Although two condominium units recently sold at 95 Audubon Court in New Haven, a lack of new development has caused the city’s condo sector to pale in comparison to its booming apartment market.
Despite state and national trends, condominiums apparently are being bypassed in New Haven’s busy residential market – a market that has seen a tremendous boom in apartment development and an increase in single-family sales.
Nelly Odenwelder, manager of H. Pearce Co. Real Estate’s downtown New Haven office, explained that while condominium sales are good, actual units are few and far between in the city.
“What we’re finding here in the downtown office is that New Haven seems to be experiencing a resurgence of sales, not only in residential homes but in condos as well,” said Odenwelder. “As quickly as condos are listed, they’re being sold.”
She said that is due, in part, to the limited number of units available. In the New Haven area, developers are no longer converting old buildings into condos and are instead focused on apartments.
“We just don’t see condos that often. A few years ago, builders were developing condos and elderly housing, and now we don’t see those complexes, and we don’t see factories being converted. It’s just not happening,” Odenwelder said.
“I suspect that this may have something to do with apartment construction in New Haven,” she added. “There seems to be enough apartments available now, but they had been a limited commodity, with New Haven being a university city.”
Odenwelder recently listed one-bedroom condo units at 95 Audubon Court that closed for more than their asking price. One unit listed at $295,000 sold for $310,000, and a second unit listed for $169,900 sold for $190,000
“We’re seeing places going for well over asking price,” she said. “There is just such limited supply. We would love to get condos downtown, but there’s just no one building them right now.”
‘Longer-Term Investment’
Apartment construction has flourished in downtown New Haven for the last few years. The Straus-Adler building on Olive Street, known as the Smoothie building, was once the home to corset manufacturers and has now been converted to luxury rental units. Odenwelder noted that rents are as high as $2,000 a month at the complex, which is managed by New London-based Accord Properties.
Another group of investors purchased 227 Church St., the former Southern New England Telephone building. The multi-story, 140,000-square-foot facility also has been taken off the office market and converted to apartment space.
In addition, 900 Chapel St. has 180,000 square feet of space facing the Yale green. Five floors of the building will be converted to apartment space while the rest will be left for office purposes.
Odenwelder noted that much of the apartment market is taken up by such large-scale projects. Rarely do renters find anything available in multifamily homes. The larger, conveniently located towers often ask higher rents but offer amenities such as fitness centers alongside their central location.
Also, because of the construction of the Q Bridge – the multi-lane Interstate 95 Quinnipiac River crossing – commuting is proving difficult for many residents of the area. Therefore, said Odenwelder, the decision is often made to remain in the downtown area rather than move out to the suburbs. With very few condos in the downtown, apartments look attractive.
“I myself moved into the downtown recently and find that it’s absolutely great. It’s not a city that closes up at 5 o’clock,” Odenwelder said.
There is no dearth of single-family homes in the area, as Yale University itself has a financing program that encourages employees and affiliates to purchase homes in the immediate area. The same is true for local hospitals, which often work with relocation specialists to find homes nearby.
“There are a number of reasonable homes in neighborhood areas,” said Odenwelder. “We have plenty of starter homes, but now we’re seeing the other end as well. Taxes in the downtown tend to be higher, but with low rates they’re more affordable. And with shoreline taxes so high, houses in the downtown are looking better.”
One notable trend in New Haven is that with low interest rates and a fair amount of housing product on the market, residents are making the jump directly from renting to owning houses, bypassing condos in the process.
“One reason people move into condos is because they can’t afford a house, but with rates as low as they are, people are jumping from renting to house buying,” said Rich Guralnick, a commercial broker in the New Haven area who agreed that apartments are booming in the city.
“The low rates have allowed them to move, and condos in New Haven are getting squeezed. People have the flexibility to move out, and with a strong housing market they’re either not going into condos or going right over them. That’s the formula for what’s going on here,” he said.
Guralnick explained that recently apartments have come in to fill a void in the downtown area.
“We’ve got the Smoothie building, 990 Chapel St., 227 Church St. and so on. And these are all being leased. They aren’t sale units, and they’re attracting a younger professional crowd as well as empty nesters from suburbia back into the downtown. There really is quite a bit of activity on the apartment side,” said Guralnick.
As to why the developments in the downtown are apartment-centered, he said that “with an apartment you’ve got control of the future. You’re controlling the whole property, and it’s a longer-term investment. The pricing will go up after you’ve made the capital investment, and rents over time will be higher and the return will be greater.”
For example, if it costs $100 per foot to build a condominium, and it sells for $120 per foot, the investor has made a 20 percent profit, but that’s the end of the deal. With apartments, the investor is banking that over time, the rents will increase to point where they’ll surpass the sale price. Ultimately, if the apartment owner wanted to sell the building, the return would theoretically be greater.
“These guys are looking to capitalize on investment with renting as opposed to selling. A condo is a one-time shot. If you run a good rental property, which these developers are aiming to do, the return upon sale should be great,” said Guralnick.
“These guys made a very specific choice to be downtown. Just look at the Smoothie building. It was very successful out of the block, and they pre-leased virtually 100 percent of the units before they even opened the door,” he added.
Prior to the recent boom of construction and renovation, there had been a vacuum of good apartments. However, it is now unclear how much the market will be able to absorb. The new developments are large in scale, and all priced in the middle to high range in terms of rents.
“We have several players betting that there is enough in the market to lease out all of these middle- to high-end apartments,” said Guralnick. “Hopefully there are enough young professionals who want to be downtown near the crowds. There is usually a built-in market around Yale and the downtown business district to feed these apartments. But it really remains to be seen if these bets are right.”
