Charlotte’s apartment market has come back from the recession’s aftermath stronger than ever before, but another staple of the boom times is still missing: Condominiums.
Even though condo projects aren’t sprouting out of the ground like apartments, experts and developers expect them to return. Some of the high-end apartment projects being built now could be converted to condos in a few years as market conditions change – the opposite of the condos-to-apartments conversions that followed the recession.
“It’s coming,” said Fitzhugh Stout, an appraiser and head of Integra Realty Resources’ Charlotte office. He said he knows of three projects in the planning phase, but couldn’t give details because they’re not yet public.
Many of the high-end apartment complexes under construction or planned now are being built to “condo standards,” their developers say, with high-end finishes such as granite or quartz counter tops and top-quality appliances. That would make them easier to convert to for-sale units.
“You could see conversions like crazy,” said Stout.
Before the downturn, developers were extremely bullish on condos, with 20 high-rise projects announced for Charlotte’s center city alone in the mid-2000s. But many of those projects ran into trouble and were canceled, or were converted to rental units to try and salvage them.
Some condo projects, such as the Catalyst, next to Romare Bearden Park on South Church Street, converted to apartments early on in the downturn. The most high-profile condo tower, 51-story luxury high-rise Vue at Fifth and Pine streets, went through foreclosure and a series of lawsuits after only 16 buyers closed on their condos in the 409-unit building.
The Vue was acquired by new owners, converted to apartments, and is now 95 percent leased. The building is booming, along with the rest of the city’s apartment market. Developers are building a record number of apartments in Charlotte, with 10,400 new units popping up in and around uptown.
David Furman, founder of Centro Cityworks, developed high-profile condo projects uptown during the mid-2000s, including the 28-story Trademark building at Trade and Poplar streets and the 17-story Courtside building near Time Warner Cable Arena.
During the downturn, some of his condo projects were converted to apartments, such as Quarterside uptown. But he’s optimistic again.
“If I could find the right site for the right type of project, I would step back in,” said Furman. “I think the condo market is about ready to come back.”
Still, there are challenges: Financing for condo projects is hard to come by right now, developers say, and millennials – burdened by high levels of debt and wary of buying in the recession’s aftermath – seem much more inclined to rent.
He said one of the major reasons more young people are renting apartments instead of buying condos has been because the previous ease with which people bought and sold condos largely evaporated.
“In the old days, there was this instant appreciation,” said Furman. Condos were so easy to sell that the young professional workers developers were catering to didn’t view them as a burden, Furman said.
“Back in the day, you could sell a condo in an afternoon,” said Furman. “The 2008 recession kind of blew that up. Rather than being a savvy investment, (a condo) became baggage.”
Now, the same workers in their 20s and 30s who developers thought would snap up condos in the 2000s clearly prefer to rent – at least for now, Furman said.
Building permit numbers show how sharply the condo construction market has fallen off. According to Mecklenburg County statistics, 56 applications for condo building permits were filed in the 12 months ending in February, the most recent data available.
That’s down from about 2,500 during the same time in 2006-2007, at the height of the prerecession building boom.
But some of the thousands of apartment units under construction could well end up as condos.
That’s what Porter Jones, head of DPJ Residential, is considering at a 97-unit apartment project he’s planning to build at Central Avenue and Westover Street in Plaza Midwood. The project is being financed as apartments right now, but Jones said he thinks demand for condos in two years, the earliest his project will be finished, might be strong enough to justify converting the units.
“I believe there’s a huge demand for condos,” said Jones. The problem, as he sees it, is that it’s still hard to get lenders to finance condo projects.
“The financing right now for condos is extremely difficult,” said Jones. “If I can’t get the financing, it doesn’t matter what the demand is.”
Other developers are also building with the possibility of condo conversions in mind. Crescent Communities, for example, has noted that its new apartment development planned for 36th Street in NoDa could also include condos.
So when people wonder if we’re vastly over-building apartments, remember: Those big new buildings all across town might not all be apartments forever.