Sales slump leaves many Duluth-area condos vacantFrom May 2008 to April 2009, Duluth recorded just 46 sales of condominiums. That’s 35 percent fewer than the 71 units sold the previous year.
By: Peter Passi, Duluth News Tribune
Developer Tim Wiklund thought he had nearly a sure-fire plan in 2005 when he began work on Superior Vista, a 45-unit condominium built atop a site boasting one of the most fabled views of Duluth’s waterfront.
“I had 41 sales or reservations prior to even putting a shovel in the ground,” Wiklund said, recalling the enthusiastic response generated by his plans to redevelop property once home to the Buena Vista Motel, a local landmark famous for its overlook.
But things didn’t work out quite the way he anticipated. Today, the swanky new building sits half-empty, and last fall Wiklund agreed to a voluntary foreclosure by his lender, North American Banking Co.
Looking back, he said: “I still think it was a good project, but the economy took a dive.”
Wiklund is far from the only condo developer sideswiped by the economic downturn in recent months. From May 2008 to April 2009, Duluth recorded just 46 sales of condominiums. That’s 35 percent fewer than the 71 units sold the previous year.
“The condominium market started to crack in 2007 and then it crashed in 2008,” said Seth Oliver, a local developer.
Many condominiums have languished on the local market for months, and several developers continue to sit on large numbers of unoccupied units.
In 2005, Oliver redeveloped the upper floors of the former Duluth city water and gas building at 411 W. Superior St., creating eight condominium units, four of which remain empty.
He also converted the former Proctor Junior High School into condominiums. There, Oliver has managed to sell just 10 of 23 units.
“There’s been virtually zero activity the past several months,” Oliver said, noting that he hasn’t made any new condo sales since the third quarter of 2008.
He believes much of the problem stems from people’s hesitancy to put their homes on a market that’s perceived to be weak.
“Either people don’t want to sell their homes in the current environment or they’re afraid they can’t, so they don’t even try,” Oliver said. “A lot of it has to do with confidence.”
Developers will deal
Oliver said many would-be condo buyers fail to realize that even though they might not receive top dollar for a house in a soft real estate market, they may be well-positioned to get a good deal on a condominium at a time when developers are hungry for sales.
“I haven’t changed my listing prices, but if a serious buyer offered me substantially less, I would have to entertain that offer right now,” Oliver said.
Frank Messina, who spearheads sales for Lester River Condominiums, agreed that today’s consumers will find some attractive deals. “Three years down the road, we’re going to hear people saying,
‘I could kick myself for not buying a condo back in 2009, when units were at these prices.’
”Half of the 30 units at Lester River Condominiums have been sold to date, and to help make ends meet, five to six vacant units at the development have been rented.
Messina said the pool of prospective condo buyers has shrunk for a number of reasons besides wobbly home sales.
“A lot of baby boomers also got hurt by the stock market,” he observed. “People are on hold, waiting to see what’s going to happen.”
But it’s not all doom and gloom in the condominium business.
Some optimism survives
In 2005, Ron Edmunds, a local developer and real estate broker, built Matterhorn Ridge Condominiums, a 34-unit building catering to seniors in Duluth, and the building is full.
“No question, there’s an oversupply of condos right now. But I’m optimistic the market will come back around,” he said.
Cheryl Archer, a sales agent for 311 Superior, a condominium development occupying the top five floors of the Sheraton Hotel in Duluth, said all but seven of the 33 units in the building have been sold. They range in price from about $300,000 to $500,000.
Edmunds pointed out that condominiums have proven to be an attractive option for older people who no longer want the responsibility of caring for a house, shoveling snow or doing yardwork.
“Every year, there’s a new group of people who are retiring. It’s not like the desire for that kind of housing is going to go away,” he said. But Edmunds has shelved plans for additional condominiums until the market shows signs of strengthening.
Wanda and Dale Brandt were the second tenants to move into Superior Vista Condominiums.
“It’s a wonderful place with gorgeous views,” said Wanda Brandt, who has visited other developments and claims “Ours is still the homiest, coziest and most neighborly of them all.”
Although the Brandts say they’ve enjoyed living at Superior Vista, they’ve recently put their three-bedroom unit on the market for $579,900.
The couple has six children and five grandchildren scattered around the world, and Wanda Brandt said she wants to be able to host family gatherings.
Brandt remains confident that her condominium will sell even though much of the building remains empty, largely because of lingering legal issues.
New units coming online
Even though there’s no shortage of condominiums in Duluth, new units continue to come onto the market. A&L Properties expects to complete work on 14 condominiums in June. These will be located in the top two floors of the Wieland Block development, across from the Technology Village on Superior Street.
Kathy Marinac, a property and leasing manager for A&L, said none of the units are presold, but she predicts they will be well-received. Prices will range from about $260,000 to $415,000.
“A courtyard and a roof-top garden help make our project unique,” she said. “We expect the market will get stronger and these premium units will be purchased.”
“If you look at other cities, in general, Duluth is better off than a lot of markets,” Wiklund said, contrasting the city’s surplus supply of condominiums with places such as Las Vegas or even the Twin Cities.
“Duluth is never as good as other places when the market is hot,” he said. “But it’s also never so bad as other cities when there’s a downturn, either.”