WASHINGTON, DC-New apartment developments in the DC area have been clocking in at 100 plus units. It indicates strong demand for multifamily product, of course—but does it also portend another wave of condo conversions down the pike? Probably not. So far, the financials for conversion are in the 60-unit to 100-unit range, Delta Associates’ William Rich tells GlobeSt.com. “In the short term we don’t see the pipeline getting any larger in a significant way. It takes a lot of time for projects to move along pipeline and financing is still difficult,” he says.
There is one exception, though: CityCenterDC, a mixed-use project in the heart of the city being developed by Hines, Archstone and TFI US Real Estate Fund.
The project will consist of 520,000 square feet of office in the first phase, 190,000 square feet of retail, 458 apartments and 216 condos. Another 90,000 square feet of retail and a 370-room hotel is part of the second phase.
Hines began marketing the luxury condos at the project at the start of the year and while the company declines to discuss any figures, says interest in the units is strong. The company began working on the project in 2002 when the condo market was robust, Howard Riker, managing director of Hines, tells GlobeSt.com. “Its scope was established in that time frame. We were very careful when thinking about the mix of condo and apartments and the optimal number of units that the market could support.” The company determined that two buildings with roughly 110 units was manageable—and despite the sea change in the local economy, still feels it made the right decision.
“In the aftermath of economic downturn, the pipeline for residential product shut down completely and because we were seeing continued job growth in DC we knew that as the market worked through the existing inventory there might be a supply side constraint,” Riker explained. Capital has been more oriented to apartments and, as a result there are few condo units available in the city.
Meanwhile the number of new apartment buildings coming to market are not likely candidates for conversion, Rich says. “Most of the apartment buildings built have 100 to 200 units. That is too large for conversion.”