In the third quarter of 2004, there were almost 5,200 condo units available in Chicago, and now, Tracy Cross & Associates indicated that only 600 available condos remain. With the housing market on the rise, and seemingly a rise in demand for new condo buildings, one might assume that developers are licking their chops for the right time to break ground on a new addition to Chicago Skyline.
With Chicagoland on the verge of having its best year in home sales since 2008, coupled with the recent job growth in the city, and high rental rates, there is a lot of chatter about who and when then next large condo development will go up. Also, with high rents, deductive reasoning typically takes over and arrives at the conclusion that it is cheaper to buy right now.
There are a few parcels of land in the south loop that would seemingly be the first up to bat and all the signs of it being the right time are there.
“The reason to be first is while you’re out there…there is no competition. That gives you a huge competitive advantage,” said David Carlins, president of Magellan Development Group of Chicago, who has carefully watched the market and says there is no hurry to start another large development.
Other developers may not have that kind of will power. Colin Kinhke, president of CMK Cos, is already in motion planning a high-rise in the south loop, at 13th and Wabash, housing 150 units on 16 floors.
Gregory Warsek, senior vice president of Associated Bank Corp in Chicago, who may assist in the funding said, “I think the key to that deal is that Colin is focused on the lower price point, which is a good place to be if you were to go to market with that number of units.”
CMK is also looking to build a 268 unit tower. Although Kinhke declined to comment on the projects, one could understand his being cautious. After all, his last project of 714 units at 235 w Van Buren St. still has over 200 units available in it.
The cautiousness isn’t only on the developer side, but on the lender side as well. Given the past, lenders just aren’t ready to take on that kind of risk yet. Any significant surge in new projects would allow current apartment rentals to covert to condos and disrupt the potential sales.
So maybe real estate buyers are not licking their chops right now because they are still licking their wounds from the recession of 2008.