Condo Sales Down Again

Condo sales fall for 2nd straight quarter


By Eddie Baeb
Oct. 25, 2006

(Crain’s) — While the apartment market remains strong in Chicago and the suburbs, downtown condominium sales fell for a second straight quarter, raising concerns that a number of proposed high-rises may ultimately be scrapped.
Condo sales in new buildings fell to about 700 in the third quarter, down from about 1,200 in the second quarter and 1,600 in the first quarter. Sales this quarter also marked a 26% decline from the same period a year ago, according to a report to be released next month by Appraisal Research Counselors, a Chicago-based real estate consulting firm.

That’s bad news for developers, who generally need contracts for about half of their units to get financing required to begin construction.

“Some projects might not get built,” Gail Lissner, a vice-president at Appraisal Research, said during a presentation Wednesday at the Chicagoland Apartment Assn.’s industry outlook meeting.

However, Ms. Lissner noted that year-to-date condo sales have fallen only about 5% from last year’s record pace and still remain well above sales in the first nine months of 2004 and 2003.

The more stark figures: About 5,700 new condos are being marketed this year, most of which aren’t yet under construction, compared with just 4,700 that were marketed all of last year.

Of those 5,700 new condos, contracts have been signed on about 3,500 units through the third quarter, according to Appraisal Research data. “Sales aren’t keeping pace with new inventory,” Ms. Lissner said in an interview. Despite the decline in sales, Ms. Lissner said two condo developments that started this year are already under construction: CMK Co.’s 1720 S. Michigan Ave. and Mesa Development Co.’s The Legacy at Millennium Park. The third quarter provided more good news for apartment building owners, who are benefiting from job growth in the region along with tight supply because developers have been converting apartments into condominiums and not building many new apartment complexes.

Net apartment rents in the suburbs rose 5.9% in the third quarter from the year-earlier period, while rents downtown for “Class A” apartment buildings rose 8.9%.

Appraisal Research Vice-president Ron DeVries said he thinks the supply-demand trend will continue and cause rents in the suburbs and city to rise another 5% over the next 12 months.