Condos out, apartments in these days
From St. Louis to St. Charles, developers are making a switch. As housing sales continue to shrivel and prices slip, nimble builders are luring renters instead of buyers.
Developers are getting hit by both ends of the housing markets. Twitchy lenders are less willing to finance condominiums, preferring apartment projects that can provide a steady cash flow. And the rental market grows larger as reduced mortgage lending and tightened credit standards constrict the ranks of potential buyers.
Lawrence Group is among developers largely abandoning, for now, condo work in favor of apartments. President Steve Smith said rentals were the only thing going these days in housing.
"People can’t buy homes if they can’t get financing," he said.
As a result, Lawrence Group dropped its plan to put condos in the former Missouri Pacific Railroad headquarters on 13th Street downtown. Instead, work will begin early next year to build 192 apartments inside the old rail company headquarters, built in 1927. Apartments will range from $600-a-month starters to $8,000 penthouses.
"People still need a home and a roof over their heads," Smith said. "There is, for the right project, financing available for rental housing."
Original plans called for renovation of the 22-story building as 98 condominiums and 57 apartments plus office and retail space in a project called Park Pacific. Parking for 700 cars and 42 condos were to have been built in an adjoining high-rise. Now, plans for the adjacent structure shifted to include retail and office space, and a garage for about 600 cars.
"When we saw the writing on the wall, we switched gears," Smith said.
Developers said apartment demand was strong downtown and elsewhere in the region. Rents have increased slightly in the past year, they said.
Craig Heller, the developer whose success a decade ago with the 10th Street Lofts proved the existence of a downtown housing market, said his "gut feel" was that renters were more inclined than before to try out the area before buying. All 70 apartments at his company’s mixed-use Syndicate Building are full, as are those at his smaller buildings downtown.
"We may have one or two (apartments) every so often, but it seems as soon as one opens up we have someone to rent them," he said.
However, Heller said he had no plan to convert to rentals any of the Syndicate’s 102 condos. About half are occupied, he said need cash.
Tim McGowan, a principal at McGowan Brothers Management, agreed that many renters were staying longer because they were unwilling or unable to buy homes.
"Before, they would typically scratch and sniff for a year or so, find out what they liked and then move forward with a purchase," he said.
As part of the strong rental trend, McGowan Brothers is turning a building on Forest Park Avenue into 48 loft apartments. The building, which McGowan Brothers has had under contract for two years, housed a custom screen printing business and is next to St. Louis University.
Farther west, at Euclid Avenue and West Pine Boulevard in the Central West End, Mills Properties hopes to break ground early next year on its City Walk apartments. The project, on the site of the now-demolished Doctor’s Building, had once been slated as a condo tower. Bruce Mills, the company’s chief executive, said the latest plan was for a $40 million development of 160 apartments and first-floor retail. Final plans for the six-story building should be ready by the end of the year.
"I think it’s a really cool design," he said.
Even farther west, in Brentwood, MLP Investments is converting some condos to apartments at its Hanley Station project, which is part of a large mixed-use development. Efforts to reach an MLP official to discuss details were unsuccessful.
Ryan Wachter, who bought one of the 150 units last year, said he was not worried that his two-bedroom, two-bath condo purchased last year would lose value as a result of the change.
"It’s a great place to live and close to MetroLink," which Wachter, 28, said he occasionally used to get to his job at KPMG downtown.
In St. Charles, developer Cullinan Properties of Peoria, Ill., has begun work on the Streets of St. Charles, a mixed-use project just off Interstate 70. As elsewhere, condos are out and apartments are in. Cullinan’s president, Jeff Giebelhausen, said the apartments would be suitable for later conversion to condos.
Developers said they were confident the for-sale market would rebound eventually. But McGowan noted that for now his company wasn’t losing renters to the condo builders.
"As they say, one man’s loss is another’s triumph," he said.
tbryant@post-dispatch.com | 314-340-8206
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