TIER FIRSTCHOICE
10.2006
Multifamily Trends Magazine
A groundbreaking ceremony was held in July for a building its developer believes will be the tallest residential structure west of the Mississippi River. Twin 54-story towers will have more than 2 million square feet (186,000 sq m) of residential and commercial space, including more than 800 condominiums and a four-star hotel. Given the recent U.S. condominium boom, the type of project may not seem all that unusual, but its location certainly is. The tallest residential building in the western United States is not being built in Los Angeles, San Francisco, San Diego, Las Vegas, or Seattle—cities with regional populations in the millions and well-developed appeal as urban housing nodes—but rather in downtown Sacramento, California, until recently not a location associated with urban housing. The resurgence of urban areas as residential neighborhoods has blossomed in recent decades in the United States. The mix of recreation, business, and civic uses commonly found in central city areas, combined with the history, architecture, and density of central areas, gives them more of a sense of place than that offered by outlying suburban areas. Public and private investment to improve the quality and safety of cities—tied to attracting tourism and business—has made urban areas more comfortable, secure, and interesting. Modern design, which has been associated with urban living, has emerged as an appealing style in media and advertising, as well as in the design motifs of trendy restaurants, and clothing and house wares stores, such as Pottery Barn. Worsening traffic congestion is creating demand for closer-in housing options in cities throughout the nation, and rising gasoline prices may accelerate this as spiraling commuting costs entice more homeowners, including young families, to live in central cities. Successful urban housing development generally takes place in locations offering the following elements: committed public officials and investment; marketing to brand central locations as exciting places to live, work, and play; creative financing that combines private investment with public subsidy, particularly in the early stages to fund catalyst projects; regulatory flexibility; a developer friendly business climate; parking; amenities, such as retail, dining, and entertainment venues; and good design that motivates households to accept higher densities where they are not already established. Buyers at two ends of the age spectrum are driving the demand for urban housing. The large contingent of aging baby boomers in the population is moving toward “downshifting,” fueling demand for more diverse housing options for affluent, active retirees, including housing in walk able communities that offer services, amenities, and access to cool urban concentrations. These buyers, who are looking for a new lifestyle, are attracted by the restaurants, shops, entertainment, cultural offerings, and high-quality medical care offered in central areas, as well as views, building amenities, and the ease of lifestyle in high-rise and urban projects. At the other end of the spectrum are young singles and professionals who prefer an urban lifestyle and are looking for alternatives to conventional suburban housing. Going forward, this age category will become dominant. With a predisposition to urban living, this buyer group could drive increased demand for family living options in cities, particularly where attention is paid to putting in place the amenities to support families, such as schools. Urban centers like New York City, Boston, Chicago, and San Francisco have long appealed to those seeking an urban lifestyle, and these areas have well-developed condominium markets. More recently, cities such as Miami, Las Vegas, San Diego, Atlanta, Denver, Dallas, Houston, and Phoenix have developed vibrant urban housing markets with high-rise and mixed-use residential development. Now, this trend is progressing beyond the established markets, and a number of smaller cities and regional centers like Sacramento, Omaha, Nashville, Norfolk, Fort Worth, and Austin are seeing their first developments of this type.
The large contingent of aging baby boomers in the population is moving toward “downshifting,” fueling demand for more diverse housing options. For affluent, active retirees, including housing in walkable communities that offer services, amenities, and access to cool urban concentrations.
