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Puget Sound Condo Market Starting to Pick up Steam

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By Neil Gonzales

The condominium market in Puget Sound could be in full swing by the time Canadian developer Burrard Group’s proposed 41-story residential tower in downtown Seattle is expected to finish.

“We think there will be strong demand when it is released in the third quarter of 2019,” said Jason Wexler, vice president of development for the Vancouver-based company. “We think it’s a wonderful opportunity for young urbanites to own a piece of Seattle.”

We believe there’s going to be strong demand for this type of product given that there haven’t been many condo projects the last 10 years

Although the region’s apartment market is hot right now and projected to stay that way in the foreseeable future, the condo sector has been gaining steam for the first time since the start of the economic resurgence a few years ago.

Condo prices are climbing while construction of hundreds of units is under way with more in the planning pipeline, including Burrard’s 364 units on what currently is surface parking lot at 1200 Howell St.

“We believe there’s going to be strong demand for this type of product given that there haven’t been many condo projects the last 10 years,” Wexler said.

The Burrard project could break ground in the fourth quarter of 2016, he said. It would offer studio to three-bedroom units, amenities such as a fitness center, 275 parking stalls and ground-floor commercial space possibly for a café. The project’s architect is Seattle-based Weber Thompson, which designed the downtown condo high-rise Fifteen Twenty-One Second Avenue, completed in 2008.

Another Vancouver-based developer, Bosa, is in the midst of building its 41-story, twin-tower condo development also in downtown Seattle. The Insignia towers at 588 Bell St. are expected to include about 700 units, a two-story glass atrium with an indoor pool and street-level stores.

“We’re seeing (the condo market picking up) now for the last six to nine months,” said Paul Zeger, a partner at San Francisco-based real estate sales and marketing firm Polaris Pacific. “It will continue and get stronger as we go.”

According to Polaris Pacific’s October report for the Seattle-area condo market, the median price during the three-month period ending Sept. 30 increased nearly 27 percent from the previous year to $405,000. “The median price has rebounded from 2012 and is expected to appreciate further,” the firm reported.

Currently, 916 new condos are under way in the Seattle area while another 169 units are entitled and could break ground in the near future. As a comparison, the region saw just 142 condos done in 2013 and minimal completions the following year.

The condo market still has plenty of catching up to do considering the peak year for completions was 2007 when 1,863 new units were delivered, according to Polaris Pacific.

The current pace also remains way below that of the apartment market in which 6,566 units are under construction and another 5,316 have been approved, the firm said.

But a rapid acceleration in construction costs is “making developers say the return on apartments is diminishing,” Zeger said, “so lots of those builders are shifting to condos. You’re not seeing it in the market yet, but some of the product is going in that direction.”

He also pointed out that as apartment rents continue to climb people will see they can buy a condo for a similar amount and reap tax and other benefits as a homeowner.

A recent report by The Mark Co., an urban residential marketing and sales firm based in San Francisco, echoed Polaris Pacific’s findings about Puget Sound’s streaking condo market.

According to The Mark Co.’s report, downtown Seattle condo prices in terms of square footage rose 5 percent month-over-month to $794 in August and were 13 percent higher compared to the same period last year.

“Strong economic conditions and low inventory levels are driving new condominium price increases in downtown Seattle,” Erin Kennelly, senior director of research for The Mark Co., said in a news release. “New construction absorption – a reliable indicator of buyer demand – was also positive, rising 73 percent with 45 units sold in August.”

In deciding to pursue its first project in Seattle, Burrard sees Puget Sound’s economic outlook remaining robust for the next three to five years at least and supporting the condo market well. “There are fantastic companies, strong employment and good job growth,” Wexler said. “It’s quite an exciting time to be a part of.”