A buyer's market in North Bethesda
Economic downturn has led to a glut of luxury apartments
Eric Goss found plenty of choices as he shopped for luxury condos in North Bethesda last weekend.
"I'm finding plenty in my price range," he said.
His real estate agent, Bill Agnostak, of Fairfax Realty said Goss was looking in the right place at the right time.
"It is saturated," he said of the luxury condo market in North Bethesda, while showing Goss a unit in TenTenOne Grosvenor, on Grosvenor Place on Sunday. "There's way too much stuff here. It's excellent for the buyers."
The county is currently developing a new sector plan for the area around the White Flint Metro Station in North Bethesda, with 9,800 new housing units anticipated over a 30-year revitalization period. According to the final sector plan draft to be presented to the Planning Board on Thursday, more than 4,500 residential units already exist or are in pipeline for White Flint. Overall, however, the area is dominantly commercial and the housing that is available tends to be single family homes or upper-tier, luxury apartments. County planners are hoping in 30 years North Bethesda will be a walkable community featuring not only retail and commercial developments, but also a more diverse, affordable housing stock.
But for now, sellers already there are finding even the Washington real estate market, traditionally insulated from disruption by the vibrant job sector that accompanies the staid presence of the federal government, has been tripped up by economic decline. Lately, banners advertising special leasing rates and open houses adorn Rockville Pike like a parade route, and condo-hired sign twirlers vie with beggars for the attention of motorists.
Even Delta Associates First Quarter 2009 Market Report for the mid-Atlantic region—a report cosponsored by real estate marketing firm McWilliams Ballard— concludes new condo sales in the Washington Metro Area over the past 12 months are half of what they were for the same prior period.
The report said condo prices in the Washington Metro Area are down 4 percent, with bigger hits in suburban Maryland.
John Lin, president of CapStar Commercial Realty, estimates the drop for some condos in North Bethesda is closer to 20 percent, and said the luxury rental market is affected as well. Lin sold a condo in The Sterling development on Old Georgetown Road a year ago for $800,000 to a client who intended to rent it out for $3,500 a month.
"Now the market [rental] rate has dropped to the low $2,000s," Lin explained. "A lot of people are bringing down the prices. Even the low-end market has been hit pretty bad."
Kenneth Wenhold, Washington regional director of Metrostudy , a national real estate market analysis firm, said with the glut of luxury housing in Bethesda and North Bethesda, the future of development there could change over the next few years. And as the plans come forward for new projects, such as the 9,800 units expected in White Flint, developers will need to carefully consider what kind of housing to propose.
"The area will definitely need more housing units, especially as the region grows. It's a very desirable area," Wenhold said. "The question is, what kind of units?"
The Delta Associates report said condominium shortages could be seen in the D.C. area as soon as 2011, but also said that's due in part to intended condominium projects being converted "in pipeline" to rentals by developers.
Chris Case, a resident of White Flint Station on Old Georgetown Road, said he used market forces to his advantage when buying his condo, waiting a year while he watched the price drop.
"We weren't going to buy at the price they wanted at first," said Case. "There's certainly people that bought [condos] at the price we passed on."
Agnostak said he recently sold two condos at White Flint Station, which is near a Harris Teeter and the White Flint Metro and is precisely the kind of walkable development being encouraged with the White Flint Sector Plan.
"There were some on the market [at White Flint Station] right now that sold for significantly less than what was paid for them," Agnostak said. "There's always people that are going to buy for the convenience, but they're not selling them as fast as they should be selling."
The environment doesn't scare Greg Trimmer, senior vice president of JBG, which is developing a 400-unit high-rise luxury apartment complex called North Bethesda Market on Rockville Pike. Trimmer said the development, which will sit atop a Whole Foods and a gym, is unique enough to sell on its own merits, and JBG is "hoping to be on the early side of the full recovery."
Trimmer said JBG is still 12 to 15 months from delivering the units, which are not yet being marketed for lease. "That's a lot of time for product to burn off the market."
JBG evaluated all options, including whether to market the units as condominiums, but settled on making them apartments because of market forces, Trimmer said.
"The way we look at it is we're optimistic for job growth in the Washington region and Montgomery County is a great place to live," Trimmer said. "The vacancy rate should improve."
Lin took a more dour view of more impending luxury units in White Flint. "That just gives additional pressure to the entire rental market," he said. "We're talking about a time bomb that is about to happen in a few months."