Market conditions over the last several years have been steadily improving in the condo market as existing inventory has been whittled away and new construction inventory on the horizon is scarce. This is due mostly to the hardship of securing construction financing with the apartment industry being the darling of the financial markets, but conditions could not be more promising now for new construction condominium development in the Midtown and Buckhead submarkets. Even though financing is still an uphill battle, condo developers who have the penchant for navigating the financial channels would be wise to take advantage of the need for new product and favorable timing for development, particularly in the mid-priced luxury market.
Haddow and Co. 2015 year-end report shows unsold inventory at year end was 1,346 units, of which 73% is unsold townhome inventory, predominantly in the Buckhead market, and 75% of future planned development is also in the townhome sector due to readily available financing. Demand statistics are also weighted towards townhome sales due to the lack of available condo inventory. Of the 439 new construction sales in 2015, 73% of the sales were in the townhome sector.
The midtown submarket, where there are a handful of new construction condo projects already underway, shows encouraging signs for new condo sales. Sales at 1065 Midtown, the condo conversion above the Loews Hotel, were impressive with 21 homes sold in 2015 with an average price per square foot of $580. One Museum Place, across from the High Museum of Art, has presold 24 out of its 44 units at $602 per square foot. Seventh Midtown has sold 75% of its existing inventory at $445 per square foot. Another indicator of a ripe midtown condo market is the uptick in resale pricing. Average condo resale price per square foot is up 24% from fourth quarter last year to the same time this year, an increase from $255 to $315 per square foot.
Buckhead is another submarket in which conditions for development are favorable. In 2015, iconic buildings such as Sovereign sold out at an average price per square foot of $563. At this point, new construction inventory only exists in the uber luxury market. Projects such as The Residences at The St. Regis Atlanta and The Residences at Mandarin Oriental, Atlanta with prices starting at over two million dollars still have available inventory, a definite indicator that the Buckhead market is ready for condo development at a lower price point.
2016 is sure to be a pivotal time for new construction condo development in the intown markets. The few new projects currently selling will most likely sell out and the challenge is on for new projects that will be able to come to market and have the wind at their backs for 2016.