Condominium tower developers have a long-term trend on their side. High-rise living is inevitable in a county running out of space for new homes.
But pardon them for having some near-term concerns.
“It’s clear that the heat is off the market,” said Tim O’Brien, senior vice president for the Irvine office of Chicago-based Fifield Cos., which plans twin condo towers near South Coast Plaza in Costa Mesa.
A cooling housing market is set to test dozens of condo towers under construction or planned from Irvine to Anaheim.
Speculators, who helped drive sales at the county’s first condo towers along Jamboree Road in Irvine, seem to have moved on.
And at least one real estate analyst said he thinks some of the towers now planned around the county won’t be built before demand picks up again.
“Developers are targeting a thin market segment,” said real estate economist Walter Hahn, who does consulting work from Irvine. “If they’re smart, some of them will stop where they are.”
Condo developers say they are undaunted.
“High-density development in Orange County is going to happen,” said Cory Alder, president of Santa Ana-based developer Nexus Cos., which is building twin towers near its headquarters. “Its time has come.”
There now are eight towers, totaling about 1,000 homes, in construction or in sales mode, in Irvine and on the edge of Santa Ana along MacArthur Boulevard.
Roughly an additional 30 high-rises with some 3,000 homes have been proposed throughout the county, including big projects in Costa Mesa and Anaheim.
No one has said they’re putting off construction because of a slowdown in home sales and prices that are flattening out.
But there have been a few hiccups.
In August, Shea Homes, the homebuilding arm of Walnut-based J.F. Shea Co., pulled out of early plans to build a 573-home development in Santa Ana that included a 24-story tower.
The company reportedly withdrew its proposal due to rising construction costs, and a desire to focus on low-rise homes.
In Irvine, slow reselling of condos by speculators at Bosa Development Corp.’s Marquee Towers at Park Place has become a source of gossip for local real estate executives.
Those issues haven’t deterred developers.
In Santa Ana, Nexus is well under way with construction for its two-tower, 349-condo development at MacArthur Boulevard and the Costa Mesa (55) Freeway.
The company’s Skyline at MacArthur Place project should be done by early 2008. In a departure from other projects, Nexus has opted not to start selling condos until the $350 million project is further along. Sales there won’t begin until next year.
Across the street from Nexus’ project, a second Santa Ana development is moving forward. Promenade Pointe recently began pre-sales for its 18-story building.
Besides a 187-home tower, the project includes an additional 100 low-rise loft homes. Franco Mola’s Coastal Rim Properties Inc. in Santa Ana and Canada’s Pointe of View Development are behind the project.
Promenade Pointe still needs final city approval.
Last month, the Aliso Viejo office of Miami-based Lennar Corp. and Canada’s Intergulf Development Group started initial construction and sales for a two-tower project in Irvine called Astoria. The 240-home project is part of Lennar’s Central Park West development.
Meanwhile, the Irvine office of Phoenix-based Opus West Corp. and Scottsdale’s Geoffrey H. Edmunds & Associates Inc. are pressing on with a third tower along Jamboree in Irvine as its first two high-rises there near completion.
Developers say they understand the market is shifting.
They “will have to go back to the fundamentals, which is to sell the best product,” Fifield’s O’Brien said at a recent real estate conference.
Condo towers get a lot of attention. But they only are a fraction of the homes being built locally, Opus director of real estate development Matt Montgomery said.
That limits competition, he said.
Overbuilding of towers is unlikely, given the high cost of construction and rigid approval process in cities such as Irvine, Montgomery said.
“It’s not an easy process to build here, unlike San Diego or downtown Los Angeles,” he said.
In many cases, developers are going after OC’s wealthiest homebuyers.
Typical prices for smaller condos in the high-rises start around $600,000 and move well past the $1 million mark for larger condos.
The condos run from about $600 per square foot to $800 per square foot.
Some owners at Bosa’s Marquee Towers are asking nearly $2 million for their resale condos.
Most of the condos likely will sell above the county’s median home price of about $633,000.
Emile Haddad, chief investment officer for Miami-based Lennar and head of the homebuilder’s Western operations, said it’s unfair to describe condos like those at his Astoria as being “luxury priced.”
In Irvine, the median price of a home is nearly $1.1 million, well above the $650,000 starting price for the cheapest condos in Lennar’s towers, he said.
“A project like Central Park West is going to be the answer to the affordability issue” in Irvine, Haddad said.
Astoria has seen close to 20 sales reservations, something Haddad calls a positive sign in a housing market that has become “more challenged.”
The developers of Promenade Pointe in Santa Ana said they’ve sold 30 condos, including those at the top floor.
Promenade Pointe is aiming for a late 2008 opening, said John McMonigle of the McMonigle Group, a Newport Beach-based brokerage that handles tower condos and other upscale home sales.
The pricier condos are seeing more interest than the lower-priced ones starting at around $550,000, he said.
“If we’d had more penthouses, we would have sold them out, too,” McMonigle said.
The first two Opus towers along Jamboree Road are nearing completion and are sold out. A third tower, adding an additional 105 homes, is about half sold as construction begins in earnest.
Some have speculated that nervous buyers,seeing the towers more as an investment than a home,would back out of pricey contracts as the market softens.
That hasn’t happened, Opus’ Montgomery said.
“The closer we get to finishing the first two towers, the more interest increases for the third,” he said.
