A few projects may have been canceled or, in the words of some developers, "repurposed." But it seems that the condo-sales market in Center City fared better during the 2006 real estate slowdown than markets did in Washington, New York, Boston, Miami and Las Vegas, according to economists, developers and local real estate agents.
Though final numbers for the fourth quarter are not available, anecdotal evidence indicates that the sales climate was less volatile and prices were more stable here than in some other major cities.
"The run-up in Philadelphia home prices over the last few years was not as dramatic as in these other cities, development was not as frenzied, and there were fewer speculators," said Lawrence Yu, an economist with the National Association of Realtors in Washington. "When the market changed, therefore, Philadelphia required less of an adjustment than these other cities to deal with it."
Condominiums in the planning stages here last year are under construction, while sales remain brisk at other projects, local observers say.
"There has been much improvement this week alone, which I believe is the result of pent-up demand from buyers who stayed out of the market in 2006," said Mark Wade of Prudential Fox & Roach, who specializes in low-rise condos.
At least one developer is set to convert rental units into for-sale condos in the under-$500,000 end of the market, which has the largest pool of buyers these days. J.A. Reinhold Residential has purchased the Lofts at Logan View at 16th and Callowhill Streets and Locust Pointe at 24th and Locust and will begin marketing units this spring starting in the mid-$200,000 range, president Marianne Harris said.
(Company principal Jeffrey A. Reinhold was chief executive officer of Historic Landmarks for Living, which converted factories, warehouses and other buildings to apartments in the early 1980s.)
"I think Locust Pointe, especially, will fly because it is just across the Schuylkill from Penn," said Fred Glick, a Philadelphia real estate and mortgage broker involved in condo projects with developers such as Miles & Generalis Inc.
On the eastern edge of Northern Liberties, which has felt positive ripples from the Center City boom, the developers of Bridgeman's View said Thursday that they had closed on property at 900 N. Delaware Ave. and plan to begin construction in the fall on a previously announced 900-foot tower with 600 condo units and ground-floor retail.
In general, observers of the local market said, midrange condos ($300,000 to $750,000), such as those in the Western Union Building at 11th and Locust Streets, have continued to sell particularly well. But the million-dollar-plus condo market took a hit because high-end suburban buyers looking to move into the city could not sell their houses for the kind of money they needed to do so.
That market has picked up recently, Glick said. "Why? No idea. Best guess is that the top-end buyers saw that the prices were high, waited for things to settle, and now, because of the [projects] that got canceled and prices have come down, the time may be right."
Some very-high-end projects, such as Scannapieco Development's 1706 Rittenhouse Square, continue to take reservations at a steady pace, since the $4 million to $12 million prices attract buyers with financial resources greater than just home equity. Groundbreaking is due in the spring.
Other high-end projects are proceeding as well. Ten Rittenhouse Square is under construction. The sounds of pilings being driven into the ground for the Residences at the Ritz Carlton reverberate in the SEPTA concourse adjacent to 15th and Market Streets. The Murano at 21st and Market Streets has risen several stories, Symphony House at Broad and Pine Streets will open in the spring, and the Ayer on Washington Square is moving along rapidly.
In the central business district and beyond, dozens of low-rise condos and conversions are humming along, too.
Among the projects canceled last year were Marina View Towers on the Delaware River north of the Benjamin Franklin Bridge and a 57-story condo tower at 15th and Chestnut Streets.
In December, South Bridge - the condo project designed by Venturi Scott Brown for the old John F. Kennedy Vocational School and administrative offices near the eastern end of the South Street Bridge - closed its sales office and returned deposits. The developer, Switzenbaum & Associates, declined to comment on new plans for the building "until after zoning," spokesman Mike Lizun said. Reports are that the gutted building could become luxury rentals.
Although Philadelphia condo sales slowed down in 2006 and units stayed on the market longer than they did the previous year, Washington, Boston and other cities are in much worse shape, Yu said. Many condo developers there are switching to rentals to keep projects alive until the market recovers, he said.
By contrast, Center City condo conversions the last couple of years have taken 1,500 apartments off the market, not including the two Reinhold projects.
Sales at the Residences at Dockside on Columbus Boulevard, which went condo in early 2006, have been slower than anticipated. Still, said Donna Bartynski, chief operating officer of Dockside's developer, the DePaul Group, "we remain highly confident in our decision to convert Dockside to condominiums."
"The Center City market remains solid and will continue to thrive over the long term," she said. "We're not in a rush to sell out at Dockside. It will happen when it happens."
Compared with other cities, Philadelphia's development pace has been conservative. By one estimate, 42 projects and 15,000 new condo units were proposed for Center City three years ago. The new reality suggests that 1,000 units will be added each year between 2007 and 2012.
"Fortunately for Philadelphia, we did not start many projects and, therefore, do not have to make the decision to switch to rental," said Allan Domb, a veteran player in condo sales and development here. "In fact, the benefit of not starting many of our projects will help tighten the market eventually and cause us to probably have the softest landing of many major markets."
Kevin G. Gillen, a Wharton School economist who tracks city sales and prices, said Philadelphia was better off than many comparable markets, especially Miami.
"Exotic subprime mortgages were originated in much greater volume in Florida than in Pennsylvania over the past few years," Gillen said. "Recent homeowners down there are, on average, much more highly leveraged, and thus at risk, than we are to even modest price corrections."
In Miami and Las Vegas, anticipated population growth will likely make real estate troubles short-lived, Yu said, but "that will likely not be the case for New York . . . and Washington."
Popularity is a big factor in the Center City market, Gillen noted:
"The fact that Center City is the one area of Philly that has grown in population would seem to be the primary justification for the downtown development boomlet."