Pierce Condos Pre-Sales

Question: Do you know when Pierce condos sales will begin?

Answer: Penzance’s ambitious Pierce condo project, the high-end 104-unit building that is currently under construction in Rosslyn, began setting pre-sale appointments last week and taking their first deposits this week for condos expected to deliver in 2021. Their sales team set over 50 appointments during an invite-only event last week, indicating plenty of interest in the building…but will that interest turn into the 10% deposit needed to secure a unit in Northern VA’s most expensive building?

When 2000 Clarendon in Courthouse began sales there was no question the demand would be through the roof given the lack of condo supply and that pricing was within range of other condos in the Rosslyn-Ballston Corridor. However, Pierce is a different product and very different price point with over half of the units priced over $2M and many units going for $1,100-$1,200/sqft.

The most comparable building we have to this in Arlington is Turnberry Tower in Rosslyn (the blue glass building) which has had 85 sales in the last five years, 20 of which have been over $2M and only seven at $1,000/sqft or more. Pierce will need to sell 104 units in a lot less than five years with more than 50 units being $2M+.

Is the luxury buyer market in Arlington/Northern VA deep enough to support these sales? I’m looking forward to finding out.

What Will You Get?

The amenity package at Pierce includes a 24hr concierge staff, rooftop pool, two-level gym, and a rooftop club room and terrace.

Each unit is being designed with the same finishes and color package; there will not be any options/upgrades for buyers. The package includes Thermador and Bosch appliances, custom Snaidero cabinetry, hand-scrapped hickory floors, quartz countertops, and many units with direct-access elevators. There have been other high-end condo projects in the region that have taken a similar approach of not offering finish options for buyers, so there is some precedent.

Below are some renderings and finish samples courtesy of The Mayhood Company:

Feature Floorplans

I think there are a handful of units that will sell quickly. The ~$1M 1BR+den and 2BR units on lower floors, a few units with massive terraces, and premier units with unobstructed views of the Potomac River and Georgetown. I included some of those floorplans below courtesy of The Mayhood Company:

This is easily the most ambitious project in the Arlington pipeline and quite possibly all of Northern VA so I’ll be keeping a close eye on it and hope to bring you some updates over the next year or two on how sales are going.

For those of you interested in the building, a sales office is located a block away that include a partial model unit to show off what the kitchen and living space will look like. You can email me at Eli@EliResidential.com to schedule a visit or make a pre-sale appointment.

2019 Arlington Real Estate Market Review: Condos

Question: How did the Arlington real estate market do in 2019?

Answer: Arlington’s real estate market made the national news cycle more than a few times in 2019 with some pretty extraordinary references to rapid appreciation – some accurate and some not. I’ve seen prices in some pockets of the market surge 15-20% in 2019, but for most of the market, appreciation was strong but not eye-popping.

Overall, the average and median price of a home sold in Arlington in 2019 was $705k and $610k, a 6.3% and 8.9% increase over 2018, respectively. Average days on market dropped by one week and an incredible 61.4% of buyers paid at or above the seller’s original asking price. The number of homes listed for sale in 2019 dropped about 17% compared to 2018 and demand surged, with buyers absorbing about 67% more inventory in 2019 than in 2018.

This week I will dig into how Arlington’s condo market performed in 2019 and next week I’ll do the same for the detached single-family home and townhouse market. I did separate write-ups on the 22202 (Amazon zip code) condo and detached home markets last month.

Arlington Condo Market Performance

First we’ll take a look at some of the key measures for market performance across Arlington and within North and South Arlington. This data excludes age-restricted housing (The Jefferson), Cooperatives (River Place), and townhouse-style condos (Fairlington).

  • The condo market seems to have appreciated 7-8% in 2019, after experiencing barely any growth from 2013-2017 and modest growth in 2018
  • South Arlington beat out North Arlington in every key category, which makes sense because it’s an easier price point for homeowners and investors who wanted some sort of real estate position in Arlington before Amazon’s hiring picks up
  • The average condo buyer in South Arlington paid .8% over the seller’s asking price
  • Condos in North Arlington sold twice as fast as they did from 2015-2017. In South Arlington they sold more than three times faster than 2015-2016.
Performance of Different Sub-Markets

I took a look at some of the sub-markets that make up large cross-sections of Arlington’s condo market to see how they performed compared to the overall market.

