Hoping to repeat his success with 1706 Rittenhouse Square Street, developer Tom Scannapieco will break ground Thursday on 500 Walnut, his 26-story, 38-unit high-rise condo building at Fifth and Walnut Streets, overlooking Independence Hall.
The $180 million tower, described as "ultra-luxury" because of its prices, unit sizes, and amenities, is the first condominium building to be constructed in Philadelphia since November 2007, when Scannapieco began building 1706 Rittenhouse.
As Scannapieco's first foray into the Center City condo market, 1706 Rittenhouse accounted for more than 90 percent of the city's sales above $4 million between 2010 and late 2013, when the building sold out.
To date, 21 of the 38 units at 500 Walnut have been reserved, said Paula Celletti-Baron, vice president of sales and marketing. A total of $24.5 million in sales contracts have been signed, she said; the remaining reservations are worth $53 million.
A March 2014 study by Econsult Solutions ranking the city's 34 high-rise condominium buildings said 1706 Rittenhouse was the only ultra-luxury building, averaging "1,210 adjusted dollars per square foot in sales across all of their units," more than 50 percent higher than the $728-per-square-foot average at another condo tower, 10 Rittenhouse Square.
The lowest per-square-foot condo price was $259, the Econsult study showed, while the median price of the single-family homes in the city was $104 per square foot.
The condos at 500 Walnut range in size from 2,700 to 9,100 square feet - twice the average unit size of any tower built during the last decade, the Econsult study showed. Prices range from $2.5 million to $17 million.
Based on the current projected sizes and prices, the average condo at 500 Walnut may cost at least $1,400 per square foot but probably more.
Those kinds of prices have been a long time coming for Philadelphia, said Kevin Gillen, chief economist at Meyers Research and senior research fellow at the Lindy Institute for Urban Innovation at Drexel University.
Before 2000, Gillen said, "we sold five or 10 dwellings a year at prices of $1 million or more. And absolutely nobody was building new units at all, much less new units for millionaires."
"We are now averaging nearly 100 sales of million-dollar homes and condos a year, only 15 years since we had practically none," he said. "That is remarkable progress."
Scannapieco's target buyers are local: millionaires, part of a group of 1,700 or so area residents worth $10 million and more, a survey the developer commissioned a few years ago showed. They travel, they talk to their friends, they see what ultra-luxury means in places such as New York City, "and they know exactly what they want," Scannapieco said.
They also plan to make these condos their principal residences - a sea change from a decade ago, when the city was just a pied-a-terre stopping point on the way to the Shore or Florida, he said.
"Primary homes in a building of like-minded units." Scannapieco said of 500 Walnut.
Developer Carl Dranoff, whose One Riverside luxury high-rise at 25th and Locust Streets breaks ground next month, agreed, saying that his building is designed to allow buyers to break through adjacent units to increase the amount of square footage.
"The 1,000-square-foot units that satisfied buyers of new construction before the housing boom went bust are just not enough for today," Dranoff said.
Privacy and exclusivity are perhaps the biggest selling points for buyers in Scannapieco's buildings. There are just 38 units at 500 Walnut, compared with 100 or more at most condo high-rises. Each floor of the tower will have no more than two units; most will have just one.
Buyers are so concerned about privacy that each has signed a confidentiality agreement with the developer.
When 1706 Rittenhouse was taking shape, Scannapieco was as much an unknown quantity to the highest-end buyer as what he would build was to Philadelphia's residential real estate market.
"No one had ever delivered 4,000 square feet of ultra-luxury in the $4 million to $8 million range," he said. "You could count $4 million sales on one hand."
After a delay of more than two years by a lawsuit that required him to move the building on the site, it took Scannapieco 1 1/2 years to come up with the necessary eight reservations to start construction.
Inquiries about a new building began as 1706 Rittenhouse was selling out, when 500 Walnut was a twinkle in Scannapieco's eye. They accelerated in March 2014, when he announced the new tower, expected to welcome its first residents in spring 2017.
Will two ultra-luxury buildings start a trend in Philadelphia?
"There is ultimately some limit to how many luxury units you can build for multimillionaire households," economist Gillen said. "Maybe we are close to our saturation point, but I'd rather be closer to that than back where we used to be."