Downtown Raleigh Condos

[JDC]

Someone should show that article to Frank Wittenberg (the "brains" behind the Durham Centre tower and it's fictitious twin, the Renaissance at Durham Centre). He's trying to sell luxury condos and penthouses for prices that would make your head spin. I know I'd like to pay $900,000 for a 3,000 sf space that overlooks the parking lots on Morris Street.

[yoga]

Someone should show that article to Frank Wittenberg (the "brains" behind the Durham Centre tower and it's fictitious twin, the Renaissance at Durham Centre). He's trying to sell luxury condos and penthouses for prices that would make your head spin. I know I'd like to pay $900,000 for a 3,000 sf space that overlooks the parking lots on Morris Street.

And what ChiefJoJo said. What's that phrase - use in moderation? Applies to housing DT as well IMHO. It ain't Manhattan.

[ChiefJoJo]

Good news on the DT affordability front.

[ncwebguy]

The only majority-affordable unit projects "downtown" that I know of are:

Existing - Sir Walter Hotel (Fayetville Street), Prarieview (on Wilmington north of Hargett), Carrige house (Boylan just north of Hillsborough), Glenwood Towers (across from 510), Parkview Manor and Capital Park (mentioned in the article, on Blount north of Peace College)

Under Construction - Carlton Place (SE corner of Bloodworth and Davie) and the new Chavis Heights plus senior housing (north of MLK, east of Chavis Way).

Almost all of these units fall outside of downtown proper, so is downtown really being served?. Is this enough inventory? I don't know. Do any firefighters, teachers and police officers live there? I am not sure. When given the choice, most live OTB or in Garner, Clayton, etc. and commute.

Which is a better deal for affordable housing -- making 10% of units affordable or the 1% payment to the affordable housing fund? These are the two options to get a density bonus in the Downtown Overlay district. I think it will vary project by project, but I have a feeling the vast majority will take the "easy way out" and pay the money as part of the cost of doing business downtown. Or the affordable units will only be a few hundred square feet interior units. It is hard to tell what is better "bang for the buck".

During the land use charette for sites 1-4, some people (including me) advocated for affordable housing at site 1, but either the moderators and/or city officials pushed the "this is the high dollar area, and affordable housing will be taken care of elsewhere." This felt like the "payment" method which creates more units, but removes them from the fabric of the downtown core.

[Subway Scoundrel]

I do think that many of these buildings that are written about will never get built. The ones that have strong backers and good marketing stand a better chance, but I do think many of these projects will take on many different faces before and if they are ever built.

I was talking to someone the other night that is really on the inside of all this and they were saying that projects like "Bloomsbury" have been on the table for a very ong time. I think that means that by the time we hear about them, they could be many months and even years in the works and then the real work of selling units and updating financing, etc. which could take years and often kills projects.

A prime example is The Metropolitan. I think a better example is the new Reynolds building. It has been worked for years that the average person on this board knows about and right now, they have a drawing and just a basic plan. I think it is still years away from being built if it will ever be built, especially if interest rates are rising, construction costs are rising and the market is starting to soften.

It is like baseball standings. The top team is being chased and it is easy to get knock out of the top position and end up in the cellar.

In short, in my opinion, several of these buildings are "pipe dreams." Again, just my opinion.

[Rufus]

To me, Raleigh is in a much better situation than the cities mentioned in terms of condo development. LAs Vegas has a problem with its numerous condo developments that have been proposed by celebrities, mega developers, and luxury hotel groups, when the ultra-rich hold a far less percentage of the country's population. Raleigh has developers like Hatem who see the need for some affordable condos. we dont have hundreds of condo developments like LV, Philly, or NYC. Our condo market is slowing down, but we still have not become overly saturated with condos.

[urbanvb]

But your housing market overall is very healthy and will continue to grow at a very healthy pace. And since the Raleigh market is undervalued folks moving from more expensive areas can get more house for their money.

[ChiefJoJo]

And since the Raleigh market is undervalued folks moving from more expensive areas can get more house for their money.

We might gasp at $300/sf, but a 2k sf/$600k condo with a great view, say in Site 1, will still be very affordable for an empty nest, baby boom couple moving from Boston, DC, etc., where they may have sold a home for $1.2M with $500k in equity. Then, it becomes very affordable.

When the tier 1 markets slow down (they have) and sellers can't command ultra-high prices on their existing homes and interest rates remain high, the slowdown will eventually make it here. Keep in mind that counteracting the real estate slowdown is the general trend towards urban living in the US, more people want to drive less ($3 gas), and the Triangle has some built in advantages... we have a fast-growing economy, a good job market, and a good climate (well, not today!), schools, and most of all condo demand remains unmet (especially the low-moderate priced market). God, if we could just get TTA rail off the ground, we'd have another ace in the hole.