For “standard” 1BR and 2BR condos in the Rosslyn-Ballston (R-B) Corridor I specifically looked at condos in buildings constructed during the 2000s condo boom with 650-800sqft (1BR) and 950-1,200sqft (2BR).

  • “Standard” R-B 1BRs appreciated 4% in 2019
  • “Standard” R-B 2BRs appreciated 5% in 2019

For “older” 1BR and 2BR condos, I looked at those constructed in the 1940s-1960s. This category of condos had been slow to appreciate and as of 2018, a lot of owners were still trying to dig out from 2005-2007 prices.

  • Older 1BRs appreciated 7.4% in 2019
  • Older 2BRs appreciated 10.5% in 2019
Performance Within Different Price Ranges

Appreciation in Arlington’s condo market was pretty evenly distributed between the upper, middle, and lower price ranges as evidenced by the change in the average price of the lower 25%, middle 50%, and upper 25% of sales from 2018 to 2019.

  • The average price of the middle 50% of Arlington is now well north of $400k
  • Over the last two years, Arlington’s least expensive housing has appreciated the fastest, with the average price of the lower 25% increasing by more than 12% since 2017. You can likely attribute this to investor activity.
  • If you’re curious about the max sold price in 2019 of $4,750,000, it was a top floor 4,400+sqft condo at Turnberry Tower (link). It was first offered for sale three years ago for $7M. If you remove this sale from the data, the upper 25% appreciated 7.4% in 2019.
Inventory Shortage

A lot of real estate conversation in 2019 revolved around inventory shortages. The number of condos offered for sale dropped nearly 21% in 2019 and the increased demand (higher absorption rate) pushed available inventory down by more than 57%. The chart below shows the YoY quarterly decrease in new condo listings and available condo inventory in Arlington.

https://cpp1.getsmartcharts.com/chart/mls/1/getreport.php?rid=2,3&ftid=2&fid=1005&gty=4&ltid=4&lid=51013&gid=2&cc=05c500,ffc000&sid=1&mid=2&tt=2&mode=4
Looking Ahead

I will be keeping a close eye on inventory levels as this year starts off. Last year a lot of homeowners decided to withhold homes from the market in anticipation of higher Amazon-related appreciation. Now that much of the market has experienced significant appreciation, it will be interesting to see if more homeowners decide that now is the right time to sell. I expect demand will be able to keep pace with an increase in new inventory, but more inventory should keep prices a bit more level this year.

With rates remaining low through last year and projected to do so again this year, couples with a strong employment and stock market, buyer confidence is high. On the flip side, markets usually stagnate heading into an Presidential election so it’ll be interesting to see if/how the election effects counter the current momentum.

I predict that condo values will grow steadily in the 2-5% range over the next 5-10 years, but that no year in the 2020s will outpace 2019. Some possible exceptions to this are major zoning changes by Arlington to allow for more condo development (increased supply), the conversion of some large apartment buildings into condos (increased supply), or a national economic crisis (decreased demand).

Thanks for reading along! If you have any questions or I can be of any help with your real estate needs, don’t hesitate to reach out to me at Eli@EliResidential.com. Next week we will dig into the detached single-family and townhouse markets!

If you’d like a question answered in my weekly column or to set-up an in-person meeting to discuss local Real Estate, please send an email to Eli@EliResidential.com.

New Condo Building, 2000 Clarendon, Banning Smoking

Question: Are there any smoke-free condo buildings in Arlington?

Answer: There is overwhelming support amongst condo owners in Arlington and the DC Metro to ban smoking in condo buildings, including within individual units and balconies. The problem is that it requires a two-thirds (or more) vote in all existing condo buildings to change the by-laws to ban smoking completely and only a handful of buildings have successfully done so.

2000 Clarendon To Be Smoke-Free, LEED Certified

I’d like to recognize The Bush Companies for making 2000 Clarendon, an 87-unit condo building currently under construction in the Courthouse neighborhood, for being the first developer in Arlington to ban smoking outright in the original by-laws. Per the by-laws:

“Smoking is prohibited inside the Condominium building. Smoking is prohibited outside the Condominium building except in designated smoking areas located at least 25 feet from all entries, outdoor air intakes, and operable windows. The no-smoking policy applies to spaces outside the property line used for business purposes.”

