Downtown condo sales eat away at supply

It's a notable achievement for both buildings, but not without some pain for their developers, both of whom suffered financial setbacks as units took longer than anticipated to sell.

The buildings, which are about 16 blocks apart, were marketed to different audiences. The Phoenix is a refined 17-story brick and stone building with fewer than 100 units and is in the middle of a historic district on the east bank of the Mississippi River near St. Main and Riverplace. Though the building had some units for less than $500,000, most are much more expensive.

One of the unsold units, listed by Edina Realty sales agent, Fritz Kroll, is on the 17th floor and has more than 6,000 square feet. It's listed at $3.9 million. Kroll has been with the project since the beginning and said that during the past year sales have been relatively brisk.

Shortly after beginning construction of Phoenix, Schafer Richardson started marketing an ambitious redevelopment project of the nearby Pillsbury A-Mill building and surrounding structures.

That project, which included renovating existing historic buildings and building new ones, was particularly noteworthy because it took shape only after a protracted approval process involving historic preservation groups and nearby neighborhoods. At issue was the height of several high-rise towers planned for land adjacent to a set of grain elevators that have historic status.

With the housing market in a free fall and the lending industry in turmoil, Schafer eventually lost control of that site to a lender, which has since sold the land and buildings to two local developers who now plan to renovate the existing structures and to build rental apartments.

Skyscape, by contrast, is a more sleek glass and concrete 27-story high-rise between downtown Minneapolis and the Elliot Park neighborhood. It was developed by a company from Chicago that hoped to attract primarily buyers who were more cost-conscious with compact units in a building with lots of amenities aimed at creating a vertical community.

The efficiency of the units was based on the notion that buyers would be spending much of their social time in common spaces. The building has a rooftop lawn and a sprawling fitness center overlooking the downtown skyline.

Tandem Developers eventually sold more than 70 of those units in a bulk sale to a local investment group, which sold many of them at an unusual - and controversial "close-out" auction. That sale was deemed a success, but many of the residents who bought earlier worried that the auction would drive down prices.

Ben Ganje of Downtown Resource group said the remaining unit is on the 26th floor and has two bedrooms, a den, two balconies and just shy of 2,000 square feet. It's listed at $450,000.

There are other condo buildings in the Twin Cities metro that hit the ground during the housing downturn and are still selling units. At last count, Bridgewater, a massive low-rise condo building with nearly 300 units that occupied most of a city block in the downtown Minneapolis Mill District, was down to just a couple dozen units. And down the street the Zenith still has unsold units. Across town in the downtown Minneapolis Warehouse District there are still 17 unsold units at 730 Lofts, which has 111 condos.

By and large the downtown Minneapolis and St.Paul condo markets have fared better than those in the suburbs as buyers focus on proximity to amenities and public transportation.

In Minneapolis, for example, the number of condos and townhouse listings on the market during the past year is 17 percent lower than it was during the previous year, according to the latest data from the Minneapolis Area Association of Realtors. Single-family house listings are down only 3.9 percent.

And that means the overall supply of condo and townhouse listings has remained stable at a 10-month supply, meaning that at the current sales pace there are enough listings to last 10 months.

When the housing market crashed developers scrapped plans to build several other proposed condo towers, so when these are sold out there are none to replace them. Instead, developers are focusing on building rental apartment buildings to help satisfy growing demand for apartments. Many of those buildings are built with a high level of finish for possible condo conversion in mind to satisfy demand once the condo market makes a rebound.