Sacramento
The Towers on Capitol Mall project, which recently broke ground in Sacramento, will constitute the city’s tallest buildings, with two 54-story structures climbing 615 feet when completed in late 2008. The project is being developed by Sacramento-based Saca Development and has a $100 million equity investment from the California Public Employees’ Retirement System. Occupying a 2.5-acre (0.84-ha) site that fronts on Capitol Mall in downtown Sacramento, the building will give residents views of the Sacramento River, the state capitol complex, and the surrounding city. The two buildings combined are planned for 804 condominiums, with sizes ranging from 600 to 2,300 square feet (56 to 214 sq m) and prices from the high $300,000s to more than $3 million; the average is about $600 per square foot ($6,460 per sq m). Building amenities will include 24-hour concierge service, room service, and access to a 60,000-square-foot (5,575-sq-m) fitness center and spa. The project also will include a 230-room InterContinental Hotel and Resort and 60,000 square feet (5,575 sq m) of retail space and restaurants. The Towers on Capitol Mall developer originally bought the site to develop an office tower, but redesigned the project in response to a weak office market in the early part of this decade, as well as public efforts to attract residential housing to a downtown that is the region’s leading employment center with more than 140,000 jobs, many in state government. Other factors were the redevelopment focus in downtown that led to a proliferation of highprofile restaurants, cultural options, and nightclubs; worsening regional traffic congestion; and public concern over sprawl and air quality in a region that has attracted more than 130,000 new residents in the past four years. With the price of a new detached home in Sacramento rising in recent years to close to $500,000, the developer thought prospective buyers would be ready to accept the tradeoff to a higher-density residential option. Condominiums had been seen as the cheap alternative to conventional housing, but now are commanding comparable or higher prices from households that see their value for lifestyle reasons. Because the Towers on Capitol Mall was the first project of this type for the region, Saca Development designed a high-quality project to motivate buyers with a blend of product, urban lifestyle, and project amenities. Inclusion of a hotel and fitness center/ spa component enabled the project to offer on-site services and amenities without requiring that the cost be paid entirely by homeowners’ fees. Project sales began in summer 2005 with a launch at which more than 250 residential units in the first phase were sold. The project has largely attracted upper-income empty nesters and retirees in their 50s and 60s seeking an urban lifestyle and professionals needing a location close to state offices. With the Towers project as a catalyst, other development projects are now in the works in downtown Sacramento with the potential to add more than 20,000 residential units, more than 3 million square feet (279,000 sq m) of private offices, 1.4 million square feet (130,000 sq m) of state offices, retail space, and hotel rooms. Saca Development is planning two other condominium projects—the 35- story Metropolitan with 320 units, and the 24-story K Street Tower with 220 units. Also, Denver’s BCN Development has two downtown projects in the works: marketing is underway for the 37-story Aura project, to include 373 units ranging from 700 to 3,000 square feet (65 to 280 sq m), and planning has started for Epic Tower, a 50-story building designed by Daniel Libeskind. Downtown Sacramento is also the location of the Railyards mixed-use project, a redevelopment by Thomas Enterprises of the 240-acre (80-ha) Union Pacific rail yards to include up to 10,000 residential units, plus office, hotel, retail, and entertainment properties.
Boulder, Colorado
In Boulder, a $150 million mixed-use project called the Peloton is being developed by Bancroft Capital, a private real estate investment firm based in Manhattan Beach, California, in conjunction with CityView, a national real estate and development company headed by Henry Cisneros, former secretary of the U.S. Department of Housing and Urban Development. The development will include 390 residential units in three- and four-story buildings, along with 17,000 square feet (1,600 sq m) of retail and office space on ten acres (3.3 ha). Units range from about 650 to 1,900 square feet (60 to 177 sq m), priced from the low $300,000s to $800,000. Project amenities include a fitness center, a rooftop deck with a swimming pool and two hot tubs, and community rooms. The Peloton is located within walking distance of a grocery store, the University of Colorado, major employers, and Twenty Ninth Street, a 770,000-square-foot (71,500-sq-m) retail, entertainment, and dining center being completed on the site of the former Crossroads Mall. Bike paths and walking trails provide access throughout the town, and a light-rail station planned nearby will provide access to the Denver area when completed by 2010. The Peloton epitomizes how smaller cities are embracing higher-density development and mixed-use projects. Bancroft, which initially acquired the site for office development, has a long history of developing commercial projects in Boulder, a city that is relatively built out and where it is tough to get development approvals. At the same time, the city is an education and job center that houses the University of Colorado at Boulder and attracts many commuters. With strong educational, recreational, cultural, and business draws, Boulder is regularly ranked as one of the best places in the country to live, but high home prices and limited new product keep many households from buying in the city. The result for Boulder is an exodus of homebuyers to areas with available product, causing increased traffic congestion and the loss of retail sales and property taxes. The city has responded by creating special zoning to assist redevelopment of commercial or industrial property as higher-density housing projects. Peloton is the biggest such project under the new zoning, although others are being planned. Marketing for Peloton, targeted to young professionals and empty nester/retirees, is set to begin in the coming months. The project broke ground in May; the first units will be delivered starting in 2008.