In addition to being smoke-free, 2000 Clarendon will also be a LEED Certified “green” building.

There is real demand in the Arlington condo market for smoke-free buildings and there will likely be multiple owners who choose 2000 Clarendon as their home because of the smoking ban. I believe that the decision by The Bush Companies to ban smoking will result in stronger sales and I expect more developers in Arlington and the surrounding DC Metro to follow suit.

On October 15th I’m hosting a panel and info session on smoking bans in existing condo buildings. If you are interested in attending or getting a recording of the meeting, please email me at Eli@EliResidential.com.

2000 Clarendon Sales Update

If you’re in the market for a condo in the Rosslyn-Ballston Corridor and aren’t aware of 2000 Clarendon, it’s because marketing has been very limited and nothing has been entered into the MLS yet (hopefully you saw my column introducing 2000 Clarendon in April). However, demand has been high enough without a full marketing push that over 50% of the units are already under contract.

The shift in demand within the Arlington condo market to larger units with 2+ bedrooms is evident at 2000 Clarendon, with impressive demand for their 2BR and 2BR+Den units and double-digit waiting lists. The 1BR+Den floor plans have been nearly as popular, but 1BR sales have lagged. I expect the 1BRs to move rather quickly once they’re entered into the MLS for broader distribution.

The developer is releasing units for sale by floor and to-date ten of the fourteen floors have been released with floors 9, 11, 13, and 14 yet to be offered. Some units on the upper floors are expected to have direct DC views.

If you’re interested in learning more about available units at 2000 Clarendon or other new condo development in Arlington or the DC Metro, feel free to reach out to me at Eli@EliResidential.com.

The Most Important Planning Tool For Condos

Question: How often should a condo building conduct a Reserve Study?

Answer: In my opinion, the Reserve Study is the most important planning tool for Condo Associations because it provides a roadmap for how much money needs to be saved and what projects the Board should prioritize.

What is a Reserve Study?

A Reserve Study should be done by an engineer who specializes in condo or apartment buildings. The engineer inspects all of the common elements like the roof, garage, hallway carpeting, pool, etc to determine the remaining useful life and major repair schedules for all common systems/elements. For buildings around here, the cost usually starts around a couple thousand dollars and goes up from there.

After the inspection is complete, the engineer provides a report that generally includes:

  • Summary of the common systems
  • Maintenance or repair recommendations
  • Replacement schedule over the next 30 years
  • Estimated annual cost of repairs and replacement needs over the next 30 years
  • Analysis of the Association’s current reserve balance, annual reserve contribution amounts, and projected annual costs to determine if the current balance and contributions are enough to support costs over the next 30 years

How Often Should a Study Be Done?

Virginia Code states that a new Reserve Study should be done at least once every five years. This will still be the case when the new code becomes effective on October 1 2019.

Who Cares?

The Reserve Study is important for many people including owners, Board members, management, and buyers.

  • The financial analysis is critical for the Treasurer to determine monthly fees and reserve contribution levels
  • The repair schedule allows the Board to set priorities for themselves and management to solicit bids for major repair or replacement projects.
  • Homeowners must provide a copy of the Reserve Study and current reserve account balance to buyers once they go under contract. Buyers have the right to cancel a contract within three days of receiving this information so having an updated Study and sufficient reserve funds is important.
  • Buyers should carefully review the Reserve Study and compare the recommended reserve balance and contribution levels with the current balance and current-year contributions in the budget.

Funding Depleted Reserves

After completing a new Reserve Study, you may find out there are insufficient reserve funds and contribution levels. Boards generally have two options – increase condo fees or issue a special assessment.

If the reserve deficiency is 5+ years out or relatively small, there’s likely enough time to slowly increase fees until you’re caught up. However, increasing fees by too much can have a negative impact on sale prices, so sometimes a one-time special assessment is in the best interest of the owners. A special assessment may also be your best option if the money is needed quickly to cover reserve costs in the next few years.

Not only does Virginia Code request Associations to complete a Reserve Study at least once every five years, it’s good practice for all stakeholders to have an update Study available for better financial planning and facility management.