When plans to turn the Borgata, a once-posh Scottsdale shopping center, into luxury condominiums were launched five years ago, the response was tepid.
The housing market’s recovery from a devastating crash had just begun, and the allure of condos hadn’t yet caught on in metro Phoenix as it had in other big cities like New York, San Francisco and Chicago.
But when the Enclave at Borgata’s first residents moved into their million-dollar condos early this year, they found plenty of neighbors had already settled in. More than 60 percent of the homes had sold.
Condominium developers are building highrises near downtowns, luxury loft-style homes next to shopping centers and smaller infill-connected homes in popular neighborhoods of Phoenix, Scottsdale and Tempe at a record pace.
Since last year, condo sales throughout the Valley have almost tripled, while prices are up 17 percent, outpacing gains for the housing market as a whole.
“Condos are gaining market share in the Phoenix area, selling in larger numbers and seeing higher prices,” said real estate analyst Mike Orr with the Cromford Report.”The new attached luxury jewel-boxes (condos) are where prices are really climbing.”
Valley luxury homes by the numbers
A year ago, some housing market watchers were concerned too many new condos were going up too fast in metro Phoenix. So far, sales and prices are beating expectations.
- More than 4,000 new condos were started or completed in the past two years.
- The median price for new condos has climbed to $384,000 from $301,000 a year ago.
- The median price for a new single-family home is about $302,000.
- During the first quarter of 2017, 50 new condos sold, compared to 11 during the first three months of 2016.
- The average price of new condo is $547 per square foot.
- Luxury condo sales have quadrupled from last year.
Housing shift underway
A shift toward denser infill housing for metro Phoenix is occurring mainly because of changing lifestyles of baby boomers and millennials, who want luxury residences with the amenities of an urban setting. Also, rising home values, in general, are helping people sell homes farther out and move closer in.
Downtown Tempe launched the post-crash condo trend in 2012, with highrise projects on Mill Avenue and Tempe Town Lake.
Downtown Phoenix, which went without any new housing for decades, now has new highrise condo projects planned on several prime corners.
At Portland on the Park, a 149-unit condo project on Portland Street and Central Avenue, 75 percent of the condos have sold. Prices start at $235,000 and climb above $1.2 million.
“Our first residents are a part of a movement writing the next chapter in a more connected, more robust downtown Phoenix,” said developer Tim Sprague, principal of Habitat Metro.
And a 31-story residential tower was recently announced for downtown Phoenix’s Arizona Center by North American Development Group.
“It’s clear people want to live in connected areas like downtown Phoenix now,” said Chris Chamberlain, a partner with North American Development Group, which is also developing the El Dorado on 1st condos in central Scottsdale.
Other areas attracting infill development include Downtown and Central Phoenix, Midtown, the Camelback Corridor and Biltmore areas, and Central Scottsdale from Borgata to Old Town Scottsdale.
Lisa and Gregg Larson’s kids had graduated from high school, and they were ready to move from their north Scottsdale house into a smaller home.
The couple began looking a few years ago and put an offer on a downtown Scottsdale condo that fell through. Then last year, they saw the Enclave at the Borgata and bought their 3,000-square-foot loft condo near Lincoln and Scottsdale roads for more than $1.7 million.
“We moved from a 6,000-square-foot home but don’t feel cramped at all,” said Lisa Larson. “It’s like we have a custom home built just for us, surrounded by great places we can walk to.”
Most of the buyers of new metro Phoenix condos are either Millennials or empty nesters like the Larsons. Both groups want to be closer to restaurants, shops, job and often light rail. And they don’t want the upkeep of a house with a yard, so they can travel and go out more.
But most empty nesters and baby boomers still want a high-end home with top of the line appliances, interior finishes and amenities. And they are willing to pay the price.
Lock and leave
David Hovey Jr., vice president of condo and apartment developer Optima Inc., said a growing number of high-end condo buyers in Scottsdale aren’t second home buyers from out of state, unlike the trends of past years.
“More local people are downsizing from large Valley homes to places they can lock and leave to travel,” said Hovey, whose firm is developing the 12-story luxury Optima Kierland condo highrise on the north Phoenix/Scottsdale border.
That’s why Paul Mashni, CEO of PEM Real Estate Group, sold his large Valley home a few years ago and will move into a new condo in El Dorado on 1st this summer.
“I travel a lot and with my kids moving off to college, it made sense for me to have more of a lock-and-go situation without all of the maintenance related to a home,” Mashni said.
Location, location, location
Millennial Sean Coleman has always been keen on the urban lifestyle and bought a condo in Tempe when he went to Arizona State University. He still owns that home and is buying another condo at Contour on Campbell near the Biltmore area in Phoenix, where prices start in the $300,000s.
“I’ve always lived in condos or apartments and prefer urban living,” said Coleman, director of technology at Drawbackwards. “I never had a desire to live in a big house and accumulate stuff. I am more interested in collecting experiences than physical possessions.”
But not every infill housing project is drawing buyers at the rate developers had hoped. Experts attribute the slack sales in those cases to location and pricing.
“Attached projects dominate the landscape in many parts of the Valley, but the reality is that about one in five infill projects is selling really well and others are struggling,” said real estate analyst Jim Belfiore of Phoenix-based Belfiore Real Estate Consulting.
He said the Enclave at Borgata and Portland on the Park are examples of infill condo projects that are well-designed and priced to meet the needs and wants of prospective buyers.
Urban homes in suburban settings
The desire for that connectivity feeling could lead to more condos and urban-style homes going up in metro Phoenix suburbs farther out. Developers are trying to figure out where the next great hub for new condos will be outside central neighborhoods in Phoenix, Scottsdale and Tempe.
“Behind the Valley’s infill growth is a trend toward people wanting to live near places they can interact with their neighbors more,” said Arizona real estate analyst Mark Stapp, director of the Master of Real Estate Development program at ASU. “More suburban developments in the Valley can have that urban feel.”
The Borgata shopping center, north of downtown Scottsdale, wasn’t considered a central location when it opened in the late 1980s. The upscale shops, situated on a large parking lot, were surrounded by vacant land.
But during the past few decades, the vacant land and parking lot have been filled with offices, restaurants, a resort and stores including a Trader Joe’s as more growth has headed north.
Living at the Borgata now, the Larsons can walk to several shops and restaurants and are only a short drive from downtown Scottsdale.
“We were originally looking in Old Town Scottsdale, but this is a better location for us,” said Gregg Larson. “It’s quieter, we can walk to shopping and restaurants, and we are only a $5 Uber ride from Old Town.”