Turnberry Ltd., the Miami-based luxury condominium builder, began pre-selling units for its 26-story Rosslyn tower out of a sales office beside the construction site in 2005. More than five years later, 90 of the 247 Turnberry units are still unsold, and they are considered an augury for companies and investors weighing a return to condominium development.
Not everyone agrees, however, on what the unsold units at Turnberry and another major pre-recession development, National Harbor, say about a condo market that is trying to return from the recession.
The research firm Delta Associates considers the unsold condos at Turnberry and National Harbor, in Prince George's County, exceptions to an otherwise recovering market. (Of National Harbor's 428 condos, completed in 2009, 103 are unsold.) According to data being released by Delta this week, there are only about 3,700 new condos on the market today, down about 1,000 from a year ago, and if those two projects are removed from the equation, condo prices have stabilized in the region -- after dropping 20 percent -- and are on the rise again in the District.
But is it time to begin building condos again? Gregory H. Leisch, Delta chief executive, said the market is there. He said condos being built today aren't likely to sit on the market like the last of the pre-recession units have, because many of the still-empty condos are the worst of the bunch.
Seeing that shortage, developers appear ready to get back into the condo game, according to recent data. Delta expects developers to begin selling or building about 2,000 new condos this year and another research firm, McWilliams Ballard, said last week that it expects to see at least 1,000 come on the market this year.
“As a developer, am I going to worry the garbage on the market isn't selling, or am I going to move forward with development because I believe there is a nascent market that isn't being serviced?” Leisch said.
But banks, many of which financed condo deals that failed once the recession hit, still see the condos that have been on the market for four or five years as signs that it isn't time to be financing new units yet.
“There's still a stigma there that's widespread, and there are a lot of lenders that have decided to effectively remove themselves from that space altogether,” said developer Jim Abdo. “You know, there are a lot of big banks that won't touch it.”
Al Cissel, managing director for the brokerage firm Jones Lang LaSalle's multifamily group, agreed. “The financing is very difficult. It's just starting to come back,” he said.
Abdo secured a loan from U.S. Bank for his 117-unit Rosslyn condo project, Gaslight Square, and with construction underway said he already has commitments from 10 buyers. But he said national banks are painting the entire area with too broad a brush. “People look at the Washington region and they're mixing in the Gainesvilles and the P.G. Counties and the Leesburgs,” he said.
William R. Lynch III, senior vice president for real estate banking at PNC Bank, said through a spokeswoman that “while there seems to be more discussion about potential condo development in the Washington, D.C. region, PNC has not seen many direct financing requests surrounding such projects."
Even local banks are returning to condo deals with caution. Dennis Griffith, executive vice president and chief lending officer at Cardinal Bank, said Cardinal had financed maybe 100 condos since the recession, mostly in $5 million to $15 million projects.
“Some of the lenders that were out are inching back in, but I'd still say it's been in a fairly slow fashion,” Griffith said. “I don't see nearly the activity we saw previously.”