It was only five years ago that downtown Minneapolis was awash in condominiums, but one of the last condo developments to break ground was in 2007 -- and that building has just a sole unit left.
Yes, downtown has become one of the tightest condo markets in the Twin Cities metro area, with fewer than 150 units available for sale at a time when demand for urban living continues to grow every year.
Several developers are taking notice and are ready to infuse downtown Minneapolis with new units. One of the first projects will come from Jim Stanton, a veteran developer who plans to build the Park Vista in the historic Mill District. The 12-story tower will eventually bring 169 new condos to the market.
"We ain't 'hoping'; we will," he said.
Developers and real estate agents say the addition of condominiums -- and plans for more towers in the ground -- signals a renewed interest in investing downtown. Already, downtown Minneapolis is in the midst of one of the biggest apartment booms in decades, with more than 1,000 rental units under construction and thousands more planned. It's all part of a demographic and social shift that calls for close proximity to jobs, shopping and other urban amenities that downtown living provides.
"A new building will support people's confidence in the market, and that's not to say that it's an artificial confidence -- it's real," said Mary Bujold, president of Maxfield Research.
Stanton began talking about the Park Vista in earnest more than two years ago, but his decision to finally pull the trigger was spurred by the dwinding supply of available condos at Bridgewater Lofts, his most recent project. Stanton said he's sold more condos there in the past six months than in the last two years.
Since demand is particularly strong for units in the $300,000 to $400,000 range, Stanton recently went to the Minneapolis Planning Commission for permission to decrease the size of each condominium in the Park Vista so he can fit more in the building and offer them at a lower price. He's also trying to cater to the growing number of families moving downtown by building an on-site playground.
Across the street from Bridgewater, even more units could be on the way. A vacant lot flanked by the Zenith Condominiums is being marketed as a medical building. But behind the scenes, George Sherman, the owner of the parcel, is considering building the second phase of the Zenith, which is down to its last three units. Sherman's marketing manager, Brad Goering, says condos are the preferred use for the site.
"I'll be sold out by the end of the year," he said, referring to the Zenith.
Sales have been brisk for condos in large part because mortgage rates are at record lows, but also because the resale market is improving. "Buyers know the condo market struggled, but people want to live downtown more than ever," said Fritz Kroll, an Edina Realty agent. "I wish there were other condo projects in the pipeline -- the market is already really tight."
But hurdles remain. The Great Recession and subsequent housing crash coincided with a downtown condo buying spree, leaving many condo owners owing more on their units than what they are worth. That has made hundreds of would-be sellers underwater on their condos and some are renting their units while they wait for higher prices.
The dearth of new units is also a radical shift for downtown. From 2005 to 2008, 35 condo buildings were added to the housing stock in downtown and in the neighborhoods just across the Mississippi River. About 600 units were available for sale at the peak. But as the Great Recession took hold and buyers hunkered down, dozens of developers pulled the plug on proposed projects. One of the last condominium developments to go up was the Phoenix on the River, an 79-unit building that broke ground in 2007. The building is now down to one remaining developer-owned unit, and at $425,000, it is one of the least-expensive condos in the building.
With demand on the rise, some condo developments that were sidelined during the recession are bringing units back online. At the Ivy Residences and Hotel, nearly two dozen condos that were pulled from the market when the economy sunk are returning to the market. The condo-hotel, an elegant glass and steel tower near the Minneapolis Convention Center, has about 90 units in all. Joe Grunnet, a broker with the Downtown Resource Group, said pricing details for the condominiums are still being worked out.
"The pendulum is swinging in the right direction," Grunnet said. "If you're waiting for the bottom of the market, I say, 'That ship has sailed.'"
Agents say buyers are beginning to recognize that the bargains are limited, which is why demand has continued to grow. Maxfield's Bujold said the median price of downtown condos so far this year is $284,000, up from $274,500 last year. But that's still well below the peak of $324,500 in 2009.
Sales are on track to at least meet last year's sales pace, but some say the market would be even more robust if buyers had more options. That's why some agents are now dipping into their "shadow inventory" of condo owners who are renting out their units, but would consider selling.
And Goering said many would-be buyers of new units are being forced to consider older buildings. "Buyers are literally being forced into buying existing inventory because new inventory isn't available," he said. "There's very little left on the market."
Jim Buchta • 612-673-7376