Will Capitol Hill’s new stock of luxury apartments one day become luxury condos?

On E Union, these will *not* be condos... yet (Image: Joe Wolf via Flickr)

On E Union, these will *not* be condos… yet (Image: Joe Wolf via Flickr)

“Condo Hill” is a term that seems to be popping up with increased regularity in reaction to the rapid construction of new, high-end buildings on Capitol Hill . It turns out, the nickname misses the mark by at least a decade as the vast majority of projects built on Capitol Hill today are for new apartments, not condos. Developers and building owners say, like anything in real estate, it comes down to what’s profitable.

That’s not to say Capitol Hill’s new apartments could never become luxury resident-owned units, but if recent trends are any indication, apartment-to-condo conversions aren’t coming to Capitol Hill soon, either.

In the past three years there has not been one single condo conversion on Capitol Hill, according to city data obtained by CHS. In that same time period, only seven apartment units were converted to condos city-wide. New condo construction has also slowed dramatically in recent years.

One of only two condo buildings in development near Capitol Hill is Luma at Boylston and Seneca, slated to break ground this fall. Suzi Morris, vice president at developer Lowe Enterprises, said the location presented a prime opportunity for condo development in an otherwise tough financing environment.

“It’s been hard for developers to get financing because of housing crash, financing just wasn’t available,” she said. “Banks are always underwriting their portfoloio risk and will opt out of certain product lines. They don’t look at it at a micro level, they’re national lenders.”

The Luma broke ground in August (Image: Weber Thompson)

The Luma broke ground in August (Image: Weber Thompson)

Luma, we should note, is pretty unusual development specimen. Weighing in at a whopping 24 stories and making future home for some 168 “condominium residences,” the tower will be an amazing new high rise on the Central Seattle skyline.

The 2008 housing market crash appears to have had a stifling effect on condo conversions as well. In 2007 1,626 Seattle apartments were converted into condos in 79 different buildings. In 2009 only 19 units were converted in two buildings.

Morris helped develop Broadway’s Brix condos while at Schnitzer West — since opening in 2009, it was one of the last major new condo projects on Capitol Hill. Morris said the developer moved away from condo development after the housing market went south, along with many of the national developers present on Capitol Hill, like Avalon Bay and Alliance Residential.

Capitol Hill apartment owner Morris Groberman at Northwest Apartments has a simpler explanation for why apartment development is currently running over the condo market. “Interest rates are low, demand is high. People are willing to pay,” he said.

One interesting wrinkle in the condo slowdown are covenants on many new buildings that prevent condo conversions for five years. The covenants, well-known to developers but perhaps less known to those outside real estate, mean developers can avoid a costly additional layer of inspections that goes along with new condo construction. The covenants also protect condo buyers who may not see serious flaws manifest until a few years after construction.

CHS discovered such a covenant in the newly completed 1711 12th Ave apartments. At most, it seems such covenants would only slightly delay larger market forces that many say will eventually resuscitate condo conversions on Capitol Hill.

According to Groberman, that could be as early as next year, although said he won’t be jumping into selling. “I love owning on Capitol Hill,” he said.

29 thoughts on “Will Capitol Hill’s new stock of luxury apartments one day become luxury condos?

  1. I’ve been predicting a rash of condo conversions in the next several years once the 5 year mark hits on the new developments. This is just another way that developers skirt around building requirements so they can do the minimum and minimum costs yet charge residents the maximum in pricing.

    When these new apartments do convert to condo, I hope the HOAs have deep reserves as the developer will no longer be liable for the defects that will appear due to the shoddy construction. And the future owners should be prepared for steep assessments to cover the repairs. Anyone remember the defective stucco debacle of the 2000’s? Owners in some buildings were hit with 25-30k assessments to reside their buildings.

    Regardless of what happens I am looking forward to more condo’s on the hill. We need people who are invested in their homes and the neighborhood. Not just renters using the hill as a stepping stone.

