There is talk lately of a renewed interest in the construction of condos in several of the largest metro areas across North America. This is happening despite the major fallout some of those cities experienced in that sector of real estate as a result of the financial crisis over the last decade.
Some of this is taking place in areas that are no brainers, such as New York City and San Francisco. Condos for sale by developers in Manhattan alone total 12,000 units between this year and 2016 – double of what was offered between 2013 and 2014. Meanwhile, San Francisco is seeing just more than 2,700 come online this year.
Probably the poster child for how bad the condo bust hit during the recession was Miami, which saw vacant high rises along the coast and condo projects that were eventually converted into apartment buildings. Now condo developers are big on Miami and surrounding South Florida cities. A whopping 70 condo towers have been announced in the Greater Miami Area, totaling just more than 20,000 units.
We are seeing some of the same activity on the other side of the country. Orange County condos are selling like crazy. In September, sales of these assets rose 17 percent year over year. That came out to 996 properties with a median selling price of $430,000.
California markets are leading national condo-sales growth, according to research firm CoreLogic. But there is a lot of movement in mortgage originations in the sector across the country. During the second quarter, originations spiked 31 percent from the prior year. Purchase-money originations were at $19.6 billion, the highest level since 2007, when they hit $21.3 billion. CoreLogic points out that despite the aforementioned markets in this article, Boston; Chicago; and Washington, D.C., are also getting a lot of traction.
However, just under half of those originations are not in markets that investors consider “gateway.”
While the Raleigh, N.C., market is by no means small, it’s not usually thought of as a place with booming commercial real estate development. Nevertheless, Raleigh’s downtown condo growth is apparently so strong that ground-floor retailers that were leasing in buildings that are being converted from apartments are being pushed out now because of increasing rents.
The United States is not an anomaly for this activity, though. There is also a lot of condo vibrancy taking place in Canada as well. Montreal reportedly has about 8,000 condo units that broke ground this year so far. It’s not the only city. Toronto is going through a building boom, with an incredible 97 residential towers under development in the metro area, many of them condos.
The apartment market is still red hot, by all accounts, but condos are starting to grow in commercial real estate relevance.
Do you think the economy can sustain the building of these types of assets in such volume?
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