After their kids had graduated from high school, Lisa and Gregg Larson 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,” Lisa Larson said. “It’s like we have a custom home built just for us, surrounded by great places we can walk to.”
Condominium developers are building high rises near downtowns, luxury loft-style homes next to shopping centers and smaller infill-connected homes in popular neighborhoods of Scottsdale, Phoenix and Tempe at a record pace.
Scottsdale has several new projects, from the luxury condos in north Scottsdale’s DC Ranch of Silverleaf drawing second-home buyers to the new midrises in Old Town Scottsdale drawing Millennials and empty nesters.
“It’s clear people want to live in connected areas,” said Chris Chamberlain, a partner with North American Development Group, which is developing the El Dorado on 1st condos in central Scottsdale and a new condo tower in downtown Phoenix.
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. New-home condo prices are climbing even faster.
Who’s buying
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.
Most empty nesters still want a high-end home with top-of-the-line appliances, interior finishes and amenities. And they are willing to pay the price.
“Condos are gaining market share in the Phoenix area, selling in larger numbers and seeing higher prices,” said Mike Orr, real estate analyst with the Cromford Report. “The new attached luxury jewel-boxes (condos) are where prices are really climbing.”
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 high-rise 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.
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.
Lock and leave
A growing number of the high-end condo buyers in Scottsdale aren’t second-home buyers from out of state, unlike the trends of past years, said David Hovey Jr., vice president of condo and apartment developer Optima Inc.
“More local people are downsizing from large Valley homes to places they can lock and leave to travel,” said Hovey, whose firm is currently developing the 12-story luxury Optima Kierland condo high-rise 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
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 in downtown Phoenix are examples of new infill condo projects that are well-designed and priced to meet the needs and wants of prospective buyers.
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.”
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 real estate analyst Mark Stapp, director of the Master of Real Estate Development program at Arizona State University.
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