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Condo projects will be few for remainder of '08

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While some multi-family developments are currently under construction in San Diego County, the amount of condominium projects that will begin during the remainder of this year will be minimal, as a significant number of previously proposed condo projects have been delayed, offered for sale by the developer or become bank-owned.

"None of the permits that are being pulled (this year for multi family construction) are going to be for condos," said Alan Nevin, director of economic research for MarketPointe Realty Advisors, adding newly constructed condos can't compete in the sales market against foreclosed homes.

The lack of new multi family construction activity, so far this year, is evident when eyeing recent building permit figures, which show that in March only eight permits were pulled and during the first three months of this year 406 multi family permits were drawn.

"What a horror," Nevin said. "None of the projections even nationwide anticipated what is happening right now."

According to Construction Industry Research Board figures, never before has the multi-family permits pulled dipped below 100 during any month.

The large decline in new attached building activity is further evident when viewing figures from the same period in past years.

During the first three months of 2007, 1,540 permits were pulled, and during the same period in 2006, 1,582 such permits were drawn.

The first quarters of 2003, 2004 and 2005 all experienced more than 2,000 permits pulled.

Because of these previously strong years, in terms of multi family building activity, total attached inventory stood at 6,069 units entering the second quarter of this year.

Because of this temporary surplus of standing condo units, mainly in downtown San Diego, lenders and developers are both reluctant to go ahead with projects, which is resulting in project delays and project sites, often times fully entitled, being offered for sale.

According to a Centre City Development Corporation (CCDC) November 2007 project status report, two condominium projects were scheduled to begin construction downtown in March 2008. To date neither of the projects has begun construction.

One of these projects was Ballpark Skylofts, a proposed 16-condo project located on 15th Street between Market and Island.

As of Wednesday this property became bank owned because of financial issues, according to Greg Paquette, who was a co-managing member of Ballpark Skylofts LLC, the developer slated to build the project.

"I carried the project as long as I could and tried to make the investors hold and sell the project to an owner builder," Paquette said.

However the project was in default and hadn't broken ground, making it unattractive to potential buyers.

According to Paquette, potential investors, developers or builders that are currently looking to buy a site are looking for a project that is out of the ground, has several months of construction remaining and is bank owned.

While Paquette is no longer developing Ballpark Skylofts, he along with several Canadian investors will begin construction on a high-rise residential/office project in Hillcrest and a 14-unit row home project in Barrio Logan this year.

Another project slated to begin construction in March was Citymark Development's Pier, a 228-condo project located on Kettner between Fir and Grape.

According to Citymark's sales office the project has been delayed until later this year or 2009 so that the project can reach completion sometime in 2010.

Potential property buyers currently appear uninterested in purchasing a project site and developing it as a condo project, as several projects that were for sale in November have yet to sell, or have been taken off the market by the developer.

These projects include Atmosphere, a proposed 73-unit condominium project intended to feature 3,000 square feet of retail space at 1446 Fifth Avenue.

Excavation on the project was completed in 2005 and the project site currently is a hole in the ground. The project is still for sale.

Market Street Village II, a 14-story mixed-use development on the full block bounded by Market, G, 13th and 14th streets also is dormant, according to ARK Architects Inc., who designed the project.

Late last year Tim Winslow of Grubb & Ellis|BRE Commercial was marketing a property located at 1221 11th Avenue; a 20,000-square-foot lot initially being developed by TC Holdings.

Approved design plans for the property included a 26-story, 200-unit residential development with 200 below grade parking spaces and 6,993 square feet of ground floor retail.

A call to Winslow was not returned by deadline regarding if the property is still for sale. However the land is still listed for sale on Grubb & Ellis's Web site.

Intracorp San Diego's Triangle project at 12th and Imperial was for sale in November, however the property has been removed from the for sale market and is still owned by Intracorp, according to an Intracorp representative.

The project calls for two buildings with 57 condominiums, 4,000 square feet of retail, and 84 parking spaces.

According to a CCDC report, 35 proposed projects downtown have no tentative construction start date.

Twenty-five of these projects are either multi family or mixed use with some residential component.

While new condo construction throughout the county will be sparse this year, monthly multi family permit figures will likely reach triple digits moving forward because of the increased demand for rental property coupled with an already tight vacancy rate.

"The only good news (in the multi-family sector) is that during the next couple of quarters there will be a substantial amount of permits pulled because of apartment developments," Nevin said, adding a half dozen projects, containing 150 or more units, should begin this year.

H.G. Fenton, Archstone-Smith, and Oliver McMillan should all pull permits for new apartment projects during the year, Nevin said, adding a large 300-unit project should also begin at the Spectrum.

According to CCDC, Cedar Gateway, a 64-unit apartment project in the Cortez Hill area is also scheduled to begin construction in December of this year.

Increased demand for these apartment units is coming from previous homeowners that have lost their homes to foreclosure and now must rent.

In addition to these market rate apartments, several new subsidized projects should begin downtown, according to Nevin.

These projects include 1050 B Street, which is being developed by Affirmed Housing, and will feature 229 apartments.

Construction scheduled to begin in May and the apartment units will be price restricted.

Parkside, a 78-unit apartment project being developed by Wakeland Housing, is scheduled to begin construction in summer. The apartment units will be priced for mixed incomes.

According to MarketPointe's LandTracker publication there is a future proposed supply of 133,479 residential units in the county spread between 490 single-family detached developments, 357 single family attached developments, 59 apartment projects, 283 condominium conversion projects and one other project.

"Of the 1,190 total proposed projects throughout the San Diego County region just 12 percent are in the latter stages of the entitlement process, while most are likely years away from entering the marketplace," the report stated.

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