“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.”
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.