Omaha, Nebraska
Omaha, with a regional population approaching 900,000 residents, is the largest city in Nebraska and the largest for several hundred miles in all directions. As is the case in other cities, growth in the region has sprawled outward while Omaha has worked to maintain the downtown core, located along the Missouri River, as the focus and hub of activity for the metropolitan area. Downtown Omaha is still the major employment center in the region, several major universities are nearby, and most of the major civic and cultural attractions in the region are located downtown or in the vicinity. Omaha offers a stable and diverse economy grounded in white-collar jobs, plus civic support for development. Downtown redevelopment began in the 1960s when several buildings in the city’s former meat and packing district were renovated as lofts, restaurants, pubs, and shops. This area, known as the Old Market, remains a regional dining and entertainment draw. More recently, the city has directed investment into maintaining and expanding the corporate presence in the area and into public facilities, with such recent additions as the First National Center, a 633-foot (192- m) office tower that is the tallest building between Chicago and Denver; the $281 million Qwest Center arena and convention center; and a $90 million performing arts center. The city has also devoted considerable effort to redevelopment that has reclaimed access to the Missouri riverfront, transforming it with greenways, trails, and open spaces along both the Nebraska and Iowa sides of the river. These trails connect many new developments, including the ConAgra corporate headquarters campus, an early 1990s project; the new Gallup campus, which houses corporate offices for the Gallup Organization; a city marina; restaurants; and the Riverfront Place mixed-use development. Until recently, residential development in downtown Omaha largely consisted of loft conversions in the numerous old brick warehouses in the Old Market area. Despite the massive public investment in the area in past decades, nighttime activity was confined to a small area, and most office workers commuted home at 5 p.m. As part of the riverfront redevelopment effort, Omaha issued a request for proposals (RFP) for new water-oriented waterfront development next to the Gallup campus. In 2003, the city signaled a shift in its priorities by selecting a proposal to develop Riverfront Place with ownership housing rather than office space or rental housing. Riverfront Partners, a group of developers with diverse experience in Utah, California, Arizona, and Nebraska, paid market price for the land, and the city used tax increment financing to assist with infrastructure costs. Riverfront Place comprises 78 residential units in two 13-story towers, 27 townhouses, 13,500 square feet (1,250 sq m) of retail space, riverfront access, and a public plaza. The $35 million project broke ground in spring 2005 and the first phase, with 56 units, will be completed late this year. The tower residences range from 1,000 to 4,200 square feet (93 to 390 sq m) and the townhouses range from 2,166 to 2,608 square feet (201 to 242 sq m). Project amenities include concierge service, a fitness facility, an entertainment lounge with a catering kitchen, and covered, heated parking. Unit prices in the building range from $240,000 to $1.4 million. The majority of Riverfront Place’s buyers have been professional couples in their 40s to 60s who are trading in a suburban home for the urban lifestyle. Ross Robb, one of the Riverfront Place partners, acknowledges that he initially was wary of doing a project of this type in Omaha, but has been impressed by the level of interest present in an untested market, and by the civic, developer, media, and public support for the project. “Extraordinary things are happening outside so-called ‘first-tier’ cities,” he says. Other for-sale projects are also being developed in and around downtown Omaha in response to the demand. While Riverfront Plaza gets credit as the first high-rise project, Omaha-based Bluestone Development actually delivered the first newly built units. The company’s successful conversion of warehouses to rental product in the 1990s and early 2000s led the company to develop a transition ownership project, and indicated to the company that there was an appetite for modern design, says Bluestone president Christian