Square Feet: Developers Lure Buyers to Cities, Even as Prices Stall

Square Feet: Developers Lure Buyers to Cities, Even as Prices Stall

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“It’s exploding,” said Ron Caplan, the president of PMC Property Group, a Philadelphia-based developer of rental properties in markets including Pittsburgh, Baltimore and Columbia, S.C., referring to the growth in demand for urban residential rentals.

Mr. Caplan said that his company’s experience was at odds with the fears about overbuilding.

“So far the development that we’ve done has been embraced by a continuing larger population,” he said. “We have found that the buildings continue to fill up.”

In Baltimore, PMC just finished work on a downtown apartment building that has been leased at the quickest rate Mr. Caplan has seen since starting the company in 1981. He expects the property to be fully leased in six months, about twice as fast as is typical.

In Columbia, the company is now leasing the Palmetto Compress, a former cotton warehouse, after creating 200 apartments for the local student population. With two months’ leasing to go before the start of the new school year, 90 percent of the building is leased, Mr. Caplan said.

Next to One Riverside is the Schuylkill River Park Community Garden.

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Ryan Collerd for The New York Times

He attributed the surging demand to the increasing livability of downtown areas that were once rife with crime and poverty but that have become more appealing with the influx of new residents who are educated, professional and often wealthy.

“What they have discovered is that it’s a lot more fun being social than it is going home at the end of the day, closing the door and watching television,” Mr. Caplan said.

In Seattle, Lake Union Partners, a local developer, has built seven rental-apartment houses since 2012 for a total investment of about $200 million, with a vacancy rate of 4 percent, said Joe Ferguson, the company’s principal.

Mr. Ferguson said that the market was being driven by vigorous hiring by major employers, including Amazon and Microsoft, and by employees’ increasing willingness to move to previously marginal areas like Pioneer Square, Seattle’s oldest neighborhood. The employers include Weyerhaeuser, a lumber company, which has responded to the influx of young adults by moving from a suburban location about 40 minutes south of downtown Seattle to a new building in Pioneer Square.

“They are doing this because they are having to compete for a lot of the same talent as the tech companies and other major employers who are recruiting at the same time,” he said. “They want to offer something that’s attractive to their future employees.”

Arthur Fischman, 68, swimming in the indoor pool at One Riverside.

Credit
Ryan Collerd for The New York Times

In the Milwaukee area, some baby boomers are moving into the downtown area from the suburbs, encouraged by suburban housing prices that have finally recovered from the 2008-9 crash, said Barry Mandel, the president of Mandel Group, a developer of multifamily buildings. Some of the boomers are buying condos while others are opting to rent city properties and preserve the capital from the sale of their houses.

Other older clients are driving the construction of urban enclaves, or “nodes,” within suburban developments, where suburban amenities like shops, restaurants and religious institutions are available within walking distance of people’s homes, Mr. Mandel said.

The “nodes” are in strong demand from buyers in their 40s and older, Mr. Mandel said, noting that one such development was 100 percent leased before construction ended about 18 months ago, while demand in another community was unexpectedly strong.

While suburbanites may welcome the opportunity to sell their lawn mowers or donate clothing to charity when moving to city apartments, there are limits to their zeal for downsizing, said Carl Dranoff, the developer of Philadelphia’s One Riverside building, where the Faders are moving.

The 82 apartments originally planned for One Riverside, a 22-story building, have been reduced to 68, the result of combining some units for buyers who wanted more space after years in the suburbs, Mr. Dranoff said. By the official opening on May 2, 80 percent of the building — the first newly constructed condo tower in central Philadelphia for seven years — had been sold.

Panama Street in the Fitler Square neighborhood of Philadelphia. Young professionals and empty-nesters in their 50s and 60s are helping drive a boom in multifamily housing in big cities.

Credit
Ryan Collerd for The New York Times

The building, offering marble counters, private balconies, and river views, sells 1,000- to 1,100-square-foot apartments for $1.5 million to $2 million, Mr. Dranoff said. A 2,500-square-foot unit costs from $2.5 million to $2.8 million.

While such prices are beyond the reach of most buyers, they are contributing to a citywide erosion in affordability, and mirror the trend in other big cities, said Rick Sauer, the executive director of the Philadelphia Association of Community Development Corporations, which advocates affordable housing, among other causes.

“There is a larger impact on the overall cost of housing in the city,” Mr. Sauer said. “While there’s new housing stock being created on the high end in particular to respond to the demand, over all what you are seeing is that housing costs in the city are going up very significantly.”

At One Riverside, the Faders recognized that the building met many of their long-term goals for city living and jumped at the chance to buy.

“It’s the last place we’re ever going to buy — we’re here for keeps,” Professor Fader said. “We are all in on the condo because the city has so much to offer.”

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