Developer John Wareck opened New Haven’s 13-loft Johnson Simons condominium project in April 2006. The city’s condo market has enjoyed more success than the state’s of late.
Amenities.
That looks to be the watchword in a Connecticut condominium market that took its biggest hit since 1990. The total number of sales declined 12.06 percent to 15,051 in 2006, according to statistics from The Warren Group, parent company of The Commercial Record.
That’s the fewest condo sales the state has seen since 2003, and the largest percentage drop in the number of sales since 1990. Sales slipped 0.29 percent in 2003 to 14,967 units, and plummeted 34.68 percent in 1990 to 5,027.
So to attract buyers, developers are looking beyond the bedrooms, kitchens and baths.
Targeted communities, such as those on a golf course or shoreline for senior citizens, or in the middle of an urban center for young professionals, are using amenities to set themselves apart, according to Barbara Pearce, president and chief executive officer of North Haven-based H. Pearce Real Estate Co.
“That’s what [developers] know is going to do well,” she said. “It’s a natural progression of the demographics.”
Active, empty-nester baby boomers are more likely to go somewhere they can play golf or be near water, while echo boomers like to be downtown – near work, transportation hubs, restaurants and city life, she said.
And while that’s encouraging news for developers, Realtors and anyone trying to sell a condo, the 12.06 percent drop in sales means some condo units are not moving.
The condos not selling well are those found in a suburban setting and lacking the aforementioned amenities, Pearce said.
Steve Witten, senior director of the National Multi Housing Group at New Haven-based Marcus & Millichap, agreed.
Apartments-turned-condos conversion projects in locations that don’t have anything particularly special to offer – such as downtown living or direct access to a golf course – are the ones struggling the most.
The cooling market, in turn, could slow down future condo projects.
“We’re seeing some condo construction, but it’s minimal,” Witten said.
Instead, some projects under construction that were designed to be sold as condos are becoming apartment projects, he said. A couple projects under way in Hartford already have opted to open as apartments instead of condos, he said, noting, “I think you’re going to see a lot more of that.”
“The market is not strong enough to command premium dollars,” Witten added. In opening the properties as apartments, he said, the owners can apply the rent monies toward operating costs and allow appreciation values to climb while waiting for a stronger condo market.
“What you’re looking at is your equity,” he said.
Although fewer units were sold in 2006, the median sales price did manage to climb 3.78 percent over 2005 to $192,000, according The Warren Group’s statistics. But the gain in 2006 looks paltry compared to the prior five consecutive years of double-digit percentage growth in the median sales price.
The 3.78 percent climb in 2006 was the smallest since 1998, when the median sales price inched up 2.94 percent to $87,500.
‘It’s Just Growing’
Unlike falling condo sales, apartment sales were flat in 2006, while the dollar volume increased 37 percent over the 2005 level to $689.8 million, according to research by Witten and his partner Victor Noletti.
The two recently wrapped up deals including 114 units in Montville for $7.2 million, 151 units in New Britain for $7.4 million and 120 units in East Haven for $10.2 million.
To find growth like that in the condo market, some developers are turning to higher learning.
Developer John Wareck of Wareck Real Estate in New Haven credits the effect of having Yale University – and its 5,300 undergraduates, 6,100 graduate and professional students and 3,300 faculty members – as the catalyst for a “bullish” condo market in downtown New Haven.
In a chicken-and-the-egg sort of scenario, entrepreneurs eyeing the school’s captive audience started bringing restaurants like the Caribbean-flavored Roomba or the contemporary-styled Zinc to the downtown, he said.
As those first restaurants took hold, more started popping up, Wareck said. Other downtown amenities, such as the Yale Center for British Art, drew more people – including a growing number from outside New Haven – to the downtown, he said.
“As far as downtown New Haven goes, it’s just growing,” Wareck said. “People want to be downtown. It’s the amenities.”
His company opened the 13-loft Johnson Simons condo building in New Haven’s downtown – a redevelopment of the former Simons Jewelers building and J. Johnson & Sons Department store – in April 2006, and Wareck plans to open another 14-unit project in the fall of this year just a couple blocks away.
The units at Johnson Simons range from $500,000 to $800,000, and Wareck sold two units last week alone, including a penthouse unit, bringing total sales at the site to five condos. Getting the condos to market involved overhauling the buildings, which had stood vacant for 10 years, from their prior retail uses.
While Wareck said he recognizes that the statewide figures for condo sales are down, he added, “Downtown New Haven is different than the rest of the market.”