Christiansen. The Rows at SoMa, developed on a five-acre (1.7-ha) parcel next to the Old Market area, offers rowhouses with private garages and roof decks. The units range from 1,300 to 2,300 square feet (121 to 214 sq m), with pricing from the $240,000s to the $470,000s. A 15-unit loft building, the Lofts at SoMa, is now being developed, with units ranging from 900 to 1,700 square feet (84 to 160 sq m) and prices from the high $100,000s to the high $300,000s. Buyers primarily are empty nesters and couples without children, plus a small number of families and second-home buyers. “People retiring or downsizing today are not like previous retirees,” says Christiansen. “They are not afraid of stairs, want to participate in the activity around them, and want something ‘cool.’” Townsend Development of Kansas City is now proposing a 32-story, 373-foot (114- m) condominium tower on the site of the old Union Pacific headquarters in downtown Omaha. To be called WallStreet Tower, the first four floors of the project would include retail/restaurant space. Completion is scheduled for 2009. Just outside downtown, Mutual of Omaha is proposing a mixed-use, urbanstyle development on surface parking lots at its headquarters site that will comprise residential units, commercial establishments, and enhanced green space in an eight-acre (2.7-ha) area. Plans call for up to 600 residential units, a grocery store, services such as a dry cleaner, entertainment options such as a movie theater, and destination restaurants with sidewalk dining.
Norfolk, Virginia
The Tidewater area of Delaware, Maryland, and Virginia, the site of major battles of the American Revolution and Civil War, today is home to the nation’s largest naval installation. The area’s beachfront neighborhoods attract retirees and buyers of vacation homes and second homes. At the center of the region, downtown Norfolk, Marathon Development Group is developing a 31-story high rise called Granby Tower. The project will include 302 residences, with units ranging from 700 to 4,400 square feet (65 to 410 sq m) and prices from the high $200,000s to over $2 million. The average price for one-bedroom units is in the mid-$400,000s, and the average two-bedroom unit is priced in the mid- $500,000s. The project will have street-level townhouses and retail space to reactivate the streets, and units from the tenth floor upward will have views of the Elizabeth River, the distant Atlantic Ocean, and the city. Project amenities will include a 24-hour doorman, concierge service, a hospitality room and media center, a fitness center, an outdoor pool and spa, sauna and massage rooms, and a business center. The building is now under construction and is to be completed in fall 2008. More than 100 of the units are under contract, says Jason Dodd, Marathon’s vice president of marketing. Key markets include retirees, empty nesters from the Norfolk area looking for a lifestyle change as their children enter college, and young singles and couples working in downtown Norfolk and seeking a walkable community. Granby Tower has attracted retirees from all over the East Coast, many of whom are former members of the military who want to return to the area where they were once based and are attracted by Norfolk’s easy lifestyle and good access to military health care, shopping, and support services. Among the younger buyers are Navy pilots and other associated professionals. Granby Tower is in the heart of downtown Norfolk, within walking distance of restaurants, the MacArthur Center shopping mall, the Chrysler Museum of Art, the Harrison Opera House, and waterfront development. Norfolk’s downtown was once a typical city center deserted at the end of the business day. Redevelopment efforts started several decades ago and accelerated with the opening in 1999 of Taubman Center Inc.’s MacArthur Center, anchored by an 18-screen cineplex and a Nordstrom department store, and offering 140 other stores. A number of loft apartments, condominiums, and townhouses have been added in the past decade. In addition to Granby Tower, Stamford, Connecticut–based Collins Enterprises is now putting up 388 Boush Street in downtown Norfolk, a five-story building with 94 residential units that will sell at prices from the $200,000s to the $400,000s, and the Landings at Bolling Square, a 174-unit project of townhouses and condominiums with prices starting in the $300,000s.
