February 13, 2009 - 285 Columbus Lofts, Boston MA

Pace of city condo sales cools down

High-profile projects sell about 1 unit per month

Pace of city condo sales cools down

High-profile projects sell about 1 unit per month

Remember how those posh new condo projects were all the rage? Not anymore.

New condo buildings in downtown Boston are selling, on average, just over one unit a month, according to a new report by PrimeTime Communities, a real estate research and marketing firm that focused on 10 high-profile projects. That's down from roughly three to four units sold each month during the condo market's boom period, said Thomas Skahen, cofounder and partner of PrimeTime, which just issued its 2009 Prime Report - opens PDF.

It could be worse. Out in the suburbs, condo projects are selling, on average, just one unit every other month.

Like sellers of single-family homes, condo developers are finding the credit crisis has made it more difficult for buyers to qualify for mortgages.

"There is no credit. It has slowed down the sales pace considerably," Skahen said. And for those who can get loans, "you will have to put 10, 20, 25 percent down. That knocks a lot of people out of the market."

The pace of sales varied significantly at the 10 projects PrimeTime reviewed. One project, the 285 Columbus Lofts, averaged almost four sales a month. Curtis Kemeny, chief executive of developer Boston Residential Group, said the sales pace at 285 Columbus dropped off last fall at the depths of the nation's financial crisis, but has picked up in the last few weeks. Just five of the 63 units remain unsold. Five units have been sold since Dec. 31 and are not included the report.

"It's a great location," Kemeny said of 285 Columbus, at the intersection of Berkeley Street, where the South End and the Back Bay meet.

Battery Wharf

Macallan

Boston InterContinental Residences

Meanwhile, Battery Wharf, a luxury project on the waterfront in the North End, is selling roughly one unit every other month. Others fell in the middle. The InterContinental, the stylish Macallen Building in South Boston, the South End's Penmark, and FP3 in Fort Point averaged about one to 1.6 sales a month.

"It's been at best, moderate," said Robert Walsh, one of the developers of the Penmark, where units start at a half-million dollars and top out at just over $1 million. "Until we have some good news stories, people will be reluctant to invest."

After marketing units for more than a year, Mitchell Properties has sold nearly all of the 84 condos at 700 Harrison, a luxury complex in the South End. Still, that contrasts with the boom years, when new projects were practically sold out by the time they opened their doors, said Mitchell Properties president Bart Mitchell. "It's always been one or two units a month," he said. "It's been pretty steady."

In some cases, developers have been able to boost sales by teaming up with banks to offer better financing.

The developers of the 1850 in the South End have an agreement with Wells Fargo under which qualifying buyers can put 5 to 10 percent down. Roughly 20 units, or 33 percent of the building, have sold, and another 10 are under agreement.

Lyndsey Wakeham, director of sales at the 1850, cites the Wells Fargo agreement as a factor in a recent uptick in sales, with two units slated to close this month and three more under agreement

"Some people . . . are hitting that 20 percent requirement and just don't have the money and are looking at other options," she said.

One place the slowdown hasn't hit developers so hard is price. Many are able to hold out, or are selling units at levels they had targeted.

At Battery Wharf, for example, units are selling for more than $1,159 a square foot, above the development's price objectives, said downtown condo broker Kevin Ahearn, president of Otis & Ahearn, which represents the project.

"I was floored when I saw the Battery Wharf numbers," said Ahearn, who sees a similar phenomenon at two other properties his firm is marketing, the InterContinental and the Penmark.

Oddly, developers of the new buildings may be helped by the gloomy economy in one respect: It's keeping other developers from starting new projects, putting a cap on the number of new luxury units available now. The number of residential building permits issued in the city fell by half during 2008, to 513, according to the Prime Report.

Skahen predicted that most of the 10 projects at the heart of his study will sell out, even at the reduced pace, over the next few years. Moreover, downtown projects may be benefiting at a cost to competitors in the suburbs, as the few buyers out there now may see this time as opportunity to find something in the city.

"There is definitely a flight to quality when times are tough," Skahen said.

Original Story - Boston Globe