    • I agree Timmy. Capitol Hill will always have a lot of renters, but home/condo ownership is what makes for a more stable neighborhood…..the more of it, the better. Long-term renters also make for the same stability, but many on Capitol Hill are here just for “awhile.”

        • You’re easily offended. It’s just plain common sense that those who invest in a home are in a neighborhood for the long run. That may or may not be true for those who rent.

          • I’m offended when sweeping generalizations are made about an entire class of individuals, in this case renters, who are often lower income. I understand what you’re getting at, but you might as well be saying, “keeping out the poor people will make our neighborhood better.” I know you’re not doing it intentionally or with ill intent, but I just ask that you be considerate, non-prejudiced, and non-judgmental towards the large contingent of people who choose not to own or do not have the ability to own. We need all types for a healthy, diverse neighborhood.

          • @pragmattic

            i don’t think calhoun is saying “keeping out the poor people will make our neighborhood better.” at all.

            and your argument that renters are often lower income is a sweeping generalization as well. particularly given all the dialog in the comments on this very blog around how expensive rents are on the hill. i doubt someone who’s in a lower income bracket is affording $2K/month for a 600 sq ft apartment.

            i think you need to take your own advise and don’t be so judgemental of a comment on a blog.

          • Valid point, I should have emphasized that I meant renter-occupied units are correlated with lower household incomes relative to owner-occupied units.
            http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/ahr2011-3-demographics.pdf

            What I’m getting at though, is when we start favoring something like owner-occupied over renter-occupied (for whatever reason, calhoun likes the nebulous “stable” neighborhoods), we are also favoring whatever demographics correlate with owners (age, income, race, education level, marital status, etc.). We just need to be careful is all.

          • @pragmatic

            I am certainly not anti-renter or anti-poor for our neighborhood, and I agree that we need a healthy mix of renters and owners. All I’m really (trying) to say is that it’s best if the majority of residents….whether owners or renters, rich or poor or in-between….are here for the long run. These are the people who are most “invested” (in the non-monetary sense) in the well-being and livability of Capitol Hill and who will work to make it a better place.

    • Darn it Timmy73, you ruined my rant! Couldn’t agree more. The article and your comment covered the whole point of conversions. It’s easier to get a construction loan for apartments right now, and the first owner gets to burn off any warranty and sell units “as is”. Be very careful buying a conversion.

    • Good points. Building owners may have a hard time selling the property as a whole, as well, if they turn into “fractured condo” buildings (part condos, part apartments). Lenders typically will make it quite difficult for buyers to purchase that kind of property.

  2. Finally a real building, 24 stories and 164 units! I am looking forward to when they start tearing down all these short fat waste of space new and old buildings. The only thing that is going to bring down the ridiculously high rents here is more supply of housing. I wonder what micro housing will cost then. I would like to see more building like the built center but that would make too much sense, right? Limiting the height on the Broadway buildings was one of the worst decisions ever and the requirement to install that ugly tile in the sidewalks too. Seattle need housing so build housing for everyone, not just the people who can afford it. What has always made Seattle strong is the mixture of people. These crazy rent and mortgage prices completely destroy what is most important to the city.

    • Another thing that would help is if they quit trying to load 10 lbs of shit into a 5 lb bag. There are LOTS of places that would make for good condo and new neighborhoods development, but it entails branching off Capitol Hill and into underutilized neighborhoods ripe for revitalizing. SoDo, Georgetown, (more of) Beacon Hill, etc. It doesn’t mean sprawl. These neighborhoods are well-served by existing roads and infrastructure and would be awesome spots for more affordable apartments and condos. Better use of space now just sitting there. All w/o turning it into a drab mess like the Eastside.

