Center City condos thriving
Sales have stayed stable, and value has appreciated.
If you're looking for property that hangs on to its value even when the real estate market twists and turns, a condominium in Center City may be what you seek. Two decades of sales downtown suggest that as a long-term investment, condos are remarkably bulletproof.
"Center City real estate has appreciated an average of 15 percent a year since 1985, greater than the inflation rate," says Center City District executive director Paul Levy. "Condos aren't something that you own for just 15 minutes. They are long-term investments with a proven record of appreciation."
That's consistent with the trend nationally, says Mark Zandi, chief economist for Moody's Economy.com. "Downtown condo markets across the country have held up better than I would have expected," he says, "given . . . demand and despite the glut of space."
In the first quarter of 2008, data from the City Recorder of Deeds Office show, condo sales throughout Philadelphia stayed about even with the same quarter last year, at more than 500 units.
Thirty-two condos in Center City sold for $1 million or more in the first quarter, the data show. The most expensive went for $4.7 million at the Ayer on West Washington Square. For all of 2007, 115 condos sold for $1 million or more; in 2006, 49 sold. (More $1 million-plus condos are being built now, thus sales numbers for them are increasing.)
Currently, there are about 10,000 condo units in Center City, more than twice the 1990 number, because of new construction and conversion of nonresidential buildings encouraged by tax-abatement programs enacted by City Council in the late 1990s.
Hundreds of units are still in the pipeline. And despite slower sales regionally and in the city's single-family-home market, most developers - especially those with high-rise and higher-end projects - appear to be hanging in.
Among such projects are 1706 Rittenhouse Street, 10 Rittenhouse Square, the Murano, and Residences at the Ritz-Carlton. Developer Carl Dranoff plans to break ground June 19 for 777 South Broad, a 146-unit, five-story condo building.
Not surprisingly, given the overall real estate market, some condo plans have not come to fruition. More than a dozen projects have been canceled, delayed or postponed over the last 18 months.
Newly built or not, Center City's condos continue to draw a mix of buyers.
"You hear everyone saying this is an ideal market for first-time buyers, and it is," says Matthew Young, 24, an engineer who has just closed on a $410,000 condo at Seventh and Bainbridge Streets.
"I was fortunate that, thanks to my savings and my family, I was able to put 60 percent down," says Young, who searched for a month before finding what he wanted.
With 73 percent of Center City residents working downtown, Levy says, gas prices may prove as big a boost to real estate there as nightlife and cultural opportunities. "It soon may be cheaper to fly home to the edge of the suburbs," he says.
"I didn't want a car," says consultant Gail S. Bowers, 46, who with her partner, Temple professor Barry Vacker, 51, has a contract on a 1,000-square-foot studio at 1352 Lofts on South Street near Broad. Prices there range from $349,000 to $1.4 million, says Kathy Conway of Prudential Fox & Roach.
Vacker, an architecture buff, wanted something built in the 20th or 21st century, and Bowers wanted a low-rise. Both wanted "fabulous space with a lot of light, and we got it," she says.
There was a time, from 1987 to 1997, when condos in the city lost value. But data compiled by Kevin Gillen, a research fellow at Wharton and vice president of Econsult, a Philadelphia economic-forecasting service, show prices rising consistently since.
Through the fourth quarter of last year, prices appeared to be holding, or at least not falling precipitously, Gillen says. And during the first quarter of this year, which he describes as one of the slowest winters in years, condos were moving.
Prices of comparable units in older buildings show substantial gains over the last decade, without factoring in inflation. For example, a one-bedroom in Wanamaker House sold for $92,500 in 1997, and a comparable unit sold for $365,000 in 2007, according to records kept by Center City condo developer/Realtor Allan Domb.
A Society Hill Towers two-bedroom that went for $122,000 in 1997 sold for $550,000 last year. A one-bedroom in Academy House that brought $72,500 in 1997 sold for $310,000 last year.
If the 1997 prices were adjusted for inflation and condo values had been flat over those 10 years, the one-bedroom at Wanamaker House would cost $119,500 today, and the two-bedroom at Society Hill Towers $157,605.
In the first quarter, with 47 units claimed, the Arts Condominium at 13th and Locust Streets was the city's best seller, deed records show. Of its 372 units, 371 have settled, says property manager Mary Galgon. Remaining is a $319,000 one-bedroom penthouse.
John Featherman, an agent with Prudential Fox & Roach, owns several condos at the Arts, sold about a dozen, and leased about 25 for clients.
"Where can someone have bought a studio for around $100,000 to $135,000?" Featherman asks. "The units are small and they generally have mini-kitchens, but you'll take these units over a dorm."
The quarter's second-best seller was Parc Rittenhouse at 17th and Locust Streets, with 36 condos sold. Of its 260 units, 153 have closed, and 42 are set to close over the next 120 days.
Former New Jersey Superior Court Judge Steven Fluharty and his wife, Joan, have lived in their two-bedroom, two-bath unit with den at the Western Union Building at 11th and Locust Streets for about a month and are "just loving it," he says. "Everyone said Rittenhouse [Square], but we wanted something close to everything but quieter. This was it."
So far, just under 70 of the building's 99 units, which go for $400,000 to $1.5 million, have sold, and more than 40 have settled, says Bruce Lang of Coldwell Banker Realty Corp., who is handling sales.
For a growing number of buyers, the Center City condo is a second home. Like Curtin and Lisa King of Northeast, Md., who in March bought a one-bedroom unit at the Winne on Front Street for about $379,000.
Both are in their 40s and are in marketing.
"My husband calls [the condo] an 800-square-foot addition to our home," she says. "I had sold some real estate and we wanted to find a place to put the money to good use."
They chose Philadelphia, "because the housing market is strong and healthy," she says. "We are planning to spend a lot of time here."
Sale Prices of Similar Units in Phila. Condo Buildings
SOURCE: Allan Domb Real Estate
Best-Selling Condo Projects
SOURCE: Philadelphia Recorder of Deeds, First Quarter 2008