Eckington Condos: Going Once...Going Twice...

A condominium project in Eckington will be put on the auction block this month, the first such auction of individual condominiums in DC in recent memory. Todd Place Condos, at 302-310 Todd Place, NE, began sales in the middle of last year, and will auction off 12 units individually on site on February 18th. While the auctioning of entire projects has been increasingly common as a way to avoid long carrying costs, developers in Washington DC have not previously chosen to auction units individually, and have instead opted to lower prices or to rent units until condo prices rise. Located just to the north of NoMa, where more than 10m s.f. of commercial space is planned or under construction, Eckington has seen a surge in residential development as developers anticipate the need for housing as a counterweight to the massive commercial development on its border.

Prices for Todd Place initially began in the low $300's for two-bed, one-bath condos, each fully renovated from a row of pre-war apartment buildings, with parking spaces being auctioned separately. Also on the auction block on the same date will be 4 units at 1609 Isherwood St., NE, in the Hill East community. Homeland Auctions will be conducting the auctions, which conducted the auctions for the Parkside of Alexandria last year.

Columbia Heights Largest Condo Converts to Apartments

Donatelli Development and partner Gragg and Associates acknowledged today they will convert their iconic Highland Park condominium (pictured, top) at the southwest corner of 14^th and Irving streets in Columbia Heights, into rental units. The mixed-use development was the neighborhood's largest condominium, with 229 residential units, 20,000 square feet of retail, and three levels of underground parking, directly above the western entrance to the Columbia Heights metro.

“In light of recent shifts in the condominium market, we decided that we would be in a better position to serve the Columbia Heights market with a luxury rental building,” said company president Chris Donatelli, who developed the project in conjunction with NCRC and has done as much as any individual to bring about the revitalization of Columbia Heights. Despite its location above the Metro and across the street from DC-USA, the massive retail center opening in late winter, only about 75 of the 229 units were ever under contract, never matching its sister project across the street, Kenyon Square , a 153-unit condominium also by Donatelli that began delivery in July and is now more than 70% sold out, according to sales agents Domus Realty.

Silver Spring-based Torti Gallas designed the building, which had been offering a 24-hour front desk, two-level fitness center, an "unusually large...hotel-style lobby" (pictured, below), and one of the most inviting roof decks of the city. The condos had been priced from the mid $300's to the upper $700's. Donatelli points out that conversion will have no adverse impact on the finishes or amenities, as the building has been mostly completed, with delivery scheduled for early next year.

At the same time, Donatelli Development announced it has reached agreements with six retailers, helping to round out the burgeoning area as the northern tip of the 14th Street retail corrider, as planned by the city, and bolstering Columbia Heights as a retail center in its own right. Retailers at Highland Park will now include Hank's Oyster Bar, Five Guys Burgers and Fries, Potbelly Sandwich Works, Pete's Apizza, Zinnia - a Caribbean food restaurant, and Signal Financial Federal Credit Union.

“With two large buildings in the neighborhood, we’re in a position to understand what’s happening in the market on an extremely local level,” said Donatelli. “By pulling a large chunk of units from the condo market, we make a whole new class of product available to the Columbia Heights rental market.”

Construction began in mid 2005, sales began in November of the same year. Donatelli has experience in both the condo and rental market, having developed the Ellington apartments that helped transform U Street while remaining nearly 100% tenanted; Donatelli is also currently developing Park Place, a 156-unit condo in Petworth, also above the Metro, that is expected to begin delivering late next year.

DC Condo Growth to Slow

The DC condominium supply chain will decrease significantly over the next 2 years, adding fewer new condominiums to the market than it has over the past 2 years and supplying only half the number of units that had previously been expected, according to data provided by DCRE real estate, a DC-based marketing firm and real estate brokerage. The analysis shows that during the next 24 months, approximately 7600 condominium and coop units will become available for sale within the District as a result of new construction or apartment conversions, a forecast down markedly from the 13,000 new units that had been expected to be released over the 24-month period beginning January, 2006. An analysis of the market shows that many of the projects that had been expected to begin sales over the next two years had been delayed, canceled, or converted to rental units as a result of perceptions about the housing market's inability to absorb large additions to the housing supply. 

The pullback in the market reflects decisions over the past 18 months about whether to advance a project in the initial planning stages, affecting supply as early as one year later, but in many cases three to four years later due to the time needed to approve and build large projects, which often require lengthy review by a city nominally encouraging growth but fastidious about architectural review and skittish about density. Though the pace of development could be considered brisk compared to the '90's, the softening of the condo market that began in the Spring of 2005 led many developers to shelve planned construction, decisions that will reverberate even through an upturn in the market. And despite factors favorable to further development - strong job growth numbers, low vacancy rates on apartments, rising rental rates, and projected population increases across the DC area - confidence in the housing market may take some time to rebound. According to the analysis, 2871 newly built or converted units are now available for purchase on the market, a number that is likely to decrease gradually over the next year as new condominiums developments replenish supply less rapidly than it is absorbed. 

By contrast, MRIS, the region's multiple listing service, reports less than 1400 units actively on the market in the District, a total that includes resales listed with a brokerage as well as some new construction, though many new developments list only a fraction of the inventory in MRIS, or none at all. The city fared better than its immediate neighbors, which not only experienced a slowing of construction and conversion, but which saw numerous projects canceled even after significant pre-construction sales had occurred, a predicament that affected very few purchasers of property in the District. Construction and conversion that has not materialized as expected included Broadway's Atlantic Plumbing site (700 units, and may instead become apartments), the Fairfield Residential project in NoMa (650 units), Pavilions at Takoma (93 units, now to be built as apartments), T Street Flats, and Il Palazzo on 16th St. (79 units, canceled for now due to zoning issues). Many other buildings will simply be built or marketed as apartments, including Vaughan Place (530 units) and View14 (170 units) The study also shows new development is shifting dramatically, away from the Northwest quadrant of DC to Southeast. 

The spurt in development toward the less densely populated areas of Southeast DC results from several forces, including construction of the new ballpark, but also from investment in areas south and east of the Anacostia River, an area once considered less attractive by developers, but where construction can satisfy the growing demand for more affordable housing, and where land is more available and communities less opposed to construction. Building outside of downtown, where developable land is less scarce, less subject to historic restrictions, often with Metro Rail access, and offering larger parcels for development, is beginning to prove increasingly attractive for developers. And as commute times lengthen and empty lots in urban areas decrease, the middle ground between the downtown and the suburbs has become the new hotbed of land speculation. Areas with the most projected condominium development include the ballpark / Navy Yard, Anacostia / Southeast, and upper Georgia Avenue - areas where the DC government has encouraged investment and where developers hope to find better appreciation in the short term. 

Areas that had seen the largest pace of development over the past several years - Logan Circle, Penn Quarter and Mt. Vernon Triangle - will see far less new construction due to the lack of developable land. And despite persistent public fears that housing is overvalued and that supply is excessive, the development community generally perceives the market as stable to positive, viewing the market as more a factor of consumer confidence than of actual demand. "We continue to believe, and our success at CityVista supports the notion, that infill communities close to transportation nodes and differentiated by their proximity or inclusion of a neighborhood amenity base will continue to see strong demand", according to Jeff Miller of Lowe Enterprises. Adding to the woes of developers is the recent reluctance of some lenders to fund condo projects. Instead, lending institutions have in numerous cases conditioned funding of residential development on building units as rental apartments, in some cases forcing the conversion to apartments after condo sales began, to the consternation of both developers and purchasers. The perceived over-supply has led investors and banks with little stomach to fund a project that may take years to build and face uncertain sales.