Condo Developers Bet Cautiously on DowntownPROPERTY: Inventory Tight, But Financing Favors Apartments Monday, August 19, 2013
Developers such as Bosa Development Corp. are proceeding with plans to build new high-rise residential condominiums in downtown San Diego, while mindful that the market for them may not bounce back to its heights of the early 2000s.
Vancouver, B.C.-based Bosa Development plans to break ground in early 2014 on a 41-story, 221-unit condo tower, President Nat Bosa said. The project, currently known as “Broadway and Pacific” though not yet formally named, would be the first condo-only high-rise built downtown in nearly eight years.
“The fundamentals here are improving,” said Bosa, whose company has completed eight condo developments in downtown San Diego in the past 15 years.
Such optimism in the market is tempered, however, as developers don’t expect a quick return to the frenzied local market of a decade ago. Downtown saw an explosion of condo construction and sales that stretched from 2002 to 2006 before new projects dried up following a meltdown in sales that hit in 2007, a year before the nation’s larger economic downturn.
The fundamentals Bosa talks about aren’t rebounding “as fast as in San Francisco, where they’ve got more job growth in places like the downtown area,” he said.
Condos Are Coming
Bosa’s project, at Broadway and Pacific Highway, was approved by city planners last year and is in its final permitting stages. The first condo units would likely go on sale in 2016, with the project also consisting of 16,000 square feet of ground-floor retail and 419 parking spaces.
Another Vancouver company, Pinnacle International, recently began construction on a 40-story high-rise, expected to have 965 condos and apartments, at 15th Street and Island Avenue in East Village.
The developer has not finalized the mix of for-rent and for-sale units that will be available. Pinnacle has informed the city that it will be gauging local condo market recovery as the project nears completion, likely in late 2015, said Brad Richter, assistant vice president of planning for Civic San Diego, which oversees downtown projects.
The vast majority of the nearly 2,000 multifamily units under construction or in the pipeline in downtown San Diego are apartments, most of them in East Village and Little Italy.
Local market analyst Russ Valone said obtaining construction financing for condo projects remains extremely difficult, with lenders continuing to favor apartment developments despite recent improvements in the single-family residential building and sales markets.
Condo Resale Market Could Resurge
No big new projects have replenished the supply of condos since Chicago-based Equity Residential bought the 679-unit Vantage Pointe condo development in 2010 and converted it to apartments — erasing most of the available new-condo inventory.
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