Overall, I think the Triangle is well positioned to remain a strong market for condos. If I were to guess which project would NOT make it, I'd say Soliel Center. Most others are helped by their large mixed use components.

[RaleighRob]

I seriously don't think demand for downtown housing in the Triangle's cities are going to dip that much....but what the developers need to start realizing is that most of that demand is from people who cannot spend $300k on a two-bedroom condo!

Give us more moderately-priced apartments, modest condos/townhouses, etc, and you'll find the demand.

(Especially when you consider a huge proportion of the people who work in downtown Raleigh, for example, are government employees who aren't paid all that much!)

[Jones_]

The only majority-affordable unit projects "downtown" that I know of are:

Existing - Sir Walter Hotel (Fayetville Street), Prarieview (on Wilmington north of Hargett), Carrige house (Boylan just north of Hillsborough), Glenwood Towers (across from 510), Parkview Manor and Capital Park (mentioned in the article, on Blount north of Peace College)

Under Construction - Carlton Place (SE corner of Bloodworth and Davie) and the new Chavis Heights plus senior housing (north of MLK, east of Chavis Way).

Almost all of these units fall outside of downtown proper, so is downtown really being served?. Is this enough inventory? I don't know. Do any firefighters, teachers and police officers live there? I am not sure. When given the choice, most live OTB or in Garner, Clayton, etc. and commute.

Which is a better deal for affordable housing -- making 10% of units affordable or the 1% payment to the affordable housing fund? These are the two options to get a density bonus in the Downtown Overlay district. I think it will vary project by project, but I have a feeling the vast majority will take the "easy way out" and pay the money as part of the cost of doing business downtown. Or the affordable units will only be a few hundred square feet interior units. It is hard to tell what is better "bang for the buck".

During the land use charette for sites 1-4, some people (including me) advocated for affordable housing at site 1, but either the moderators and/or city officials pushed the "this is the high dollar area, and affordable housing will be taken care of elsewhere." This felt like the "payment" method which creates more units, but removes them from the fabric of the downtown core.

The sector that is not being served is the whitecollar/bluecollar bunch that make 30k-50k per year. You have your 600/month apartments(subsidized by the city)and then this jump to stuff with mortgages of 1000/month and more. I am thinking 40-45k a year is begging rent or mortgage of 700-800 a month and damn if that doesn't sit right on about the the average and median household incomes for this area. We have poor(working or not) and rich (by most standards on this planet) but the solidly middle class have essentially nothing to choose from....610 Hillsborough, The Atrium, the two apartment buildings near city market(over Angelos and over A. Brothers) and Person Point are all I can think of that fit this income bracket.

[cophead567]

I seriously don't think demand for downtown housing in the Triangle's cities are going to dip that much....but what the developers need to start realizing is that most of that demand is from people who cannot spend $300k on a two-bedroom condo!

Give us more moderately-priced apartments, modest condos/townhouses, etc, and you'll find the demand.

so very much agree

[DanRNC]

The sector that is not being served is the whitecollar/bluecollar bunch that make 30k-50k per year. You have your 600/month apartments(subsidized by the city)and then this jump to stuff with mortgages of 1000/month and more. I am thinking 40-45k a year is begging rent or mortgage of 700-800 a year and damn if that doesn't sit right on about the the average and median household incomes for this area. We have poor(working or not) and rich (by most standards on this planet) but the solidly middle class have essentially nothing to choose from....610 Hillsborough, The Atrium, the two apartment buildings near city market(over Angelos and over A. Brothers) and Person Point are all I can think of that fit this income bracket.

Well said.

[only]

I seriously don't think demand for downtown housing in the Triangle's cities are going to dip that much....but what the developers need to start realizing is that most of that demand is from people who cannot spend $300k on a two-bedroom condo!

It's not that the developers don't "realize" it. The problem is that people in Raleigh expect to be able to buy property in an urban area for $100/SF. It's just not going to happen. They cost $300/sf to build. Either you buy one of the small 600SF studio units (which people around here still complain are too expensive), or you live farther from downtown where land is cheaper, allowing lower densities and lower construction costs.

[ncwebguy]

We won't get moderately-priced apartments and condos downtown until the current density allowed downtown is adjusted. The Dawson at Morgan, 510 and 222 Glenwood, etc. are expensive because the number of units, regardless of size, was a limiting factor.

