Austonian, W, Four Seasons, & Spring Sales Estimates

Harold Hunt, a research economist with the Real Estate Center at Texas A&M University, published an interesting profile of the downtown Austin condo market in Tierra Grande.

First, the report calculated that "about 1,500 condominiums have been delivered to the downtown market since 2001 . . .To date, nearly 98 percent of those units are sold and closed" Of the 18 projects completed over the last seven years, all but 18 of 1,544 units have been sold.

Interestingly enough, the report included sales estimates by project for four unfinished projects: The Austonian, the Four Seasons, the W Hotel & Residences, and Spring. These estimates, credited to Capital Market Research and dated March 10, 2010, show the challenges in selling hundreds of million dollar units in the current environment. While anecdotal research shows that sales have increased in recent weeks, many additional units remain unsold.

Sales Estimates for Projects Under Construction

Project
Year
Units
Contracts
Avail.
% Sold
Absorption / month
Avg Price
Avg Size
$ / SF
Austonian

2010

178
55
123
31%
1.89
$1,516,000
2203
$688

Four Seasons Residences

2010

148
74
74
50%
2.64
$1,269,447
1969
$645

W Hotel & Residences

2011

159
82
77
52%
2.49
$1,067,352
1716
$622

Spring

2009

248
120
128
48%
3.87
$521,063
969
$538

In summary, the article concluded that "More than 400 of the most expensive luxury condos in Texas are coming online in downtown Austin. Some say the timing is disastrous; others believe economic recovery may work in favor of these developments. Upscale buyers hold the key to success for this small niche market."

The Four Seasons Residences to Focus on Service

Lorley Musiol, the new Director of Residences at the Four Seasons in Austin, captures an important intangible about downtown condo life when she states that "this is only a building. It's going to take personality and a staff I'm hand-picking to make that building come to life."

One of the things that is hardest to quantify about a new building is the quality of the service. Training staff to connect with residents, to be personable yet professional, and to meet every residents' random and unpredictable needs and desires without disappointing is hard. This is what the Four Seasons is good at -- and something that other projects will have a tough time duplicating.

For example, the Four Seasons Residences will keep a photo database of frequent visitors so they can greet them by name. That is impressive. And of course they will also keep a database on residents to track their preferences.

Lorley Musiol and the Austin Four Seasons were featured in an interesting article in Austin360 which details at length the project's focus on service:

The word "no" does not exist in Lorley Musiol's vocabulary.

As a hotel concierge for 23 years, 16 of them at Four Seasons hotels including Austin's, she has dealt with the most persnickety of guests. Never, she says, has a request gone unfulfilled. She has thrown a birthday party for an 18-year-old Saudi prince at 2 a.m. at the Los Angeles' Beverly Wilshire Hotel on short notice. She has spelled "Marry me" in rocks outside Las Vegas so a skydiving couple could see it. She has enrolled as a student at the University of Las Vegas in order to check out architecture books that Michael Jackson wanted.

"I always find a way," she says over coffee on the terrace outside the hotel's Trio restaurant. "There is no intimidation."

If Musiol, 56, sounds like she has a Superwoman complex, it's because her job has required it. And she'll soon need to ramp up the can-do attitude, if that's possible, because sometime around Memorial Day weekend, Four Seasons Residences will open and she will be its Director of Residences. She'll manage the building and staff and make sure that every resident's wish is granted.
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15-Story Downtown Office Tower Proposed

A 15-story office tower with ground floor retail is being proposed for the north east corner of West Cesar Chavez Street and Lamar Boulevard.

The new project, to be located between the Gables apartment and Seaholm, would be the first new office project constructed in the downtown core since the Frost Bank tower was completed in 2001. The developer behind the new project, Capital City Partners LLC, recently completed Capstar Plaza, a 115,000-square-foot, eight-story, office building at the southeast corner of MoPac Expressway and Fifth Street.



The new building, currently named Park Plaza, will only be built if the developer can line-up enough tenants to justify development. If completed, the project would include 189,000 square feet of Class A office space and 10,000 square feet of ground floor retail. The project would be located just West of Seaholm and across the street from Ladybird lake. The 1.8 acre plot is owned by Gables residential which recently completed a large low-rise rental project on an adjacent site.

Condo Liquidity Analysis: Will You Be Able to Sell?

If you are thinking of buying a downtown condo unit that you will eventually sell, you need to think about liquidity. Unfortunately, rapid growth in the number of downtown units has also meant fierce competition among sellers in some projects. With so many sellers and ongoing competition from new units in projects like Spring, it can be difficult to sell.

When thinking about liquidity, you need to start with the building. Since most buyers pick a building and then a unit, being in the wrong building can make it very difficult to sell. Since most units are similar, the market is extremely efficient and the only way to sell in an unpopular building is to drop your price -- often significantly.

Last year, buyers purchased units in 22 different downtown buildings through transactions listed on the MLS. Of the 112 2009 downtown sales, there were only eight projects that sold 5 or more units. While we have pointed out many times that MLS statistics ignore developer sales and thus provide and incomplete market picture, they are in fact very accurate for sales by owner as very few units are sold without agents.

To analyze liquidity, we compared the number of units currently on the market in each building with the number of units sold in each building during 2009. We looked for buildings where the total inventory would sell within 9 months. Of the 8 projects profiled, only two buildings met this criteria, The Nokonah with an amazing average of 6 months and Milago with an average of 8. Not far behind, with an average of a year, were Austin City Lofts and the Penthouse condos.

The Nokonah, which leads the list, was the first high-end downtown project. It has an older and less likely to move owner population than projects like 360. While Milago is newer and more affordable, it is notable in the volume of units that sell. In 2009 alone, 24 of it's 240 units -- 10% -- changes hands over the MLS. Austin City Lofts has always been a popular and well-respected building with relatively brisk sales.

On the other end of the liquidity spectrum are three slow-moving projects: Five Fifty Five with an expected time to sell of 45.6 months, Cambridge Condos with a 28 month average, and 360 with an average of 27.8 months. It's hard to understand why 360 -- one of the most desirable and successful projects -- fares so poorly on the liquidity front. Likely, the issue has to do with the projects success as buyers who successfully purchased units on a well-subscribed wait list are now ready to sell. Many buyers may be holding out for more money than buyers are willing to pay. In addition, year 2 of the project may be a peak time for turn-over.

Equally concerning is the number of projects that did not make the list because sales volumes were too low to evaluate. The Brown Building and Plaza Lofts each had 3 sales during the year. Brazos Lofts, the Shore, and Brazos Place each had just one sale during the year. The Sabine did not have any successful unit resales.

Here are the full statistics on downtown Austin Condo liquidity for the eight projects with enough transaction volume to evaluate:


2009 Sold

2010 On Market
Months to Sell
Nokonah

10

5
6.0

Milago

24

16
8.0

Penthouse Condo

7

7
12.0

Austin City Lofts

6

6
12.0

Greenwood Towers

7

9
15.4

360 Condos

19

44
27.8

Cambridge Condo

6

14
28.0

Five Fifty Five

5

19
45.6