A downtown condo craze Investors and residents are snapping up high-rise units

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A downtown condo craze
Investors and residents are snapping up high-rise units

By Gerald Ensley
DEMOCRAT SENIOR WRITER

Four years ago, Pensacola developer Sonny Granger announced he was going to build a high-rise condominium in downtown Tallahassee.

The cheers were muted. Sure, Tallahassee officials had talked for years about bringing residents back downtown. But apartments costing several hundred thousand dollars? High-rise buildings? No way, said the cynics. Tallahassee isn't ready for that cosmopolitan life�style.

Oh, how wrong they were. As 2006 dawns, condo mania reigns in downtown Tallahassee.

Three high-rise condominiums are now under construction, including Granger's seminal project, the 14-story the Tennyson. A set of low-rise condos is going up in the All Saints neighborhood. The three-story Governor's Inn is converting 31 of its 42 units to condos.

A complex of luxury condos breaks ground soon on East Park Avenue. Three high-rise condo projects are on the drawing boards near Florida State University.

Some may wonder if the market is becoming saturated or if the condos are being bought by future residents or wily investors. But Granger's vision has taken root - and appears likely to change the face of Tallahassee forever.

"People want to live downtown. It's not a new concept; it's just new to Tallahassee," Granger said.

The burgeoning downtown condo market in Tallahassee is driven by several factors: escalating land prices that make "vertical construction" a necessary tool; a still-potent Florida real estate market that encourages investment; a coterie of state legislators and lobbyists willing to buy part-time residences; steady growth in population led by affluent retirees looking for an alternative to suburban life; and the willingness of Tallahassee officials to relax height restrictions and consider economic incentives for developers.

Developers are quick to suggest the downtown condo "boom" is over-hyped. Though a new project is seemingly announced every week, only three high-rise condos are actually coming out of the ground right now: The Tennyson on North Monroe Street (opening in March/April) and two projects on Kleman Plaza, the Tallahassee Center (summer) and Plaza Tower (2007).

A condo convergence

Developers say any condo project takes two to three years to get through permitting and building - "So you're not talking overnight for any project," said Russell Sykes, a sales agent for the Plaza Tower. They say there are two brakes on rampant condo building. One is the dramatic rise in construction prices since the first three projects broke ground, largely because of Hurricane Katrina-created shortages of building materials. The second is the requirement by lenders that developers pre-sell 60 percent or more of their units before they can gain construction financing.

"Nobody in this world has an open checkbook to build a 10-story condo unless they have buyers," said Barry Poole, whose Tallahassee engineering firm is working with two planned high-rise condos near FSU. "There won't be buildings built that aren't occupied."

Yet, developers agree more condos are coming. They say Tallahassee's annual 2-percent to 3-percent growth in population includes many business people, young professionals, retired college professors and empty nesters eager to live in condos. They say condo prices range from $200,000 to $1 million, but average about $400,000. The median cost of all new homes in Tallahassee is about $200,000.

"The problem with real estate is that until people see it, they don't believe it," said Dave Wamsley, CEO of K2Urbancorp, which will build 417 Park Avenue, a luxury condo project. "After the Tennyson and the other two (under construction) open and people see the vibrancy created from real downtown living, some of those trying to get a grip in the marketplace will get the wind in their sails."

Or sales, as the case may be.

Long-term investments

It has been popular cynicism to suggest the Tallahassee condo market is driven mainly by investors, particularly "flippers," who buy properties to sell quickly at a higher price. A recent study ranked Tallahassee 17th in the nation in percentage of homes and condos bought for investment purposes, a trend fueled largely by home-buying by parents of college students.

The Plaza Tower has sold about 100 of its 202 units, and Sykes estimates half have been bought by investors. The Tennyson has sold 86 of its 90 units; 14 of them have been re-sold and 10 more are currently on the market. The Tallahassee Center has sold 99 of its 114 units and only "20-percent max" have been re-sold, said agent Priscilla Tharpe.

But developers say many of the condos bought for investment were for long-term investment, by owners intending to rent out the units, not "flip them." They say Tallahassee is unlike beach communities or resort communities where condos skyrocket to feed a hungry vacation rental market.

"Sooner or later, real estate only makes sense if you are developing it for the end user," said Chip Hartung, who plans to build College Park Towers near FSU. "I think we are nearing the point where supply is very close to demand. (But) certainly, a handful of projects will still do well."

What seems certain to everyone is the condos are going to change downtown Tallahassee by bringing thousands more residents. City officials are already bracing for overuse of the downtown parks and seeking new venues for public parking. But they also are confident that more residents downtown means more restaurants and retail stores downtown.

"I truly believe that as more (condo) units get built, our ability to attract other businesses will be easier," said Michael Parker, the city's economic-development director.

And with that will come the long-sought 18-hour downtown, as Tallahassee's downtown regains a vibrancy it lost in the early 1970s after residents and stores were replaced by offices.

"For 50 years, Americans fled the urban center. Now people are fleeing the suburbs for the urban core," Wamsley said. "That's going to be a 50- to 100-year trend. And we're right on the front of that."

Article published Jan 29, 2006