With the proposed changes mentioned in the link in post 5 of this thread by ChiefJoJo, and the bank loans for low-mid income housing developers being put together, there will be an opportunity for more moderately priced housing options. Will these these be offered as rental or owned properties will depend on market deman (which I think will be pretty high for this, since there is no available product) and interest rates (higher rates will scare off would be owners).

Overheated markets exist in places like Miami, SF, New York, etc. because bodies of water limit the amount of desirable land to build on. Raleigh and Durham do not have this problem. Chapel Hill, with with UNC taking up a lot of land close to the town center and restrictive zoning, has a land crunch driving up housing costs there.

I hope West at North, Reynolds Towers, Site 1, and other "still on the drawing board/not yet under construction" projects will be postponed to take advantage of the zoning changes and offer some affordable units.

[only]

We won't get moderately-priced apartments and condos downtown until the current density allowed downtown is adjusted.

You've been misinformed. Allowing for additional density bonuses has the primary effect of allowing smaller pieces of property to be developed. It could potentially push the price of land down some (only if the market softens), but it will have no effect on cost of construction. It actually could push the price of smaller parcels of land upward, since they'll have greater value to development.

It could allow for buildings to have many more small units than they previously would have had, but that's not affecting the cost/SF at all. It just puts more 600sf units on the market.

[ncwebguy]

Putting more 600 sqft units on the market will put downtown living within reach for more people.

A prime example would be Park Deveraux -- a good mix of larger units on the corners and smaller units in between. It was limited in height due to the number of units allowed (and for being the largest at the time condo project). Unfortunately, all land downtown will cost more, regardless of size, but that is due to the increased interest and activity in the CBD, not density bonuses.

Another example is two projects that have been rumored around here -- the block north of Progress Energy II and the Hargett/East/Martin/Bloodworth block. With increased density, devlopers do not have to make the majority of units 1000-1200 square feet and above. A large chunk of the young middle class needs only one bedroom or just a studio apartment. With more units available, the current low supply of small units that is driving prices up will be less of an issue.

[Jones_]

It's not that the developers don't "realize" it. The problem is that people in Raleigh expect to be able to buy property in an urban area for $100/SF. It's just not going to happen. They cost $300/sf to build. Either you buy one of the small 600SF studio units (which people around here still complain are too expensive), or you live farther from downtown where land is cheaper, allowing lower densities and lower construction costs.

You're confusing two separate issues......land price and cost of construction....in the end acceptable and established profit margins have more just as much to do wit what these places cost.....I'll never forget Person Pointe first being marketed at around 165k per unit around the same time Park Deveraux was selling at 180k for a similar sized unit. When the recession hit in 2001 the Person Pointe prices dropped in one day to 134k. WTF? (I won't put that a license plate....promise...to those that read the paper today)......so a 25% drop in price and I assume no worse than a break even situation....that gives me a hint that most of the $300/sf places could easily come down to $200/250....also realtors.....screw their 6%...property can change hands just fine without them. That some units at Paramount went from $220/sf to $300/sf without ever being occupied tells me we are all being duped regarding what units could/should sell for downtown....hint #3 is that even at 2 million (around that figure) an acre, land is a small part of the cost of say the Hudson, where the total spent was $20million (city website) land is a mere 10% of the total project cost...I call total bs when a developer trys to use that as a reason to go from 150/sf condos to 300/sf condos. Peace.

[only]

in the end acceptable and established profit margins have more just as much to do wit what these places cost

... and you would be wrong. The assumptions you draw about the actual cost of these projects from the fluctuations in asking price only have any relevance inside your own head. You act as though it's a crime for developers to turn a profit now and again... when I'm sure you don't shed any tears for the projects that go bankrupt and die.

You've clearly never looked at the pro formas for any of these projects. The jumps in logic that you make in this post alone make it apparent that you know little about construction, development or real estate. The cost of land has nothing to do with what gets built on it? Geez. Thanks for playing.

[dmccall]

Let's say that costs and market miscalculations cause all but 3 of the new big projects to be scrapped, what 3 would you hope stay as planned? Here are mine:

* RBC

* Site 1

* Site 4 (Lafayette)

[Jones_]

... and you would be wrong. The assumptions you draw about the actual cost of these projects from the fluctuations in asking price only have any relevance inside your own head. You act as though it's a crime for developers to turn a profit now and again... when I'm sure you don't shed any tears for the projects that go bankrupt and die.

You've clearly never looked at the pro formas for any of these projects. The jumps in logic that you make in this post alone make it apparent that you know little about construction, development or real estate. The cost of land has nothing to do with what gets built on it? Geez. Thanks for playing.

