With Wave Of Large D.C. Condo Projects, Developers Hope To Pull Demand From Apartment Buildings
The D.C. condo market has experienced years of undersupply, with developers favoring the booming rental segment. But large projects under development are preparing to deliver a host of new for-sale options for D.C. buyers.
Roughly 1,750 condo units are expected to begin sales in the District this year, according to residential sales agency Urban Pace. The supply surge is being driven by large projects, with 11 condo developments of more than 50 units launching sales this year, the most large-scale projects to hit the market in the same year in at least a decade.
Population and job growth has boosted demand in D.C.'s condo market, but supply has continued to lag behind, leading to underwhelming sales volume. Urban Pace President Clint Mann expects the onslaught of new supply this year will be quickly absorbed and lead to higher overall sales volume.
"Part of the reason we haven't seen more sales in recent years is lack of inventory," Mann said. "This year we're going to be delivering a lot of product for the first time in a long time, giving the market options. I think we're going to find some of the challenges that faced our market from an undersupply standpoint and lack of inventory are going to be solved."
Before the recession, developers often built condo projects with hundreds of units, but securing financing for large-scale condo development has been much more difficult this cycle, Monument Realty founder Michael Darby said. Darby, who is preparing to launch sales on two D.C. condo projects this month with 171 and 69 units, respectively, said the market has been demanding larger condo projects because the scale allows buildings to offer the same level of amenities renters experience in apartments.
"It's been a market for renters for so long, there have been bits and pieces of smaller products that have come to market in the last 10 years, but nothing of size," Darby said. "People are fed up because they haven't had a good product to buy."
In Capitol Riverfront, PN Hoffman has already sold out 75% of the 138 units at The Bower, the first for-sale multifamily building at the 49-acre The Yards megaproject, according to its website. Three additional, 100-plus unit condo buildings will begin sales in the neighborhood this year, greatly increasing the options for buyers.
Jair Lynch Real Estate Partners, working with Urban Pace, plans to begin sales this month on eNvy, the 127-unit condo building it is developing just north of the ballpark at 70 N St. NE.
On nearby Buzzard Point, Capital City Real Estate is expected to begin sales next month on its 110-unit Peninsula 88 development, which broke ground ahead of Audi Field's opening last year. With three 100-plus unit condo projects launching sales in the same area in a matter of weeks, it could be expected that they would compete for buyers. But Darby said he believes there is enough demand for all of the projects and thinks Monument's Avidian is well-positioned.
"We're not worried about the competition," Darby said. "The product we have, we feel, is superior to a lot of the other products out there who cannot provide those amenities. And locationally, it's phenomenal, half a block from the Metro and the ballpark and the retail on Half Street."
Mann said the buyer pool has been hungry for more options, and he thinks having multiple Capitol Riverfront projects selling at the same time will benefit the neighborhood.
"In a lot of ways that's going to be helpful because we're an undersupplied market," Mann said. "This is going to provide consumers with different choices in that [Capitol Riverfront] submarket. If you want to buy, you're not limited to one building or having to look in other submarkets. You can look at three or four options and start to make decisions on pricing, finishes, location and views."
The fast-growing NoMa neighborhood is also beginning to welcome large condo projects after years of apartment development. Last year, The Bush Cos. delivered The Lexicon, a 182-unit condo building at 50 Florida Ave. NE. Urban Investment Partners plans to begin sales later this year on Tribeca, a 99-unit condo project at 41 New York Ave. NE.
J Street Cos. is building a 62-unit condo project at 1109 Congress St. NE. J Street Chairman Bruce Baschuk said he decided to go with condos on the site because of the lack of for-sale options in NoMa.
"What we've recognized is, for some period of time, there was very little for-sale in that market unless it's individual townhomes, and those have gotten expensive to own," he said. "We like the concept of being able to offer condos to first-time buyers, and that's who we're focused on."
Baschuk expects the thousands of people who have moved into NoMa's new apartment buildings in recent years will decide they want to own property but don't want to leave the neighborhood. He pointed to the 42-unit Pullman Place condo building, which sold out in June, as evidence there is pent-up demand for condos in NoMa.
"All that vertical development does nothing but help us because it's all on the for-lease rental side," Baschuk said. "A number of those people are going to start filtering into ownership positions. We're getting unsolicited calls from people saying, 'let us know when you're delivering, we'd like to buy something in the area.'"
Urban Pace is working with UIP and J Street on sales for their NoMa condo buildings. Mann said NoMa is similar to Capitol Riverfront in that it has grown so much as a rental market that people are beginning to seek for-sale options.
"I think it's the same story in all these markets where you have a robust for-rent market, you have all these incubated consumers who have bought into the neighborhoods and like the submarket and want to be part of the change that's happening, and they're now converting from rental to for-sale," he said.
Mann has also seen condo demand increase following the Amazon HQ2 announcement. In the future, he expects it will grow the pool of high-income buyers looking for places to live in D.C., but today the impact is more about existing homeowners looking to invest in a second property in anticipation of future value appreciation.
"The average consumers deciding they want to buy a second unit as an investment property are a little more bullish on the market and see opportunity," Mann said. "We're seeing an uptick in investors looking to buy condos to hold and rent out, and I think some of that has happened because of the Amazon announcement."
Darby believes the projects he is planning near Yellow Line stops in D.C. will benefit from Amazon hiring thousands of people on the same Metro line in Crystal City and Pentagon City. Monument is beginning sales later this month on a 69-unit condo project in Shaw at 608 T St. NW. It has also assembled nine properties on Eye Street NW in Chinatown, between Sixth and Seventh streets, where it plans to break ground later this year on a 100-unit condo project.
"I think we'll get a lot of demand from people who are looking to buy and are pushed to make a decision faster with Amazon coming to town, and we'll get demand from the Amazon people coming to town," Darby said. "It's beautiful."