(Read more on the multifamily market.)
PHILADELPHIA-In the wake of the proliferation of Center City residential condos, rising construction costs and an up-tick in mortgage rates, Opus East has pulled the plug on its initial plans for a 39-story tower containing 292 for-sale residential units. Instead, it will develop a 14-story, 257-unit rental property at 1919 Market St. Ground will break in July, with completion two years after.
The cost-estimate for the original plan, announced in December 2005, was about $135 million. "By the time we got through the design process and zoning approvals, the costs, primarily for oil- and steel-related products, came in 32% higher than our initial pricing," Craig Guers, VP and general manager of Plymouth Meeting-based Opus East, tells GlobeSt.com. "That would move up condo prices by about $150,000 a unit. Interest rates also went up, and so did the number of condos in Center City.
"Together, these factors created an atmosphere of uncertainty, so we put the brakes on." The target market was young professionals, and initial pricing was between $299,000 and $800,000 a unit. "At the time, we figured we could provide young people an opportunity to own at a cost of between $1,500 and $1,700 a month. But now, that number went up to about $2,200 a month, and we lost our market," he explains. Furthermore, "the Center City rental vacancy rate is down around 1%, and there's no new rental product on line for the next three years."
The all-in cost for the new plan is about $100 million, according to Guers. Rental rates in Residences at 1919 will average about $1,600 a month in two years, when the building is complete, he says. One-bedroom units will average 700 sf, and two-bedroom layouts will be just above 1,000 sf.
The plan also includes 18,000 sf of ground-floor retail and a three-level underground garage with space for 172 vehicles. The garage will be public parking. No leases are signed for the retail space, but Guers says, "we've been contacted by two to three grocers and some banks and drug stores."
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