PORTLAND — In the housing market’s glory days, would-be buyers would line up outside the sales office for an unfinished condo building, checkbooks in hand and angling for prime units.
Ten years later, Tiffany Sweitzer is wondering if people will still line up.
Her firm, Hoyt Street Properties, started work last week on the first new Pearl District condo tower since the recession.
Also last week, Hoyt Street finally closed the books on its last condominium venture, The Encore, selling the last of its 177 condos. The building was finished in 2008, just as the recession was taking hold, and had only 12 units sold at the time.
Against that backdrop, the new $108 million tower — which, at 28 stories and 340 feet high, will be the city’s tallest residential building — seems a particularly bold re-entry into the high-rise condo market.
“We’ve just come out of a pretty tough five years,” Sweitzer said. “So you think, do I take on another project that will be even bigger than The Encore financially? It’s a huge undertaking for us.”
But the Block 15 condominium project is one Hoyt Street has been considering for more than two years, laying the groundwork in a concerted effort to be the first to break ground post-recession, before other competition crowds the market. And experts say the project may be well timed to improvements in the housing market, and that projects by other developers are probably not far behind.
It comes as most active developers are focused on rental apartments. Sweitzer and Clay Fowler, both partners in Hoyt Street, are also involved in a 281-unit apartment building going up on nearby Block 17, with backing from national real estate firm Wood Partners.
But Joe Weston, the other partner in Hoyt Street and a longtime apartment owner and developer, saw too much risk in the current apartment market. The Portland area is on track to gain well over 10,000 new apartment units in 2014 and 2015 alone, a response to growing demand for rentals and rising rents.
Meanwhile, the for-sale housing inventory is seeing similar high demand — but little new construction.
“Here’s a guy who made his fortune off apartments, and he says the apartment market is being overbuilt,” Sweitzer said. “He says, ‘I think we need to do a condo project.’ “
Having Weston on board as the biggest investor, along with a track record in Pearl District condominiums, helped secure a construction loan with Wells Fargo.
As the experience with The Encore illustrates, the appetite for buying condos disappeared almost overnight during the recession. The boom had left too many condo buildings with excess inventory, and by 2009, sales had slowed to a rate where it would take more than five years to sell all the condos on the market. A typical market hovers around six months of supply.
Things turned around by 2011, as the oversupply dried up and prices and sales started to rise.
According to a recent analysis by brokerage Realty Trust City, the supply of condos has dwindled to two months. Most are on the market for only 31 days.
And some individual condos are now setting price records, beating the highs set in the boom years. As a result, developers’ attitude toward new condo development is improving, said Patrick Clark of Realty Trust.
“Hoyt Street is farther along than other folks, and good for them,” Clark said. “The timing is going to work to their benefit.”
Clark has consulted with other developers considering condo projects in the Pearl District and elsewhere. “I think there will be other projects that will be announced,” he said, “Maybe a year from now, maybe six months from now.”
As in the housing market generally, the condo market is hurting for more diversity in its inventory, said Judie Dunken, a broker with Keller Williams Realty who works primarily in the Pearl District.
A new building could set off a shuffle as some people move into the newer building, she said, unlocking more condos elsewhere for the resale market.
“People who are looking for a view, nicer finishes, more square footage, there just isn’t the availability,” Dunken said. “I think that’s the excitement of the new building.”
The tall, glass-curtain tower — which has also been called Park Central, but which will get a new name in the next couple of weeks — was designed by Boora Architects. The general contractor is Andersen Construction.
Sales will begin in early October, and the tower is scheduled to be completed by summer 2016.