I Don’t Think the Condo Market Has Gone Bust
- Aug 07, 2008
Michael Cannon, managing director for Integra Realty Resources’ Miami office and 30-year commercial real estate veteran, says mixed-use projects can work if they are built for the right reasons but cautions that these types of projects potentially carry much more risk.He talks to MHN Online News Editor Anuradha Kher about what condo developers are doing in markets with no demand for condos, risks in condo conversion and the hot condo markets in the world.MHN: What are condo developers doing in markets where there is no demand for condos? Cannon: Worried condo developers with projects in the pipeline are getting creative instead of rolling the dice with a “build and hope” strategy. In cooled-off condo markets, developers are revising their blueprints to transform condo towers into mixed-use buildings, cutting down the number of residences, and incorporating more storefronts, hotel rooms and offices. Revised floor plans allow for easy transition from hotel to condo. MHN: How is it that in a slowing economy there is still demand for mixed-use projects? Cannon: Even in a slow economy, demand for products that are marketable remains high. MHN: What are the biggest risks in condo conversion to rental or mixed-use projects that developers need to be aware of? Cannon: They need to keep in mind that the development may not have the attributes for conversion and if the renter profile is not interested as buyers, the open market may not be either. MHN: How important is the residential component in mixed-use projects?Cannon: Residential complements mixed-use projects and creates a “Live and Work’ environment without the need for cars. MHN: What are the hot condo development markets in the U.S. and around the world? Cannon: Nothing is hot in the United States today. However as the middle class continues to grow in Dubai, India, China and Russia, condo’s seem to be “HOT” there.MHN: What is the forecast for condo markets like Florida that have gone bust? Cannon: The condo market in my professional opinion has not gone “bust.” The hyperbole list prices of 2003-2006 never had enough sales to call it a market. In fact, what is happening is that fancy listing prices are rolling back to what I call the equilibrium.MHN: The bigger the risk the bigger the reward. Is this true for condo development in any market right now? Cannon: The market goes as the money flows or the market went when imprudent lenders lent and developers spent.