Thursday, August 31, 2006

The Coming Bust? Or, Just A Shake Out?

Long before developer Louis J. Cicalese admitted to the Inquirer's Henry Holcomb that he was giving up on his BLT-designed Marina View Tower, it was evident that the project was dead. No one was fooled by the token earthmover that has decorated the site for the past few months. But, of course, Cicalese's announcement has prompted a lot of people to conclude that Philly's condo boom is over. I, for one, am looking on the bright side: At least we won't have our Delaware River views blocked by this barrel-chested bigfoot (I'm referring to the building). I also happen to believe that the bust, when it finally does arrive, will be as gradual and nuanced as the boom was when it started.

Marina View Towers is hardly the first condo project to abort its mission. Brown/Hill had to give up on 205 Race earlier this summer, despite having one best-looking architectural designs in town. Opus ditched plans for 1919 Market Street, after working diligently with neighborhood groups to camouflage the project's garage decks and create an active ground floor. You've probably noticed that it's been months since we've heard a peep out of Charles Block about his Richard Meier-designed Mandeville Place tower for 24th and Sansom Street.
On a smaller scale, there are abandoned rowhouse footings all over SoWa (South of Washington Avenue), according to my informants. And a Mt. Airy friend, who lives near steeply inclined Horter Street, had a river of water cascade into his garage this week because the developer up the hill had walked away from a four-townhouse project without bothering to replace the drains and retaining walls. I could go on, but I won't.

So why do I believe that the apocalypse isn't here yet? For one thing, new projects keep being proposed. Take Daroff Design's 40-story tower for developer Joe Federman at 19th and Spring Garden (right), which recently secured an over-the-counter building permit. That building's architect, James Rappoport, has also just produced a new tower design for the New Market site in Society Hill. Even though these two particular projects are no more likely to get built than any of the previously proposed condo towers, they suggest that there is still a residue of optimism in the hearts (if not the minds) of developers.

I was talking about this the other day with a Philly-based developer, a guy who weathered the 1989-1991 real estate collapse. Inevitably we found ourselves participating in that favorite Philadelphia pastime: Handicapping the various projects on the boards. He was convinced that most of the projects outside the safe confines of Center City were doomed to go bankrupt - and then be picked up for a song by a few disciplined bystanders with spare cash. You'll note that all the failed projects I mentioned above, save for Mandeville Place, are located in somewhat peripheral or untested spots.
But it would be overly simplistic to suggest that anything within Center City will succeed and anything outside the core will fail. Rather, my gimlet-eyed handicapper says it's important to look for certain tell-tale characteristics.

Here are a few random thoughts my cynical interlocutor offered about the market:
-Luxury condo towers that overlook parks, plazas or otherwise unobstructed vistas AND include enough units to offer a full spectrum of concierge services - they should do okay. He argues that Philadelphia still can't supply enough of those sorts of high-end, service-oriented units for all the well-heeled suburbanites who want a place in town to go with their condo in Florida.
-Demand for affordable one-bedrooms - say in the $300,000 range - in new condo towers should remain strong for awhile longer. There are still a lot of young single people out there eager to get to equity, especially if they can keep their mortgage payment about the same as their rent. The Murano is one of the buildings in that category. Even so, my handicapper says he's still not convinced the Murano will ever pop out of the ground. "They're moving awfully slowly," he argued. "It looks like a way of waiting for more pre-sales."
(Ah, yes. Pre-sales. A few months ago, developers were saying that banks were asking for deposits on 15 percent of the units before okaying financing. Then the number was 35 percent. Now, the word is that it's 50 percent.)
-Smaller projects - those with less than 100 units - will be more successful than the 300-unit behemoths, mainly for the reason that it is easier to sell out a 100-unit building than 300-unit building. That's actually good news for Philadelphia, which will be better off with shorter and thinner towers than all these 47-story megabuildings. The downside is that the condo fees tend to be higher in smaller buildings, and that could make some buyers hesitate.
-The collapse of the Marina View project, and the relative unattractiveness of the very dark and uninhabited-looking Waterfront Square, has been good for Dockside. Apparently, people who put deposits on some slow-moving North Delaware buildings are flocking to Dockside, which is converting to condos.
-Loft-style condo units in good locations will always sell like hotcakes.
-Conversions in the few remaining Class B office buildings, like the Ayer, and rental buildings should do well because they have lower construction costs than new buildings.

So, don't think the boom is busted yet.

19 Comments:

Anonymous Anonymous said...

Have you seen the new design for the New Market site??????? Its horrendous! I'm not just talking bad-its worse than bad. So maybe its a good thing that the market is softening, because it is killing (marina view) and will hopefully kill (Daroff design at New Market) the bad eggs in the housing "boom." I can think of some Howard Johnson's and roadside inns that are more appealing.

As for the Murano, investing in a tower crane and pouring foundations are a hefty investment for a project that is moving "slowly". I will be very surprised to see this one stop anytime soon.

BTW- The Ayer is the best "egg" in town. Beautiful building to begin with and serene Washington Square views = a good investment and highest class all around winner. I am jealous of those able (and willing) to purchase there......

7:31 PM  
Anonymous Anonymous said...

