The downtown condo bubble deflates
There's a mailer circulating to certain Minneapoplis residents this week touting The Nicollet on the Mall, the condo project that will purportedly become the tallest residential building in the city.
The mailer begins, as most mailers do, rather optimistically, boasting an entirely unoriginal "moving UP" motif, which also happens to be the name of this "newsletter." There's also a cute exchange between a couple--he's from Manhattan, she's a local yokel--who found the perfect luxury compromise at The Nicollet. And there is the "developer's viewpoint" missive, which offers the question: "What do you give the downtown that has everything?"
The answer, it seems, is "Nothing yet." Trouble is, the entire project is behind schedule.
You may be forgiven if you already have a grudge against The Nicollet for displacing Let It Be, one of the most beloved local record shops of all time. Or you may be one of those who bemoan the endangerment of our low-slung, sparesly populated skyline. Whatever.
Still, the delay gives cause for concern, as it is, according to some, indicative of the local housing market.
The "moving UP" newsletter acknowldges the project's delay, but chalks it up to having to "expand the base of the building," and notes that "changes are not uncommon for a project of this magnitude."
But others around town say that, reconstruction aside, The Nicollet is having trouble securing the financing because of sluggish pre-sales. According to a story in the January 23 issue of the Downtown Journal, developer Dan Hunt said The Nicolett was still in negotiations with two national lenders to secure financing.
Only 125 of the project's 350 units have been reserved since sales began this fall, falling short of the usual 50 percent usually required to attract investors (and even short of The Nicolett's 40 percent threshold).
The Nicolett's woes are not exactly a secret in town, and neither are those of other big projects that have ground to a halt. Still, some observers note that while the downtown boom pace has tapered off, there's not reason to panic--yet.
Says Sam Newberg, who works for Dahlgren, Shardlow and Uban, a downtown Minneapolis urban development research firm, "I’m not as fearful of condos as some people. But there are some projects languishing."
Newberg speaks of some projects, like Skyscape and Cobalt, that along with The Nicollet, are adding to the perception that the downtown boom is over. But Newberg sees it differently. Newberg notes that some 600 vacancies are predicted for 2006, down slightly less that the 800 in each of the previous two years. Some of that is because development has slowed, but Newberg also believes that has to do with what is essentially an off-season in housing sales generally.
Newberg and others point to the continued success of smaller projects. And many, like Alan Arthur of the Central Community Housing Trust, believe that "downtown will be sustainable at this growth rate for 10 years, at least."
If so, it will be quite a remarkable transformation for a downtown that by some estimates has tripled in size since 1990 to 30,000. (The Met Council, the Downtown Council, Census and various realty companies all have different figures for population then and now.) Latest estimates point to another 10,000 downtown dwellers by 2010.
Predicting growth is a losing vocation, but developers apparently have no fear: There are 50 projects in the pipeline currently, and the latest is calling for some 3,500 to 5,000 units. That project is on the Rapid Park lot, the chosen site for a proposed Twins stadium.
The fact that the developers are going ahead makes it seem that perhaps at least one area resident--the Minnesota Twins--won't be moving into new downtown digs.