New Condos Lure More Residents Downtown, Developers Closely Watching Demand for Units

BY STEFANIE MURRAY AND TRACY DAVIS
News Staff Writers
It doesn’t quite compare to her previous living quarters in New York City, Chicago and Israel.

Still, it’s close.

First-time home buyer Shirli Kopelman closed Wednesday on her upper floor, one-bedroom Liberty Lofts unit – which features views of Michigan Stadium, floor-to-ceiling windows and a spiral staircase – and planned to spend this weekend moving in and unpacking.

“You can almost get everything (downtown) without having to drive. … For me, it’s starting to feel like a city,” said Kopelman, 38, an assistant professor of management and organization at the University of Michigan’s Stephen M. Ross School of Business. “It’s really a community and something I never felt growing up in Ann Arbor Hills – I’m not a big fan of fences.”

She joins the steadily growing ranks of new downtown Ann Arbor residents moving into the area’s first residential developments to come online in years. People started moving into the 68-unit Liberty Lofts, at 315 Second St., in August. Residents will begin moving in Loft 322 at 322 E. Liberty St. in December.

In the next two years, almost 800 new residential units will become available for downtown Ann Arbor living – which far outpaces the 274 units that became available downtown between 1990 and 2000.

So far, demand appears to be keeping pace.

Of 353 units in five projects, all of which are taking reservations or selling units, 185, or just over half, have sold or been reserved.

The success of the hundreds of urban condos and lofts – which are primarily for sale, with a handful of rentals and some low-income and affordable units in the mix – is being closely watched by developers, planners, city officials and everyone else interested in the future of downtown.

“We are very pleased with the pace at Ashley Terrace, especially considering the lowered consumer confidence in southeast Michigan,” said Kristine Gosselin of Joseph Freed Homes, which has plans to develop at least three downtown residential towers. Ashley Terrace is under construction at the northwest corner of Ashley and Huron streets.

“We feel very fortunate to have a desirable product in a place where people want to live.”

It’s no secret Michigan has struggled with high unemployment, relative to the national rate, over the past few years as the auto industry has downsized. The housing market in the state has softened this year, to the point where sellers of single-family homes are seeing their asking prices dwindle as houses stay on the market for months – parts of Washtenaw and Livingston counties included. Sales are flat to down, while the number of homes on the market is up, and there’s no question it’s having some effect on new condo sales.

Year to date through September, condo listings are up 13 percent in Washtenaw County, while sales are down 11 percent, according to the Ann Arbor Area Board of Realtors. The median condo sale price is $163,000 across Washtenaw County, which is substantially lower than the starting sale prices of the new downtown condo units being built.

The range of prices between the three projects currently under way – Liberty Lofts, Loft 322 and Ashley Terrace – goes from $180,000 to $990,000.

Some initial interest in new downtown condos slowed when it was time to sign on the dotted line.

At Liberty Lofts, for example, more than 70 percent of the 68 units were initially reserved when sales began in March 2005. By August last year, only half of the lofts had binding purchase agreements – some of which is normal for a new project, but part of which could possibly be tied to the economy.

Peter Allen, a partner in the Kingsley Lane project, said that reservations for his four- and nine-story project in downtown’s quiet northwest corner hadn’t moved as quickly as he had hoped.

“There’s no question the economy in southeast Michigan is affecting the housing market in Ann Arbor,” he said. “New supply and new construction is not absorbing as fast as anyone would have expected it to.”

Developer Michael Concannon, who recently won approval for The Gallery, said that Washtenaw is still a bright spot in Michigan’s economy, and that it’s perceptions about the state economy bleeding into the local market that are the problem.

Aside from any real or perceived economic troubles, 800 units in roughly two years could be a lot for a market the size of Ann Arbor’s to absorb.

The city postponed issuing a request for proposals for developing the old Kline lot – the surface lot on the northeast corner of Ashley and William – in part because of the number of downtown units that were becoming available.

Susan Pollay, director of the city Downtown Development Authority, said the question is not whether there are too many projects becoming available, it’s how quickly they’ll be bought.

And that depends on just how sustained interest in downtown condo living will be.