      • So the renters are shit? I’m not certain thats what you meant, but it certainly comes across that way. Our region isspending $1.8 Billion on a lights rail extension and streetcar, this infrastructure makes Capitol Hill a very desirable neighborhood to live in. A 5-10 minute walm to the CH station and then a 3 minute ride ro the UW, a 3-5 minute ride to downtown, or 35 minutes to the airport. I suggest you get your nose plug out, there’s more coming to the neighborhood, and with your welcoming attitude, I’m sure you’ll be a pleasant neighbor.

        • No Prost, that’s not what I meant, but congrats for taking it and running with it anyway. “Cramming 10lbs of shit in a 5lb bag” is just an expression. Beacon Hill has a transit station right smack in the middle of everything. And there are plenty of areas all the way down Rainier right by existing transit or rail stations. Of course, this requires looking ahead, which developers hate doing. And lots of people hate being “urban pioneers”, but the economics that people are bitching is pricing them off Capitol Hill are starting to force the issue. Yes, Timmy, SoDo and Georgetown DO need more retailers and grocery stores, and maybe some people would never think of it as a nice place to live. But there are plenty of places going to waste that are bound to become viable eventually, out of necessity.

      • The problem with those neighborhoods is where does one shop? We need more retailers and grocery stores in those neighborhoods for them to become livable.

        Even then, there is no way in heck I’d live in SODO (where I currently work). Too many warehouses, trains, heavy trucks, airport noise. The air is also gritty from those modes of transport not to mention all the particulate spewage from the port.

        I don’t ever see SODO and Georgetown as being desirable places to live.

        • Grocery Stores and retail will come as the population increases to support the businesses. Right at the moment, the businesses springing up are bars and restaurants. Retailers–maybe not so much, ’cause Amazon. Grocery stores.–3 QFC’s, 2 Safeway’s and one each Trader Joe’s and Whole Foods within “reasonable” distance of central CH. Plus a zillion smaller independents. We could use a decent shoe store though…

          • Yep, Capitol Hill has many great grocery store options which is why its a desirable place to live.

            SODO and Georgetown, not so much which is one of many reasons people don’t want to live there. And my response to Jim as to why those areas are not ready for residential.

    • It’s amazing to me how the leadership in this city and region continues to ignore what has been done in the greater Vancouver BC area. They did transit-oriented development right, but I see almost none of their lessons applied in Seattle. In fact, we actively fight against them.

    • To your point, the non-existent upzone of Broadway was a big mistake — lots of lost opportunity for adding more residential units next to multiple modes of transit. The Pike/Pine corridor, especially along the the old auto-row, should have also been increased. Your disbelief of a 24-story condo on Capitol Hill should be tempered, because it is actually being built on First Hill, that’s why you see the height of the building leap to skyscraper status. You can actually see the physical boundary between Capitol Hill and First Hill pretty clearly because of these height differences (First Hill is mostly south of Pike and in some areas is zoned for up to 300 feet-high buildings). There’s currently a 30-story apartment on First Hill nearly complete, and two more apartment skyscrapers in the pipeline for the next year.

      • “Non-existent upzone”? Are you not aware that building heights along Broadway were raised significantly a few years ago? That’s why there are a number of new, 5-6 story buildings, whereas previously there were only a maximum of 2 stories.

        • Excellent point. Wrong word. My belief, and to some others posting here, the upzone is negligible and does not go high enough. Have a nice day, Calhoun. Remember, smile sometime. There always seems to be a cloud over your head.

          • Thanks for your concern, Kun. I know I can be a little grumpy here on the blog at times….but in real life I’m fine, and actually smile occasionally!

  3. One reason we have height restrictions is to preserve the views of our beautiful surroundings. Lake Union, Elliot Bay, Cascades, Olympic Mountains, Queen Anne Ect..

    I have a feeling whenever I read ” More density and higher buildings” in almost every post here about new building construction its coming from someone who is a transplant and hasn’t lived here long.

    I suggest you go back to your shit hole of a city and help destroy it instead.

  4. Pingback: Will New Luxury Apartments On Seattle's Capitol Hill Eventually Become Condos? Gay Realty Network

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