Materials, labor (contractor and designer), and land comprise "construction cost". Add the profit markup, composed of realtors fees as well, and you get your final sales price for new construction. My high school drafting class taught me that much. Density may alter the materials needed to build something due to structural design requirments and minor adjustments according to local building codes, but your statement that density=lower construction cost is a leap that is not necessarily true. I think my logic is quite reasonable when a property drops in asking price 25% in a single day, a drop made by a 'reputable' realty firm, such as YSU is, I think it is quite fair to say that they did not approach their investors and suggest to them they should take a loss....I assumed a huge misjudgement in the market on their part with an asking price of 167,000 for 1150 sq/ft when it was lowered to 134,000 for the same 1150 sqft. I am not a residential construction estimator but do have access to total building costs of projects and purchase price of the land (assuming there were no cash returns behind the scenes which happens). So we have a stated project cost of $25,000,000 to develop the Paramount(via the City website). This should be the package price including all permit, design and construction fees plus the $1,933,000 paid for the 1.05 acres of land (via the Wake County website). Keep in mind the original sales brochures touted prices around $220/sqft for Paramount. Most of the units have been sold and few have sold more than once....units average around 1200-1250 sq/ft with sales prices hitting around 270-275 sq/ft each (ranges from 240-300). Something around 27,000,000 total sales jives nicely with the stated $25,000,000 to develop the project leaving a profit of $2,000,000 for developer and investors (bank, wealthy friend, manager of big retirement portfolio etc.). The question of land costs relevant to total costs is easy to disect in this situation...suppose land doubled to $4M an acre....(a $2M increase), the 81 units and approximate total square footage of 100,000 sq/ft would require an increase of $20 a square foot to offset this increase, or $20,000 for a 1,000 square foot condo. What we have seen in Raleigh is places like Park Deveraux at roughly 160-180 sq/ft at initial sales shoot up to $280 sq/ft at the Paramount.....certain construction materials like concrete, steel and oil based materials like PVC and asphalt have gone up by 50% but labor has held fairly constant. I stand by my 'back of the envelope' assertion that 200-240 sq/ft is still attainable and that the consumer is being sold pretty brochures and appliances at prices they should not have to pay. It is certainly not a crime to make a profit, but a cursory look at Person Pointe and now the Paramount does not need a look at the detailed proformas to detect failed (Person Pointe) and successful (Paramount), gauging of demand, assessment of the market...price gouging? whatever you want to call it, its the same pony show....

[ncwebguy]

I think RBC could lose or reduce the condo piece and still be a good building, so it would not make my "saved" list. If Lafayette could survive as botique hotel/ground floor restaurant/coffee shop/fitness center, then it does not need to be "saved" either. 222 is under construction, so I assume it doesn't need "saving" either.

To keep condos spread out across downtown Raleigh, I would want to save

- Site 1

- Reynolds Tower(s)

- West at North

With West at North having a fair number of smaller, affordable units by way of density bonuses.

[only]

Density may alter the materials needed to build something due to structural design requirments

DING DING DING! You're sooo close, but you still missed the answer. When density drops below a certain threshold, you can also use *cheaper* materials.... like, say..... wood. Wood frame construction is considerably cheaper than steel or reinforced concrete up to a certain threshold. For the purposes of our discussion, that threshold is about 3-4 stories.

So how does the cost of land affect this? You need to find land away from the city center that is sufficiently cheap to allow you to develop it only 3 stories high. If you're paying $2m or $3m per acre, you've long since crossed the threshold requiring midrise construction methods. But if you're paying $200k per acre, then you might be in business.

What we have seen in Raleigh is places like Park Deveraux at roughly 160-180 sq/ft at initial sales shoot up to $280 sq/ft at the Paramount.

certain construction materials like concrete, steel and oil based materials like PVC and asphalt have gone up by 50% but labor has held fairly constant.

$180x1.5 = $270. And that's very conservative.

The cost of copper is up 100% on the calendar year. Concrete is up +20% in the 12 mos. The subcontractor market is tight, pushing labor prices up. Do I need to continue? You can't compare costs between buildings built in 1999 or 2000 with something built last year and predict what it costs to build today. Hell, you can't even compare costs between two projects with 3mos between their construction starts that are going up right now... might as well be pissing in the wind. Look at contractors. These guys are having a hell of a time bidding jobs now. Their suppliers tell them they can't guarantee prices more than 30 days or 60 days out... how are they supposed to predict the cost of concrete in a building that'll take 12 mos to go up, and won't break ground for another 3 mos? And you think you can figure out what condos should cost from what's printed on the Wake County website? Good luck with that.

