New downtown condo sales down 36% last year
(Crain's) — Sales of new downtown condominiums and townhomes fell 36% last year, and developers will face a big test in 2008, when nearly 6,000 units become ready for occupancy.
Condo and townhome buyers signed contracts for 3,700 units in 2007, down from 5,783 in 2006, according to Appraisal Research Counselors, a Chicago-based real estate consulting firm. Sales have fallen 55% since 2005, a record year, with 8,162 contracts, but are still higher than they were in 2001 through 2003.
"Buyers are still confused and scared of making a bad decision," and are waiting to buy until the market hits "rock bottom," Appraisal Research Vice-president Gail Lissner said at luncheon presentation Thursday at the Standard Club.
Buyers signed contracts for 412 units in the fourth quarter, down 43% from 720 in the year-ago period.
Developers will face a bad combination in 2008: weak demand and rising supply. Sales this winter have slowed to a trickle — condo buyers signed just 13 contracts at downtown projects last weekend, "an all-time low," Ms. Lissner said — just as several developments are nearing completion.
Downtown developers will finish a record 5,900 units this year, according to Appraisal Research. The problem is that 1,700, or 29% of the total, remain unsold.
"There's going to be definite pressure on developers to sell those units," Ms. Lissner said.
The good news is that many condo developers seem to be getting the message and are holding off on new projects, in some cases because they can't secure financing on good terms. The total amount of condo inventory, which includes sold and unsold units and covers completed projects and projects under construction and in pre-construction marketing, has started to flatten out.
New downtown inventory totaled 5,814 units at the end of 2007, up just 3% from 2006, according to Appraisal Research.
"That's a good sign," Ms. Lissner said, "but we still need to absorb those."
New condo projects this year include the proposed Chicago Spire, which would be North America's tallest skyscraper, rising 2,000 from a site at Lake Shore Drive and the Chicago River. Shelbourne Development Group Inc. opened the sales office for the 1,194-unit condo tower last month and recently launched a road show to market the project in 15 cities overseas, including Dublin, Moscow and Dubai.
Back in Chicago, it's unclear when demand for condos will pick up, but Ms. Lissner ended her presentation on a positive note.
"2008 won't be so great, but 2009 could be just fine," she said.
