Not too many years ago, A stroll along a downtown Minneapolis street after quitting time would be a lonely jaunt. Same for downtown Houston, in-town Atlanta, and even office-laden Washington, whose daytime population hopped in cars for a commute to the suburbs when offices closed for the evening.
Today, the heart of the city is far more likely to be where the home is, and that home is most likely a condominium.
Cities from San Francisco to Philadelphia have turned their focus to populating their downtowns with people who can walk to their nearby jobs. Those new urbanites, in turn, have invited shopkeepers and restaurateurs to hang their shingles on city streets and stay open late. And fewer American downtowns are rolling up their sidewalks when the 5 o'clock whistle blows.
In downtown Houston, apartment occupancy is 89 percent, up from 83 percent just a year ago, according to Central Houston, a group that promotes downtown revitalization. The population of downtown Minneapolis, consisting of about 15,000 residents since the late 1980s, has almost doubled over the past few years. Robert Lang, director of Virginia Tech's Metropolitan Institute, estimates that 5 percent of American adults want to live downtown. And Christopher B. Leinberger, a Brookings Institution fellow, says up to 40 percent want to live in a “walkable urbane place”—in large or small cities.
And the downtown-bound want to live in condominiums. “Mom, Dad, and the [adult] kids all want a condo,” says Minneapolis developer Michael Lander, CEO of Lander Group. But not together: The downtown denizen, notes Laura Van Ness, director of development for the nonprofit Central Houston, is “everybody without kids. It's very diverse except when you come to kids.”
That market, predicts Lander, will continue for at least 20 years as the nests of the baby boomers empty. The parents, weary of suburban lawn chores and the mounting madness of rush hour, are seeking poshly appointed condominium homes within walking distance to jobs, nice restaurants, theaters, and shops. Their 20-something children—with a little financial help from the folks—want affordable, bohemian-style lofts that house them close to nightlife, friends, and work.
CONDO CONUNDRUM Leinberger says there are not nearly enough condos in these high-demand demographics to go around. And he says it in the midst of a housing slump that has claimed more than one center-city condominium project as a casualty.
“There's a pent-up demand,” explains Leinberger, because the supply of urban condos in most markets is on target to satisfy less than a quarter of would-be city slickers. “Only 25 percent of households have school-age children at home. The other 75 percent of the market is where urban product is aimed.”
Ironically, perhaps, downtown condos aren't selling so well. The four-year investor-induced building, buying, and selling frenzy, which priced downtown condos beyond the reach of too many workaday would-be owners, came screeching to a halt in 2006. Investors fled the field when asking prices got so high that they could no longer flip a quick profit, and today, residential towers in cities such as Miami and Las Vegas—if they even broke ground—stand dark and unoccupied. In newly residential downtowns such as Atlanta, Seattle, and Houston, sales have slowed and prices have cooled. Builders and developers are playing a waiting game—reverting condo conversions back to apartments, scrapping plans for for-sale product, slashing prices, and piling on incentives such as plasma TVs, prepaid HOA fees, and even golf club memberships to lure reluctant buyers.
“We enjoyed the last couple of years when the frenzy was out there,” says Matthew Blocher, senior vice president of Washington-based JBG Cos. “Who wouldn't? But we're returning to a normal absorption pace in the market. Now sales will take longer, and we're being cautious.”