[JDC]

Overheated markets exist in places like Miami, SF, New York, etc. because bodies of water limit the amount of desirable land to build on. Raleigh and Durham do not have this problem.

True Raleigh and Durham don't have that problem, however, on an interesting side note, municipalities that aren't surrounded by water, etc. are likely more prone to sprawl. America's oldest cities are largely developed near the ocean or rivers (New York, Seattle, Memphis, St. Paul) given the chief mode of imports and exports at the time being waterways. Consequently, many of these cities are denser, and often more walkable. "Newer" cities have grown as a result of the railroads and later, the highways, lending themselves to sprawl. Consider where the nation's ten largest cities are today compared to where they were 50 or 100 years ago.

Anyway, you can see that some of the faster growing metros are these "newer" cities, nowhere near any bodies of water to speak of, and in keeping with the topic at hand, must have something to do with the price of housing.

[Jones_]

DING DING DING! You're sooo close, but you still missed the answer. When density drops below a certain threshold, you can also use *cheaper* materials.... like, say..... wood. Wood frame construction is considerably cheaper than steel or reinforced concrete up to a certain threshold. For the purposes of our discussion, that threshold is about 3-4 stories.

So how does the cost of land affect this? You need to find land away from the city center that is sufficiently cheap to allow you to develop it only 3 stories high. If you're paying $2m or $3m per acre, you've long since crossed the threshold requiring midrise construction methods. But if you're paying $200k per acre, then you might be in business.

$180x1.5 = $270. And that's very conservative.

The cost of copper is up 100% on the calendar year. Concrete is up +20% in the 12 mos. The subcontractor market is tight, pushing labor prices up. Do I need to continue? You can't compare costs between buildings built in 1999 or 2000 with something built last year and predict what it costs to build today. Hell, you can't even compare costs between two projects with 3mos between their construction starts that are going up right now... might as well be pissing in the wind. Look at contractors. These guys are having a hell of a time bidding jobs now. Their suppliers tell them they can't guarantee prices more than 30 days or 60 days out... how are they supposed to predict the cost of concrete in a building that'll take 12 mos to go up, and won't break ground for another 3 mos? And you think you can figure out what condos should cost from what's printed on the Wake County website? Good luck with that.

I am aware of all these things, I have seen steel and concrete suppliers not guarantee a price byeond 24 hours......with that in mind is this too much of a leap---->midrise is part of the problem....lots of people on this forum have noted that HIGH-rise condos would/could make them more affordable.....starting from 5 stories though......sticks to four stories vs. reinforced concrete to 5 stories....you get 25% more units but have to almost double your construction costs to get them.........but mostly the developers around here simply aren't interested in keeping total cost down....they launch into presales with some drawings and some pretty blonde realtors....once they get 50% they get their financing......5 stories and concrete vs. 4 stories and sticks.....they don't care......regardless of the price of the land this pivot in construction materials jumps Raleigh prices to the levels we are seeing because we are midrise everywhere.....anyone going below 5 stories? Tucker St has talked up lower prices with stick construction...first since Founders Row and St. Marys Townhouse....anyone interested in going higher to bring costs back down? RBC will be interesting and maybe Reynolds, although the Reynolds reportedly were talked out of condos in the 150k range by their architect just because they were convinced our high end market was not tapped out yet. That word from a potential buyer at the low range. And a word on land....its pretty clear that land prices and their effect on prices would be alot less if these stupid skyscrapers would stop going up and paying stupid amounts for land in a sea of parking lots.....as soon as First Union(now Wachovia) and Two Hannover went up every grandmothers land trust downtown decided to hold their land for their 2 million dollar payout.....an extra million bucks spread out over 29 floors of rent is easier to absorb than in 4 stories of stick built condos....but hey, everyone wants their freakin' iconic buildings but can't understand why land is getting jacked so high and adding to the affect of midrise concrete and steel condo prices so much.....oh, the pretty blonde realtors...their cut is 6% if you leave your agent at home.........are you a developer, architect or realtor....this is as ridiculous as the arguments about shopping malls....

[DwnTwnRaleighGuy]

Ok, so I admit it, I watch HGTV!

And while watching an episode of House Hunters last week it appeared to me that the prices for condos in Downtown/Midtown Atlanta are much cheaper than those in downtown Raleigh! Why is this? The ones that they showed in Atlanta were very nice, all in mid to tall high rises, some had granite countertops, tall ceilings and all were around 900 sq ft. with pricing that me blew me away averaging around $175,000.00!!!!!!!!!!!!!!

I would think that you could build and sell out of a lot of those buildings in downtown Raleigh?

And yes, I know that there are more expensive ones in Atlanta as well!