The last time I wrote about the downtown condominium market was just after we received the resale totals for 2010. I was somewhat stunned to learn that 2010 was the second best resale year in downtown San Diego history, barely lagging 2005's 722 sales. In 2010, resales averaged more than 60 closings per month.
This year looks like another winner, if, in fact, there is an adequate inventory of resales available. Two years ago, the number of resale units listed for sale downtown approached 600. Today, the inventory is at 300 units. And, for the most part, the bleeding (foreclosures and distressed sales) has subsided.
Through May, there were 400-plus resales in the downtown marketplace. If there is an adequate supply of resales available, it is possible that sales could surpass 2005.
Perhaps the most interesting aspect of the downtown condominium market today is the number of all cash buyers. In talking with Raye Scott and Francine Finn of Windermere Realty, they noted that in the first quarter of 2011, a mind-boggling 47 percent of all downtown units purchased were all-cash sales. That is up from the one-third average in 2010.
In the first quarter of 2011, there were four units sold for more than $2 million. That matches the $2 million-plus sales for all of 2010.
Of major significance, new resale highs per square foot were established in five high-rises downtown: Bayside, Park Place, Horizons, Alta and Electra. Bayside was the leader in this category with a sale for $868 per square foot.
Obviously, there has been a lot of money sitting on the sidelines waiting to pounce on good deals.
In terms of dollars per square foot in the entire resale market, sales in the first quarter averaged $361 exactly the same as two years ago.
In the new condominium market, there remain remarkably few units. In the high-end projects: Bayside, Breeza and Sapphire Towers, there are fewer than 100 units remaining among them. It is highly likely that all three will be sold out by year end. Bayside recently held a major marketing campaign and could very well be sold out by the end of summer.
In the modest priced projects, there is really one that is actively marketing: Smart Corner at 12th and Broadway. They have approximately 100 units left to sell.
To our knowledge, there is only one developer planning on moving forward with condominiums in the near future and that's Bosa. It is possible that they will break ground on their site behind Bayside in 2012, with completion in late 2014 or early 2015.
The last condominium project to break ground was in 2007, so there will have been a five-year hiatus in condominium construction activity. In the same vein, the last project was completed in 2009 and it will be five years before the next one is ready for move-in.
I don't think I am being naïve in stating that should our local economy remain modestly healthy that there will be a serious imbalance between supply and demand in the downtown condominium market. And that condition should lead to routinely higher prices for downtown condominiums.
There are several other condominium projects that are in an advanced architectural status, but the absence of construction for all but the strongest developers (like Bosa) should preclude the start of any new project.
Further, many of the sites once destined for condominium development are now in the hands of rental project developers who, for the most part, have abandoned the original plans on the sites and opted instead for lower-rise product. There will be a boom in rental apartment construction downtown over the next few years. And that's OK because we have had fewer than 400 market-rate rental units completed in the past five years and the market is strong.
The wild card in the downtown market is the money coming in from China. With condominiums wildly overpriced in London, Hong Kong and Shanghai, the Chinese are looking to other markets to park their money. They are a dominant force in Vancouver and starting to look at San Francisco. Perhaps we could be next. Time will tell.
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