Hartford, Connecticut
In downtown Hartford, a number of residential and commercial projects are underway that are drawing new residents back to what was once a desolate area. Public officials have worked hard to attract residential development with public subsidies, and about 1,300 new housing units—mostly rentals— have opened, are being built, or are planned for new and renovated buildings. Boston-based Northland Investment Corporation is developing the Hartford 21 project, a redevelopment of the failed Civic Center Mall in the center of downtown Hartford. The mall, which opened in 1975 and was in decline by the 1990s, is being redeveloped as the Residences at Hartford 21—a 36-story tower with 262 luxury apartments—plus 53,000 square feet (4,900 sq m) of street-level retail space, 93,000 square feet (8,640 sq m) of office space, 800 parking spaces, and a new 35,000-square-foot (3,250-sq-m) public space that will serve as an entrance to the Veteran’s Memorial Coliseum. The project broke ground in mid-2004, and the first residents started moving in during September. The residential units range from 730 to 2,000 square feet (68 to 186 sq m), with monthly rents of $1,400 to $6,000. Project amenities include 24-hour security, a concierge service, a fitness center, a private theater, a club room, a business center, and dedicated parking. The retail component of the project is anchored by a 40,000-square-foot (3,700-sq-m) YMCA facility that relocated to the building. Northland has acquired the former YMCA site and plans an additional project there with rental units and condominiums.
Baltimore
Apartment, condominium, and townhouse developers have added more than 3,000 new housing units in downtown Baltimore since 2000, with the majority being market-rate rental units. This year, for-sale deliveries outpaced rentals, with empty nesters, retiring baby boomers, and older, childless singles and couples fueling the for-sale market. In addition to spurring local demand, relatively affordable home prices and transit connections to the congested Washington, D.C., market 45 miles to the south are generating demand for residential units in downtown Baltimore from Washington transplants who can live in Baltimore and still commute to jobs in the District of Columbia region. Baltimore developer Patrick Turner is developing the former Archer Daniels Midland grain elevator and storage silos as the Silo Point project on the Baltimore Harbor waterfront in the Locust Point neighborhood, a former blue collar area next to historic Fort McHenry and facing downtown Baltimore and the Inner Harbor. The neighborhood has direct access to Interstate 95, providing an easy commute south to Washington. The Silo Point project will involve redevelopment of a 290-foot (88-m) grain elevator and the surrounding 15-acre (5-ha) site to provide 550 residential units, 130,000 square feet (12,100 sq m) of office space, 50,000 square feet (4,600 sq m) of retail space, and a 500-car garage. Silo Point is to start marketing this fall, with units ranging from 1,000 to 5,000 square feet (93 to 465 sq m) and priced from $400,000 to over $1 million. The project will be targeted to singles, dual-income professionals, and empty nesters from the Baltimore and Washington areas. The project will have units with sweeping area views and offer the unique advantage of being the only grain elevator people can live in with easy access to downtown Baltimore. Another portion of the site is already being developed by Pulte Homes as McHenry Pointe, with 121 townhouses ranging from 2,068 to 2,234 square feet (192 to 208 sq m) and priced from the $500,000s. At a waterfront site in Baltimore’s Harbor East neighborhood, a joint venture of the Bozzuto Group and H&S Properties Development Corp. has developed Spinnaker Bay, offering 315 luxury apartments, 32 condominium residences, and more than 43,000 square feet (4,000 sq m) of retail/restaurant space. Parking is located at the core of the structure and wrapped with the retail and residential elements. Now sold out, Spinnaker Bay’s 32 condominium homes range in size from 1,400 to 4,000 square feet (130 to 370 sq m) and are designed with floor-to-ceiling windows to maximize the waterfront views. Prices for Spinnaker Bay’s condominium residences ranged from $600,000 to more than $2.2 million. Away from the national spotlight, downtown living is experiencing a renaissance in smaller cities. This trend is driven by demographic shifts and by the willingness of city leaders to support the changes necessary to attract developers and residents to their downtowns. This is helping second-tier cities improve the quality of life for their residents and begin to attract the former denizens of their larger, glitzier neighbors. MFT