Inga you write: (It's) actually good news for Philadelphia, which will be better off with shorter and thinner towers than all these 47-story megabuildings." What evidence do you have for saying that? Name ALL THE 47 MEGA STORY CONDO'S YOU ARE TALKING ABOUT? I don't see them except for the St. James! You seem to have a problem with height. By the way, how tall are you?

8:38 PM  
Anonymous Anonymous said...

Great points Inga - hope you're right!!

10:27 PM  
Anonymous Anonymous said...

I agree with the first commenter. The new design for the New Market site is horrendous!!!! This would be terrible for the historic area.

10:34 AM  
Anonymous Davis said...

While I agree that the shorter thinner towers are generally better for the cityscape, the new Daroff design for 19th & Spring Garden is comical to say the least. What about context?!!! No, I don't mean 4 story pseudo-Victorian, but really, why 40 stories?!

12:03 PM  
Anonymous Vince Dean said...

I just hope that enough of the poorly designed projects will be cancelled, so that the great designs can be built. Particularly, Mandeville Place. It's gorgeous. I agree that Murano is stalled. How about reviewing something that is already built. The new apartment building at Fortieth and Chestnut is spectacular ! Where can I see the design for New Market ?

1:14 PM  
Anonymous Anonymous said...

I heard a rumor that the Ritz condos were going to slow down contstruction to be safe? Any truth to this?


What about 10 Rittenhouse Square? Since the small buildings were knocked down, nothing has happened. Last week, the Inquirer said that the developer is waiting for a shipment of steel. I am not sure if he is just stalling because of the market.

1:27 PM  
Anonymous Anonymous said...

Typical Philly thinking. Big is bad. New is bad. Open vistas with views of nothing are good.

You do realize that people enjoy nice skylines?

If Philadelphia was experiencing anything like the building boom in Chicago (where megabuilding means over 90 stories), we would be so proud. But we're not. So we pretend we don't want to.

Way to go Philly! Keep thinking small!

10:12 AM  
Anonymous Anonymous said...

Tall is good. Small is good too. But only in the right places.

The Zoning Code appropriately distributes into the correct parts of Philly the capacity for tall buildings. And it appropriately restricts height in other places.

Build the tall buildings where they belong. And leave the low-scale neighborhoods alone. They are doing just fine.

12:26 PM  
Anonymous Anonymous said...

Inga, why do you hate on BLT like no other firm in philadelphia? You call them out whenever you can and it seems a little personal at times....?! some critisism is definitely justified but you cant deny that they are pretty solid in the hospitality and gaming niche outside of philadelphia. you can't take the work of one partner in the firm to represent the whole firm, or can you? philly is brutal to many architects, no wonder so many find success elsewhere!?.. BLT is soon to be a firm that used to work on most of its projects in philly and take its bread and butter outside of philly... i am sure you will be more than happy.

12:33 AM  
Anonymous Anonymous said...

Hi Inga, As one of the developers of the Murano ,I can assure you that we are really under construction. Our basement is almost finished and we are now above street level. The below ground work takes time. We will be on the second floor by mid October. As for sales all I can say is that we are ahead of our sale schedule and very happy with the results. As for financing, we are closed on our construction loan with Corus Bank. They were the lender at the ST James. I usually do not respond to the constant barrage of rumors, however I felt that I had to set your record straight.

Alan Casnoff

11:49 AM  
Anonymous Anonymous said...

BLT (and Cope) have brought us some of the worst buildings in Philadelphia, starting with the whole Market East Developement. Gallery East is a failure both as urban planning, architecture, and retail.

The new Parking Garage at Jefferson is so out of character and thin that you wonder if the client is the designer and that BLT just rubber stamps the final plans. Cret's building and the Post Office did not benefit from this concrete postmodern facade. Giant deco lights and blue awnings only muck the design further.

I challege the readers or the firms to pick one success by either of these firms in Center City.

12:13 PM  
Anonymous Anonymous said...

Pick one success by either of these firms in Center City:

101 Walnut is a good design.

10:22 AM  
Anonymous Anonymous said...

It is telling that the developer of the Murano needs to appear on this thread to correct rumors. It is also typical. Inga, why does it seem like you never do the work of picking up a phone and asking questions? It seems like you consistently prefer to spout off your prejudices, etc. w/out background research.

12:15 PM  
Anonymous Anonymous said...

Sort of off-topic, but here goes:
I would love you (Inga) to do an architectural comparison between:
the new apartment building at Fortieth and Chestnut Street (mentioned in a comment here; I don't know what to make of this building);
the gorgeous church (restored recently) a few doors to the west on Chestnut;
and the 6-story 1960s-era monstrosity immediately next to the church.
These three buildings show a world of architectural fashion and change on a single block.

5:33 PM  
Anonymous Anonymous said...

101 Walnut is in Society Hill, not CC.
Try harder.

11:35 AM  
Anonymous Anonymous said...

1234 market.

philadelphians so often mistake their provencal opinions for facts.

try harder.

10:15 AM  
Anonymous Anonymous said...

1234 Market?...Mies is turning over in his grave. No ground floor retail relationship to the street and a poorly proportioned facade does not make good architecture. The adjacency to PSFS (with no contextual relationship) only makes it appear the ugly step sister it is. That building was dead on arrival in1973. 30 years later here we are in a "Provincial Philly" loaded with BLT design like the purplish po mo Mariott pimple across the street.

1:26 PM  
Anonymous Anonymous said...

BLT is awesome.

11:19 PM  

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