It may come as a surprise to many that the hot condo market in downtown San Diego has some developers cashing out prior to building their projects. Yes, so far The Elle, Triangle and a couple of other projects are now up for sale by the developers who have approval to build them but are choosing not to.
The Elle, a proposed 174 unit high rise in the Columbia neighborhood and Triangle, a proposed 57 unit project in East Village are up for sale. What�s actually for sale is the land and the approved plans for the projects. Asking price for The Elle is $17.5 million and The Triangle asking price is being kept confidential.
Why are these projects for sale? One speculation is that the raw materials costs are rising so fast developers no longer feel they can make a profit. Now that sales volume has slowed down and inventory is sitting for a much longer time period, developers don�t feel they can sell at premium prices to cover their costs. In the past year developers have been able to sell at premium prices to buyers that have not done their homework with regard to �market prices�. Now with the competing downtown San Diego condo inventory of almost 600 resale units, a lot of buyers are either shopping around or have become aware of what comparable resale units are selling for.
It�s not just the condo developers in downtown San Diego that are running into this problem. Its also hit in several other cities including the Las Vegas condo market. In the long run, this is a good problem if you already own a condo, with less supply coming on the market; it puts upward price pressure on existing inventory. This upward price pressure is what the market needs in order for future developments to one again begin, thus the real estate cycle continues.
Written March 2006