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Downtown condo sales suffer from shortage

Highlights:

  • Jesse Hamilton of Land Title Guarantee Co. releases reports.
  • Hamilton, tracks downtown condo sales.
  • Sales are for 4th quarter and 2013 vs. 2012.
The kitchen of the Four Seasons condo that sold for $4.95 million, or $967 per square foot.

The kitchen of the Four Seasons condo that sold for $4.95 million, or $967 per square foot.

Downtown Denver condo market sales activity fell on a year-over-year basis last year and in the fourth quarter, shows a comprehensive report by Jesse Hamilton of Land Title Guarantee Co.

But the drop was due to a lack of supply, not a lack of demand.

“If you just looked at everything combined, your initial reaction would be the market is down and that is true,” said Hamilton, an account manager at LTGC. (LTGC is a sponsor of InsideRealEstateNews.com.)

However, one doesn’t need to dig too deep to discover the market is arguably as strong, if not stronger, than ever.

“The downtown condo market is actually red hot,” Hamilton said. “The reason the numbers is down because of a lack of inventory. And there are no new buildings on the way.”

One indication of the strength of the downtown condo market is that a resale unit in the Four Seasons Private Residence recently sold for a record $967 per square foot. It was barely on the market before it was snapped up, according to the listing broker, Douglas Kerbs, of Fuller Sotheby’s International Realty.

For the entire downtown market, in 2013 a total of 475 condos sold for $235.3 million, down 4 percent from the 497 units that traded hands 2012 and a 24 percent drop in the almost $308 million in sales in 2012.

Impact of Four Seasons sell out

Almost all the drop, however, can be explained by the Four Seasons, which sold out in 2012.

Snapshot of Jesse Hamilton's YOY report for downtown condos.

Snapshot of Jesse Hamilton’s YOY report for downtown condos.

In 2012, the Four Seasons boasted 84 sales for $119.18 million, compared with five sales in 2013 for $8.5 million.

“The Four Seasons had its close out in 2012,” Hamilton said, with now only resales left to trade.

Last year, dollar volume fell by $72.7 million from 2012.

“When Four Seasons accounted for $120 million in sales in 2012, you can see that more than accounted for the $73 million difference,” Hamilton said.

That is a trend that is continuing.

For example, the Residences XXV (at the Ritz Carlton hotel building) sold out with 21 units selling last year, compared with six in 2012. The Spire, which led the sales action last year with 116 units trading hands, is just about sold out, Hamilton said.

The most expensive home to sell last year was the $2.425 million sale of a unit in One Lincoln Park.

One Lincoln Park was another comeback story in 2013, with 32 sales last year, a 39 percent increase from the 23 in 2012. The average price per square foot last year rose 10 percent to $436, from 2013.

However, that deal was eclipsed on Jan. 31 of this year, when Kerbs of Fuller Sotheby’s sold a 5,092-square-foot unit in the Four Seasons for $4.925 million.

Kerbs initially sold the unfinished unit to a couple that was relocating to Denver from California about a year before.

“It was raw space,” Kerbs said.

Build out over the top

The living room of the Four Seasons unit that Douglas Kerbs recently sold for almost $1,000 a square foot.

The living room of the Four Seasons unit that Douglas Kerbs recently sold for almost $1,000 a square foot.

They pulled out all the stops.

“It was just spectacular,” Kerbs said. “They were very high-end finishes that you just don’t see in this area. It was more like you would see in New York City.”

Kerbs said just about the time the renovation was being completed, the coupled needed to move back to California.

“I was showing another couple a different unit in the Four Seasons and I showed them this one for comparison and they said this is perfect,” Kerbs said.

“I barely had it listed,” he said. “It was sold practically before it hit the market.”

The buyers split their time between Texas and Denver, he said.

“The market is still very strong,” Kerbs said. “Like most markets, in 2014, we still have an inventory issue in downtown Denver. That is, we don’t have enough inventory. Especially for the larger units. If you are looking for a unit of at least 2,800 square feet, it is very difficult to find downtown.”

Dee on downtown

Dee Chirafisi, a broker owner at Kentwood City Properties, agreed that there is a lack of inventory is keeping a lid on downtown sales.

“It is definitely a supply problem,” Chirafisi said. “There is nothing there; there is no inventory. It is crazy.”

She said something must be done to remedy the construction liability defect risk, which has led to so many developers building luxury apartment buildings, instead of condo towers in downtown.

“Even if something was done to address the construction defect liability program, you are still talking about another two years before any new product would hit the market,” Chirafisi said.

“Right now, all of our brokers are calling every downtown owner they know and asking if they are willing to sell. If they are willing to sell, we have buyers for them.”

Interested in buying a home in downtown Denver? Please visit COhomefinder.com.

Have a story idea or real estate tip? Contact John Rebchook at  JRCHOOK@gmail.com. InsideRealEstateNews.com is sponsored by Universal Lending, Land Title Guarantee and 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.