January 26, 2006

Vegas Condos Go Cold


We reported on this over a month ago. Nice to see Time magazine catch up... Wonder what kind of screaming deals you can get today in Vegas compared to 6 months ago?

Now that several high rollers in the Las Vegas condo-hotel game, including luxury properties linked to Michael Jordan and Ivana Trump, are either folding or selling their holdings, a growing number of players are losing their taste for big bets on high-rise, residential real estate development.

Over the past two years, as high-rise fever spread across town, prices for the luxury apartments ballooned, fetching as much as $500 - $1,000 a square foot— or up to $1.5 million for a one-bedroom— at the peak. Buyers, mostly interested in flipping them for quick profits, eagerly anted up five-figure down payments, while developers planned more than 70 luxury towers holding a total of about 43,000 units on or near the Strip and downtown. But the intense competition for the city's limited supply of contractors sent construction costs skyrocketing 30% last year, just as lending policies tightened, interest rates climbed and sales started to slow.

Currently, just 18 projects are underway, and nervous developers have called off three high-profile projects over the past seven months.

"The days of the two guys from the East Coast or Canada coming into town and promoting a condo development with a website and a dream are over.”

10 comments:

Anonymous said...

What happens when developers cancel projects? There are zillions of these multi-million dollar condos scheduled to be built here in Florida, but there can't be that many reckless millionaires living here or moving here to justify the construction.

This sounds a lot like the pyramid schemes of the '60s and '70s. Surely the developers know that the buyers they're targeting are just investors playing Monopoly, and that when all is said and done, there will be hundreds of thousands of gaudy condos sitting empty because nobody can actually afford them.

Does anybody keep track of the number of planned condos and communities versus the number that actually get built? Donald Trump has a tower supposedly going up in Tampa, but after many months, there is no sign of construction.

Anonymous said...

One of the posters, maybe here, says he was an in area in the early 1990's where the developer just called in a bunch of bulldozers to raze the half-finished shells of houses. He's looking forward to it again.

New Housing Sales tomorrow at 10 AM EST. It will be interesting to see if the end-of-the-year promos by Centex et al helped them make the consensus.

FWIW, here is the Weekly Economic Calendar from thestreet.com. "Don't go short without it!"

Wes D said...

Veronica:

The Trump tower is being built in Tampa, it's just west of the AmSouth building and they are working on it right now. There are also some condos going up further along Cass Street.

The developers don't care if the buildings are empty as long as they get out of town with their money. The DOTCOM crash spurred construction of many new office buildings. In the crash these buildings emptied out and many are still sitting empty. Around the Tampa area, there are ENTIRE corporate campuses that are empty today. These newer empty buildings are depressing the prices for other office space. The same thing will happen with condos. With 10,000+ empty condos on the market, prices for every other kind of real estate will be negatively pressured. It's going to be a bloodbath.

Oh in my neighborhood too (Gateway area of ST. Petersburg) another 600 unit apartment complex has just turned into condos. There is way too much supply on the market.

Anonymous said...

Actually, the Trump Tower is not being built. The site has been cleared a bit, but nothing is happening.

Other huge projects have even less going on, but the developers claim people are selling their South Tampa homes to move into them. Many of these are in terrible areas and ugly neighborhoods, so why would people living in nice houses in nice areas sell and move into more expensive condos in bad areas, and face even worse taxes ($2,500 for every one-hundred-thousand dollars of cost)? It isn't believable.

The developers claim that these projects haven't moved forward much because they can't get concrete or workers, but I've been to their sites and they use illegal Mexican immigrants, and there is certainly no shortage there.

I don't think one can bulldoze a skyscraper.

I read yesterday that Tampa has millions (?) of square feet of empty office space. My question is, why would anybody build highrise condos in downtown Tampa, when there is nothing in downtown Tampa to do? Are the buyers going to gaze blissfully out of their windows at the dreary old empty office buildings across the street and think how lucky and progressive they are to be living downtown?

Katy said...

Does anyone remember the story a couple months ago about the guy who lived in a shack in Vegas and he kept turning down multi-million offers for his property because he thought the offers would just keep going up? Bet he's regretting that decision now...

If you find the story, could you post? Thanks.

Anonymous said...

I was just gonna post about that exact same story, but Katy beat me to it. This is Las Vegas for you, where the excessive greed and "we are bubble-proof" mentality run rampant.

I grew up a half mile from naked city so I couldn't help but laugh when I first read this story. If you know anything about naked city it is the section south of Sahara Ave behind the Stratosphere north of the strip, considered the most dangerous area of town, especially back in the 80s.

Converting naked city into some new, upscale resort area is nothing new. When the Stratosphere was built in the early 90s, there were these ambitious plans to buy up all that naked city property behind it to boost its value and revitalize that area. But nothing happened. I still won't go near there, high rises or not.

Katy said...

Thanks, yes, that's glorious.

Anonymous said...

ah, no big deal. i expect prices on some on these things to get cut in half -- and they would still be expensive..c'mon, forget all you troubles, c'mon be happy... everybody sing...

Anonymous said...

Phoenix

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blogger said...

anon w/ phoenix numbers - what site do you use to get the daily listings? I see weekly, but that daily one is beautiful (beautifully ugly)