Generations of Americans have embraced home ownership as the achievement of the American Dream. And more and more, people are now choosing an urban home within walking distance of stores, restaurants and entertainment rather than a house with a yard.
So the news that Southern Land Co. plans a new high-rise building that would add about 280 luxury apartments in downtown Fort Worth was hailed with fanfare by prospective urban dwellers and advocates for downtown residential growth.
But some were quietly disappointed that the announcement again did not include condos as a residential option.
“There is a strong need for residential units in downtown Fort Worth so having more options is a good thing,” said Mary Margaret Davis, a broker and Realtor specializing in urban sales. “But there is a strong demand for condos and there is just not enough available to meet that need.”
As brokers such as Davis and others clamor for more condos, downtown advocates such as Andy Taft, president of Downtown Fort Work Inc., are joining the chorus.
“We would love to see more condo development in downtown and the urban core,” he said.
Slowly, there has been some progress, but industry experts say financing and liability concerns are among the issues that have stymied condo development since the end of the recession in Fort Worth.
Taft said 11 “for sale” units were recently completed on Henderson Street and those units, which are townhomes rather than condos, were the first to be built in the past five years. Townhomes are conjoined units similar to row houses and owned by individual residents. Condominiums are buildings or groups of buildings in which the units are owned by individuals.
Downtown Fort Worth is home to nearly 8,000 people and has about 4,000 apartment units available with 2,400 more under construction or in the pipeline in the next 36 months.
Downtown rentals have posted an average occupancy rate of 95.9 percent since 2006, and downtown rents have risen nearly 16 percent during that time, hitting an average of $1,700 in 2016, according to Downtown Fort Worth Inc. research.
Based on international industry standards, Fort Worth should have about 24,000 condo and apartment units, representing about 3 percent of the city’s population of more than 830,000 residents.
“We have less than 1 percent,” she said.
Condo development is a fairly recent part of the downtown real estate landscape. U.S. Rep. Kay Granger , R-Fort Worth, was the first person to live in downtown Fort Worth – in quarters above her office – since the 1920s, Davis said. Downtown condo development began in earnest in 2000.
“Demand really took off after Sundance Square Plaza opened in 2013,” said Debbie Hunn, a broker and Realtor who is part of the Urban Group for Williams Trew Real Estate.
Hunn said there are 872 condo and townhouse units in downtown and 674 units in the West Seventh Street area. Yet, except for eight of the 11 units at Museum Townhomes on Henderson Street and 11 unsold condos at the 23-unit Museum Place in the West Seventh district, there are no new condos left to be sold, Hunn said. All that remains are resale units.
“Prices have gone sky-high because there is so much demand and no new inventory,” Hunn said.
Hunn lives in a condo in The Tower and handled sales of the building’s 288 units. The 35-story former Bank One building was severely damaged by an F3 tornado in March 2000. When the building re-opened for residential living in 2003, the plan was that half the units would be apartments and the other half would be condos.
But the condos were so popular that all the units were sold as condos within three years.
“The key to a successful condo development is being in the right location,” said Tony Landrum, developer of The Tower and Museum Place condos.
Still, even with a good location like downtown Fort Worth, condos are more difficult and riskier to build than apartment projects.
With an apartment building or complex, the developer can realize cash flow right away through rent or by selling the development to an investor, Landrum said. With condos, the developer has to sell each unit individually, which can take several years.
Also, financing for a condo development is harder to obtain than for an apartment complex or other type of commercial project.
“There’s not a lot of outside money coming into Fort Worth and that makes this market difficult to build equity,” Landrum said.
Taft said another drawback is a 10-year statute of limitations against defects on condo developments in Texas, meaning that the developer is liable for defects such as a broken elevator button for that whole time.
On the buyer side, mortgages through government-backed Fannie Mae can be problematic in downtown developments that combine retail and restaurant uses with residential units, Hunn said.
Also, condo association fees can add hundreds of dollars per month to the cost of a condo, experts say. The median sale price of a downtown Fort Worth condo or townhome in 2016 was $262,750, according to the Downtown Fort Worth Inc. data. About half of downtown’s condo buyers were under age 40 and the other half was above that age.
Luxury condos, particularly those above the Omni Hotel, can cost $4 million or more because of the amenities that are shared with the hotel, including a fitness center, restaurant and room service.
Fort Worth isn’t the only market struggling to attract more condo development. Dallas has similar trouble and has attracted mostly expensive condo developments, including some ultra-luxury units priced at $400 to $600 per square foot, according to Paige Shipp, regional director of Metrostudy, a housing industry analysis firm.
“Austin is the only city in Texas that has attracted those giant skyscraper condo buildings near downtown,” Shipp said. “Everybody wants to live near downtown because everything is going on there.”
For the same reason, downtown Fort Worth with its vibrant mix of work, entertainment and urban life is a better condo market than Dallas, Shipp said.
So far, condo investment hasn’t materialized, largely because single-family detached homes are still affordable in Fort Worth. In past building cycles, condos became an attractive alternative to the high prices of houses, she said.
But with increasing demand for urban living options, Shipp predicted, more small condo development projects on infill lots will take off.
“Downtown has that 24-hour lifestyle and that’s what people want,” Shipp said. “The big condo developments are risky investments in DFW but the smaller developments would be a very good fit in Fort Worth.”