In a recent article, Seattle Commercial Real Estate talked about the 27,000 multifamily units under construction or contemplated in Seattle. We pointed out the strong demand and the fact that only 6% of these are going to condominiums. These new projects are “affordable” or high end. Affordable units are smaller and often still sell in the range of $800-900 per square foot or the developer targets the Higher End Market.
Our higher end multifamily market is now nudging $2,000 per square foot and is actively sought by empty nesters tired of a single family home lifestyle and/or foreign investors. To us this is sticker shock, but it is still less than downtown San Francisco or when compared to New York at $10-12,000 per square foot….
To find an “affordable” (let’s say a unit costing only $300,000) and still work in downtown, you have to go to areas like Columbia City in South Seattle. Projects built along the light rail transit line put you at work in only 10-15 minutes. But why aren’t there more condominium multifamily projects?
In addition to the demand, other factors are at work. The condominium statutes of the State of Washington almost guarantee that there will be litigation by the owners against the developers of the projects. Some of this risk can be mitigated by insurance but not all. Developers factor in these costs up front. On the other hand, a project which was built as a rental property and subsequently (say after a period of 10 years) is converted to a condominium is not at risk for the same issues.
Seattle Commercial Real Estate professionals are aware of these factors and counsel patience when investing in multifamily and most certainly an exit strategy for a well located property may become conversion to condominiums at a higher price per square foot.