Steady demand, so far

Loft 322 has been held up as the poster child that there is, indeed, demand for housing downtown. The 21-unit condominium complex, at 322 E. Liberty St., sold 17 of its lofts on the opening day of sales in February 2005 – a good eight months before a shovel ever dug into the ground. Sale prices ranged between $370,000 and $830,000, and residents are expected to start moving in during December.

“We didn’t expect to sell out that quickly,” said Mark DeMaria, a principal in Denali Development, which developed the lofts. “It shows loft living is very ripe for Ann Arbor and obviously in our opinion, the demand is going to (continue) to be strong even though the housing market is slow right now.”

Denali Development, a Royal Oak-based company, is planning more downtown Ann Arbor residential projects. The company is partnering with local developer Ed Shaffran to scout potential sites. DeMaria declined to say where they’re looking or what their next project will entail.

Loft 322 was the first of the newest wave of residential developments to launch sales of its units since Ashley Mews several years ago – and Ashley Mews is still trying to sell four of its unfinished penthouse units, which are listed for sale between $650,000 and $1.2 million.

The Mews development began construction in 1999 and finished in about 2002. The 47 townhouses there finally sold out in 2005 – a delay that many attributed to the price of the condos, almost all of which were north of the $300,000 mark.

Interest is there

Alex Milshteyn, a Realtor with Edward Surovell Realtors, said he is “constantly” showing the downtown condo models and building sites to clients. One client is waiting to close on a unit at Liberty Lofts, and a second is considering an Ashley Terrace condo.

Previously, the options for owning a residential downtown unit included mainly 101 N. Main St., Sloan Plaza and Tower Plaza, Milshteyn said. Resales were slow to come on the market and were usually pricey.

“For the first time, people have selection in downtown Ann Arbor,” Milshteyn said. “Before, you could rent downtown, but you couldn’t really buy. The demand has been great.”

Michael Christie, 33, will move into his 1,000-square-foot Loft 322 unit next month. It’s more expensive by far than his 2,000-square-foot Scio Township house, he said. It’s also more conducive to his lifestyle.

After the 45-minute drive home from running his warehousing and transportation company in Brownstown Township, Christie said, he just doesn’t want to drive any more. He can walk to bars, restaurants, a gym and some grocery stores.

Heading into 2007, the question is whether buyers like Christie will continue to invest in downtown residences when Citi Centre Lofts, William Street Station, Metro 202, The Gallery, Kingsley Lane and the all-rental Ann Arbor City Apartments come online.

The buyers will do so, says Christopher Leinberger, director of the graduate real estate program at the University of Michigan and a fellow at the Brookings Institution think tank in Washington.

Leinberger thinks Ann Arbor is “one of the finest walkable urbane places in Michigan” and has the highly educated work force drawn to living in downtown condominium and loft complexes.

“There’s no question there is pent-up demand for it; the issue is whether the economy will allow people to move,” Leinberger said.

Changing demographics

With people staying single longer and having fewer children, and the number of empty-nesters growing as baby boomers age, there is demand for a different kind of housing, Pollay said.

At least one business plans to move here specifically because of the growing downtown residential market: ProSource Wholesale Floorcovering.

The St. Louis-based company says it has revamped its suburban-based showroom approach to target urban places like Ann Arbor, in anticipation of increased demand. It plans to open a local showroom in 2007, along with sites in New York, Boston, Seattle, Los Angeles and Miami.

New downtown resident Bob Galardi, deputy superintendent of administrative and human resources services for Ann Arbor Schools, said he had always wanted to live in the center of the city. He falls into the empty-nesters category.

He and his wife Susan rented their Burns Park home and moved into Liberty Lofts. They liked the idea of a refurbished space and no longer having to worry about lawn care and other home maintenance.

Galardi said he loves the place and now has some cache with his grown children and their friends. Living downtown, he said, “We’ve become cool.”

Contact Stefanie Murray at smurray@annarbornews.com or 734-994-6932. Contact Tracy Davis at 734-994-6856 or tdavis@annarbornews.com.

Click here to visit the Liberty Lofts website!