Hi Jay, the US also has $1000/sqf apartments, but yielding only 3% as opposed to the 6.5% you mentioned.
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$1,000 a Square Foot
washingtonpost.com
Top-End Condos In Area Breaking A Price Barrier
By Daniela Deane
Washington Post Staff Writer
Thursday, July 12, 2001; Page E01
Move over, New York, Boston and San Francisco. It's becoming just as expensive to buy a top-end apartment in Washington.
The amount of money that developers of the most expensive condominium and rental buildings charge for their product -- as measured by the important gauge of dollars per square foot -- is catching up to other traditionally more expensive American cities.
Millennium Partners, the developers of the District's newest luxury condo project -- the Ritz-Carlton hotel and residences under construction overlooking the river in Georgetown -- are hoping to break the $1,000-per-square-foot barrier this fall. A high-rise planned for Rosslyn also plans to sell penthouses for $1,000 per square foot.
These prices are unheard-of here. Three years ago, for example, a developer would have been proud to get $400 a square foot for a luxury condo in an excellent location -- not that many developers were even trying. Meanwhile, in Manhattan, San Francisco and Boston, prices per square foot were double and even triple that.
Millennium will start prices at $1,200 a square foot for its new condos -- the same that it charges in San Francisco for similar units, and more than in Boston or New York. That translates to $1.2 million for a 1,000-square-foot apartment -- a large one-bedroom unit or a smallish two-bedroom. The building will have 26 units, a small boutique-style Ritz-Carlton hotel and a 14-screen movie theater.
At the moment, the skeleton of the new complex is just starting to peek out over the Whitehurst Freeway. The condos are planned for above the freeway line, to produce views worth paying for.
"Washington has changed very much for the better," said Brian Collins, a founding partner with New York-based Millennium Partners. "When we talk about Washington these days, we don't think of it as any different from Boston or New York."
But is this just a developer's fantasy? Will there really be demand at those prices?
After all, Millennium's Ritz-Carlton residences at 24th and M streets NW still have 45 condos for sale out of 160, prompting some real estate agents to question whether sales have stalled there. Collins says the sales pace there has followed that of other cities where his firm works.
Real estate agents and local economists generally agree with developers that there is a market for high-priced, amenity-laden urban residences, catering primarily to affluent empty-nesters.
"There are definitely people looking for luxury," said Fred Kendrick, an agent with Pardoe ERA in the District. "And there aren't that many luxury buildings out there with a lot of facilities and amenities."
Said Joseph Cater III, a senior economist with Fannie Mae who studies the local economy: "They'll be able to get those prices. That segment of the market exists, and it's not being served that well. It may take them a little while to sell them all, but they'll definitely sell them."
Interest in the new luxury project in Rosslyn bears this theory out. Developer Farr/Curtis/Walton Ltd.'s 27-story building, called Eighteen-81 after its address, will start at $350 a square foot for the lower floors and go up to $1,000 a square foot for the penthouse apartment, which will have stunning city views from its floor-to-ceiling windows.
Nancy Itteilag, an agent with Pardoe ERA who is handling the sales in the building, said 100 people have already paid $5,000 to get on the waiting list to buy at the project when selling begins this fall. The 5,000-square-foot-plus penthouse apartment will be priced at more than $5 million, Itteilag said.
Cater said affluent empty-nesters are increasingly attracted to the vitality of urban areas such as Georgetown and Rosslyn.
That's exactly what drove Bruce McLeod, 58, and his wife, Barb, 56, to sell their four-bedroom Bowie home and move to the first Ritz-Carlton residences in the District.
"We bought it for an investment, but that wasn't the main reason," said Barb McLeod about the couple's one-bedroom condo looking out over the courtyard at the center of the complex. "We bought lifestyle. The city, the health club, the hotel, the facilities. We were sick of commuting and mowing the lawn."
When the McLeods bought their 1,104-square-foot condo in 1997, asking prices at the complex averaged $650 per square foot. Now, prices average $800 per foot.
Millennium spent $325 a square foot -- or half of the initial selling price -- to build the hotel and residences, Collins said. "When we started building, the residential development market told us we were crazy to think we could get $650," Collins said. "We've been pleasantly surprised that Washingtonians have been prepared to step up to the higher pricing level."
What makes the new Ritz-Carlton Georgetown residences even pricier than their West End counterparts, Millennium says, is that they will have views, a premium hard to achieve in Washington. The residences will look across the river into Virginia.
"In Washington, it's very difficult to get views because of the height restrictions," said Collins. By law, building heights are limited to 130 feet in nearly every part of the District. "In Boston and New York, you can build 40 stories or higher. The views will contribute very much towards getting $1,200 a square foot."
Even in less pricey areas, developers are breaking long-standing price ceilings.
"A year and a half ago, people laughed when I said I was going to build $400-a-square-foot condos on 13th Street," said Jim Abdo, owner of Abdo Development. But Abdo was able to do just that recently at his Emerson condos at 13th and N Streets NW. One of the penthouse condos in the building just sold for $919,000, or more than $400 a square foot.
Whatever their location, the condos fetching these prices have many upscale features in common: hardwood flooring, granite kitchens, marble bathrooms, stainless-steel appliances, gas fireplaces and the like.
In the luxury-apartment rental market, records are also being broken on a price-per-square-foot basis, although the numbers for rentals are different. In rentals, it's the $3-a-square-foot ceiling that's being smashed through these days.
At the up-market Regent at the corner of 16th and R streets NW, owned by Keener/Squire Properties, rents are averaging $3.02 a square foot, with some apartments going for considerably more than that. At $3 a square foot, a 1,000-square-foot apartment rents for $3,000 a month. At the Regent, rents on two-bedroom units start at $2,500 per month and go up to $7,000.
"We were originally planning $2.50 a square foot at the Regent two years ago when we started building," said Gary Squire, co-owner of Keener/Squire. "And we thought we were pushing it at that. But the market moved up in the meantime."
Other landlords are also talking about these same kinds of numbers and are making similar plans for high-end rentals.
Chicago-based Hyatt Hotels Corp. broke ground last winter on 85 up-market corporate rental residences adjacent to the Park Hyatt in the West End, near the Ritz-Carlton residences.
And Post Properties, putting up a 269-unit rental building at 15th Street and Massachusetts Avenue NW, hopes to rent the apartments for $3 a square foot when they begin leasing in late 2002.
Steve Etminani, vice president of Post Properties, said his company believes there's little risk of overbuilding in the District -- which would mean having to cut rents from these levels -- despite the renewed interest on the part of developers.
"It's a pretty hard place to build," Etminani said. "Land costs are high, there are a limited number of sites, height restrictions, a complicated permitting process, contaminated soil problems, issues with neighbors."
But at $3 a square foot, it's worth it, he said.
"We felt that rents had been pretty low in Washington," Etminani said. "Not for a lack of demand, but because there was nowhere to move to. We're catering to that pent-up demand that has just not been fed yet."
© 2001 The Washington Post Company
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