As Louisville goes through its progression toward a downtown reawakening, suburban homeowners are warming to the idea of purchasing luxury residences in the Central Business District.
Problem is, there’s not much to buy. The downtown condominium inventory is pretty thin. As real estate pro Phil Scherer of Commercial Kentucky says, “it’s going, going, gone.”
According to figures recently released by the Louisville Downtown Partnership, of the 342 units in the commonly accepted boundaries of “downtown” — the river south to York Street and from Hancock Street west to Ninth Street — there are only 15 unsold units.
The data encompass 16 different properties located in the CBD, from the largest (the 76-unit Waterfront Park Place on Witherspoon Street) to the smallest (the single condominium unit in Louisville Glassworks Lofts).
The LDP also provided data for nine condominium properties just outside of downtown, called the “edge neighborhoods” in Metro government argot. In those properties, only six of 99 units are unsold.
I’ve done the math for you: just 21 total condominium units are available in or close to downtown.
Those availabilities are in:
- Falls City Lofts, 415 E. Market St., three available units;
- Waterfront Park Place, 222 E. Witherspoon St., one available unit;
- City Homes of the Edge, 409-415 Hancock Green Pl., four available units; and
- Soho Lofts, 110 S. Campbell St., two available units.
- There are also 11 unsold units in the Fleur de Lis, 324 E. Main St., but those are currently rental properties, as part of an arrangement between the property owner and the lender.
In a seller’s market like this, you can imagine that what’s available will be pricey. Through September, completed sales transactions ranged in price from $606,000 for a 2,069-square-foot unit in Falls City Lofts to $138,600 for a 1,372-square-foot unit in East Market Lofts (325-327 E. Market).
On a per-square-foot basis, the priciest sale was around $314 for a 1,659-square-foot unit in Waterfront Park Place; and the least-expensive was the East Market Lofts unit, at $101 per square foot.
What’s still available? Through September, the Downtown Partnership reports, the properties at the top of the list (read: most expensive) are:
- A two bedroom/two bath unit at Waterfront Park Place, 3,300 square feet, asking price $1.399 million;
- A two bedroom/two-and-a-half bath unit at Preston Pointe (333 E. Main St.), 3,300 square feet, asking $1.395 million; and
- A three bedroom/three bath unit at Waterfront Park Place, 3,085 square feet, asking $1.125 million.
The lowest-priced end of the list:
- A 1,093-square-foot, two bedroom/two bath unit at Fifth Street Terrace (900 S. Fifth St.) going for $159,950;
- A 697-square foot, one bedroom/one bath unit at Mercantile Gallery Lofts (305 E. Market St.), going for $188,000; and
- A 912-square-foot, one bedroom/one bath unit at Bycks Lofts (532 S. Fourth St.) going for $214,000.
Greater supply always drives down prices. It’s Economics 101. But it doesn’t happen to be Downtown Louisville Economics 101. So if you’re waiting for an increase in condominium properties to break the logjam, industry insiders say you’re going to have a very long time to hold your breath.
“Once the recession hit, financing the building of new condominiums became very difficult,” says Scherer. “The land in the CBD is very expensive, and getting financing for condo development is tricky and full of stipulations. Plus, of course, would-be buyers are still having trouble getting conventional financing on 25-30-year low-interest fixed-rate mortgages.”
That leaves the option of rehabbing existing downtown commercial property for reuse, and there’s plenty of that in downtown Louisville’s inventory. But federal historic preservation rules make it easier to get tax credits if the residential units are being developed for rent rather than for sale.
So the Starks Building at Fourth and Muhammad Ali is being converted to rental units. The Henry Clay Building conversion, at Third and Chestnut, started out as a combination of three floors rental and one floor of condos. At one point, there was the thought within City Properties Group of converting some of that rental space to condominiums, but operations manager Lee Weyland said the cost of conversion would not have justified the return.
Waterside at RiverPark Place, on River Road east of downtown, already has an apartment complex. But original plans to build two condominium towers closer to the water’s edge have been altered. One of those towers will now be rental instead.
Even the massive new Omni Hotel – bounded by Second and Third, Liberty and Muhammad Ali – will have 225 luxury rental apartments (Omni Hotels & Resorts CFO Mike Garcia referred to them as “swank”) on the top of the 30-story building, above the 600 hotel suites.
Supply is not the only thing driving the market. There’s also that other factor: demand.
“There is simply more current demand for rental than for ownership,” says Jim Baines, deputy director of research for The Louisville Downtown Partnership. “Younger people want the downtown lifestyle vibe, but often they’re the ones without enough of a down payment to buy, or the credit history to get a mortgage, or the lifestyle values that cherish home ownership as part of the American Dream.”
So, he says, they’re likely to be drawn to properties like the new apartment complex being built at Main and Clay by Bristol Development Corp. It will have the youth-oriented amenities of a suburban apartment community — swimming pool, recreation grounds and clubhouse — but still within easy walking distance of downtown restaurants, bars, Yum! Center, Kentucky Center for the Arts, and the like.
And the redevelopment of The 800 Tower City Apartments on South Fourth Street is expected to return luxury high-rise renting to Louisville and also, maybe, extend downtown vitality to the area south of Broadway, between downtown and Old Louisville.
The tight downtown condo market also is squeezing the rental market. As of September, last available figures from The Louisville Downtown Partnership show 33 different residential rental properties downtown — from the 274-unit Kentucky Towers, at 430 W. Muhammad Ali, to the three units at the 832 E. Franklin St. apartments — with a total of 1,989 units.
And only 215 were currently empty.
More and more, says Baines, people eager to live “downtown” are going to have to expand the definition of “downtown” – east to as far as Butchertown, south beyond Broadway and into Old Louisville, west beyond Ninth Street (the traditional western boundary of the Downtown Management District) or even north across the river in Southern Indiana.
As for rents in the CBD and edge neighborhoods, that range is from $385 a month for a studio apartment in Hampton Hall (209 York St., south of Broadway, near Spalding University and the main branch of the library), to $2,500 for one of the two loft units in the 110 Building on West Main Street.