Often considered an option for seaside getaways or relaxing respites from the demands of traditional property ownership, condominiums are taking on a different connotation in the months to come. Experts in commercial real estate are taking note of favorable economic factors and predicting that condominium development isn’t taking any vacations in 2015.
So, why the strong confidence in condos? Not only is job growth on the rise nationwide, but interest rates are also remaining low and lending requirements are relaxed. And, while these conditions will encourage home purchases across the board, the shrinking backlog of available condo units bodes well for condo developers. In fact, the recent Urban Land Institute/PricewaterhouseCoopers Emerging Trends in Real Estate survey revealed the inventory of condos for sale is very limited, with just a 4.8 months’ supply nationally.
“For first time buyers, condos are usually the first option, especially as the economic recovery gains more strength,” said Luis Mejia, CoStar Group director of U.S. research, multifamily.
In 2014, the median U.S. price of a condo was $204,300, up 5% from 2013 and 17.6% from 2012, according to the National Association of Realtors. And sales figures are already on the rise this year, as January condo prices were up 5.3% from the same time last year.
Figures like these are certain to entice developers into condominium projects,but investors should be cautious about location. While the trend will certainly impact existing developments in large cities and secondary markets, condo construction and conversion are most likely to favor those working within the urban core.
“Condo demand, and as result supply, are largely concentrated in the largest metros. Even as households age and lifestyles change, possibly requiring moving to the typical detached single family home, demand for condo units in the near term will probably be more dominant in the more central urban areas, rather than way out in the suburbs,” Mejia said.
If you’re interested in discussing commercial real estate development opportunities in St. Louis and the Midwest region, get in touch with our Construction and Development Services Team. We’ll help you identify the best ways to capitalize on market trends.