When business owner Jim Hanley and his family purchased an old, three-story brick building downtown a couple years ago, they foresaw creating seven upscale condominiums.
Part of that vision came together: Equipped with stainless steel appliances, custom concrete counters and the latest audio-visual connections, some of the units inside the old Comet Press building at First and Washington may be just weeks away from occupancy.
But increases in material costs have put the redevelopers thousands of dollars over budget, and they are months behind schedule. When the condo market plunged, three would-be buyers backed out, leaving them with just two units sold and one reserved for his daughter, Heather Hanley, who spearheaded the project.
“I didn’t see it coming at all,” Jim Hanley said.
Now they hope to lease the remaining units, joining a growing number of project owners looking for renters to pay the bills while they search for buyers.
With fewer new condos opening this year, 147 condos have sold in Spokane County, compared with 376 in all of 2007, a peak year for condo sales, Spokane Association of Realtors figures show. At the present rate, 2008 deals would fall short of the 277 condos sold in 2005.
Because condo developers equipped units with chic features designed to lure buyers, renters may get extra amenities, such as balconies. But they can expect to pay for those upgrades.
The Hanleys hope to lease the units for as much as $1,500 to $2,500 a month to professionals who work downtown and value walking to work, starting in October, Jim Hanley said. It was partly advantageous that some buyers backed out of deals on the condos, which would cost $400,000 to $500,000, he said.
“We can now recover more of our costs,” he said.
It is unclear how would-be renters will respond. The average monthly rent for condos and townhomes in two-story buildings ranged from $743 for a one-bedroom to $1,205 for a four-bedroom, according to a recent survey by Rental Directory of Spokane.
That compares to $482 to $980 a month for apartments in two-story complexes.
At the 15-unit Railside Center condos downtown, 1016 W. Railroad Ave., developer Spokane Partners LLC will look to lease two units for $1,200 and $1,800 a month in the refurbished building, said Michael Dennis, property manager. At another project, the former Kempis Apartments building, 326 W. Sixth Ave., a 600-square-foot unit will rent for $695 a month, while a 1,100-square-foot condo will go for $895 a month, he said.
“We’ll be very selective (about) who we lease to,” Dennis said. “It’s not desperation, it’s not grief, but the market is what it is.”
In the reverse of a trend seen over the last few years, two other projects will return to their roots as apartments. Developers converted Manito Court, 2417 S. Grand Blvd., into 14 condos, and Oak Terrace, 1711 W. Seventh Ave., into 24 condos. Units at both were marketed at $148,000, but only one sold at Manito Court and seven at Oak Terrace, said real estate broker Tom Crowley.
Renters now can lease some units there for about $800 a month, with an option to receive a $400-per-month credit toward the purchase of certain units. At least part of each building is for sale online.
“They would much rather sell them because they’ve invested in refurbishing the building,” Crowley said. “They’ve done really a first-class job of making the units almost like new, putting (in) granite counter tops and all new appliances and new window systems.”
First-time buyers cannot get 100 percent financing with the credit crunch, he said, forcing developers to slash prices or lease units.
“We lost five sales last year because of financing” at Manito Court, Crowley said.
The developers, a group of five California investors, also plan to sell some condos at one of the projects for just $109,000, he said. “It’s a buyer’s market. The interesting part of it is the buyer doesn’t know it yet.”
The average price of sold condos this year was about $157,000, compared with $164,702 last year. The number of condos on the market – 235 on Tuesday – is down about 20 from the spring.
Crowley said a similar condo cooldown happened in the mid-1980s.
“This will change,” he said. “It never stays bad, and it never stays good.”