Wednesday, June 28, 2006

Phoenix Arizona - Condos Springing Up

Condos Springing Up By Glen Creno The Arizona Republic

Condominium developers are betting millions of dollars that plenty of buyers are willing to spend big money to live the luxury urban lifestyle in metropolitan Phoenix .At least 25 of these projects, offering everything from condos to lofts to brownstone-style residences, are being built or planned across the region.

With prices running from the hundreds of thousands to $1 million or more, they are chasing an unproven market in an area where new housing is dominated by tract homes on the edges of the city.

It is likely that some of the projects either will not be built or will not sell as well as their promoters hoped. That will depend on their location, demand, interest rates and competition - and whether luxury condo living in Phoenix turns out to be more than a fad. "I can't say across the board that every building will be successful just because a developer puts up a building on a piece of land," said David Hovey, founder of Optima, the Chicago-area company developing condo projects in the Biltmore area of Phoenix and near downtown Scottsdale. "Buyers are very astute."Buyers include young professionals, empty nesters looking to downsize, executives, singles, winter visitors and athletes. They come from across the state and the country.

Developers and brokers also say Europeans looking to take advantage of their strong currency have been buying.

Another trend: business executives and professionals who live in places like Paradise Valley and north Scottsdale buying lofts or condos as pied-a-terre, second homes that let them stay in the city when they work late or entertain. About half of the projects are in some phase of construction."The jury is still out on how hot the condo market is," said RL Brown, publisher of the Phoenix Housing Market Letter. "We have had a lot of noise but very little dirt being moved. Some of these will turn into live projects, but they are not here yet."New homes permitted in metro Phoenix in 2004 numbered 60,872, and analysts expect a similar performance this year. Of that number, 5.9 percent were condos, Brown said. This year to date, 5.1 percent of permits have been condos.

Many developers and brokers say the number of condos and lofts is much too small a portion, and they point to long waiting lists at new projects as evidence.

One of the most talked about is the condominium-hotel proposed by celebrity developer Donald Trump and the Bayrock Group. The developers are trying to re-tool the plan to make it agreeable to neighbors who don't want it to break height restrictions in the Biltmore area of Phoenix ."Demand for luxury condos is far from saturated," said Beau Woodring, Bayrock's managing director. "If anything, it is quite the opposite. . . . What does exist represents a remarkably small fraction of overall new housing supply. "When you see teardown homes selling for $700,000 in Arcadia , for example, it suggests a vibrant market. We believe that will continue to be the case." A big-city thing.

A growing population, new jobs, low interest rates and investors have been driving the single-family home market to records in metro Phoenix , which now has surpassed Atlanta as the country's top new-home market.

Those forces, along with the lifestyle choice of turnkey urban living, also are creating demand for condos."These are not single-family buyers," said Kim Baker, president of National Developers, which is planning a 74-unit loft building in downtown Phoenix . "They are just different animals."

Ultimately, no one knows how many buyers there are for expensive condos in a metro area less known for "condos" than for another six-letter word, sprawl. The area has lagged other cities where high-rise living is a tradition.

Phoenix is playing catch-up, developers say.

According to the U.S. Census' 2002 American Housing Survey, Phoenix had 89,300 condos, San Diego had 140,600, the Anaheim-Santa Ana area had 169,700 and the Miami , Fla. , area had 402,500."It is a phenomenon that will happen in any city that grows to a certain size. I think Phoenix has reached that size," said Jeremy Hall, a vice president of Patrinely Group, a Houston developer putting up the Residences at 2211 Camelback. The project sold out its 90 units at an average price of $1 million."I don't know how much deeper the market is," Hall said. "I do think there are projects in locations that are rather challenging."

Condo cores are emerging on Central Avenue and in the Camelback Corridor in Phoenix and in the city's downtown. New projects are on the way in Scottsdale 's downtown and in the Kierland area as well as in Tempe 's downtown and Town Lake neighborhoods.

Esplanade Place, the pricey Phoenix condo tower that opened in 2003, helped kick off the craze. A sampling of its residents: a top banker, the heads of a couple of local companies and at least three pro athletes. Keith Mishkin, a broker for Cambridge Properties, said the building contains a "who's who of Arizona business."Prices may seem excessive, especially to people who think of Phoenix as the place where, traditionally, plenty of houses were selling for less than $200,000. The price profile of the area, though, is changing. ."You have a tremendous amount of money in this Valley," Mishkin said. "Who do you think is buying all of these luxury homes?"

Nearby attractions vital Hovey, the Chicago-area developer, believes that the market will be strong for the next 10 years as long as the projects are built in neighborhoods with good restaurants, shopping or cultural attractions.

His Optima Biltmore Towers , under construction near 24th Street and Camelback Road in Phoenix , sold out at prices ranging from $350,000 to $1.75 million.

Debbie Nute of Phoenix was one of the buyers. The single mother and owner of a collection agency is selling her 3,800-square-foot house near Piestewa Peak . She will combine two Optima condos to create a 2,400-square-foot unit that will be near restaurants, movie theaters, shopping, coffee shops and other attractions. "There so many things I want to do other than manage my home," she said.

Jay Butler, head of the Arizona Real Estate Center at Arizona State University 's Polytechnic campus, wondered about the strategy of putting cheaper condos in the same building as the most expensive units. Hovey said that creates vitality in a project. Butler suggested that picky wealthy buyers may not agree."Would you build a $300,000 home next to a million-dollar home?" he asked. "Single-family builders wouldn't do that."

A certain lifestyle

Bob Normile is sales manager for the condos at Hayden Ferry Lakeside in Tempe , where four luxury buildings are planned. The first, called Edgewater, opens in March. Its prices average $800,000.Investor buying is capped at 30 percent in the first two Lakeside buildings. Other developers have placed restrictions on buying by speculators who want to sell quickly and reap the appreciation in price.Normile's buyers are doctors, airline pilots, ASU professors, mortgage brokers and engineers. He said about 85 percent are from Arizona with the rest from other states, mainly California . Also, demand from Canadian buyers is increasing."No one is moving here to retire," he said. "They are moving here for the lifestyle."


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