we tried to firm up the number, they would jump $10 million to $20 million,” says William P. Thompson, executive vice president of New York-based The Related Cos., a developer of the project. “I guess we just didn’t get our arms around the construction costs, and they were rising astronomically. That was a lesson learned.” Related sold the Las Ramblas project for a $100 million profit and also shut down its planned two-tower Icon condominium project in Las Vegas.
Restrepo says Related got caught in “a perfect storm of things that occurred over two years that cooled off the hype.” The condo developers who will succeed in Sin City, he predicts, are those with long-established connections in the construction industry–and those with the deepest pockets. The ever-expanding casino industry, he notes, absorbs much of the city’s construction labor, for which it can afford to pay more than residential builders.
Yet Restrepo has faith that the condo industry will flourish in Vegas again. “The dust has settled in with more realistic expectations of what the market is,” he says, noting that mixed-use (hotel/retail/residential/casino) is “probably the businessmodel” that will make it. “Stand-alone, condo-only towers are not what’s going to fly here,” he says.
