The ongoing slump in the housing market is changing the face of many of the metro area’s mixed-use projects as developers alter their plans to include fewer for-sale homes or convert them to rentals instead.
Architect Brad Buchanan, principal of Denver architecture firm Buchanan Yonushewski Group LLC, said he’s noticed the change over the past six to 12 months.
“I do not think that we are drawing a single for-sale residential project,” Buchanan said. “There have been times in this company’s business cycle that 25 to 50 percent of our work was for-sale multifamily, mid-rise housing.”
With havoc in the housing market and the capital markets in turmoil, the move away from for-sale residential is occurring not only in Denver but across the country as well.
“It’s just market-driven more than anything else,” said Ed Boxer, principal of Essex Financial Group. “It’s acknowledging market realities and how lenders are viewing for-sale condos. If there’s a residential component, it will probably start out as a rental unless you’re fortunate enough to have presales.”
Kevin Ashby, principal of the Denver office of the Rossetti architecture firm, said two projects he’s been involved with are in flux, including the redevelopment of the former Gates Rubber factory near Interstate 25 and the Broadway light-rail station and another in Troy, Mich., which has steadily decreased from 400 for-sale residential units to 125.
Cherokee Denver sold the first phase of the Gates site to Trammell Crow Residential, which will proceed with building apartments, said Ferd Belz, Cherokee’s president here. But the next phase of the project will be smaller than initially planned and will have more office, retail and rental projects.
“We’re trying to decide how much, if any, for-sale residential will go in,” Belz said. “The challenge with mixed-use is that even in perfect times, you still have three or four product types that are all coming together on one project, and all are in different phases of the real estate cycle.”
Stats show downturn
The Denver metro area recorded 1,611 new home starts during the fourth quarter of 2007, the lowest number of quarterly starts in seven years, according to Metrostudy, a provider of market information to the housing industry. Housing starts for the year were 10,135, down 36 percent from 2006.
One of Buchanan’s projects, Hangar 2 at Lowry, has changed from all for-sale residential to a mix of retail, office and self-storage space.
“People aren’t pushing the panic button, but the market ebbs and flows,” Buchanan said. “I would describe the market as very tenuous.”
Tom Gougeon, chief development officer for Continuum Partners, said company officials decided a year ago to build apartments at its development at Interstate 25 and Belleview Avenue.
“When we started planning those first blocks, we had more for-sale housing,” Gougeon said. “But we were leery of where the market might go, so we decided we didn’t have to make for-sale work in the first phase. That turned out to be a good choice.”
Continuum also is reconsidering how it will develop Kent Place at South University Avenue and East Hampden Avenue. Initially, the project was expected to have 111 for-sale luxury units.
“We’re not sure it makes sense to put 111 units in the market,” Gougeon said. “We’re trying to come up with a way to have a little more flexibility when we start.”
FasTracks feels pinch
Transit-oriented developments also are feeling the pinch, said Gideon Berger, transit-oriented development associate for the Regional Transportation District’s FasTracks team.
“There are projects that are in limbo or developers rethought the mix,” Berger said.
Long Beach, Calif.-based Urban Pacific Group revised its plan for 725 for-sale units at the Enclave at Axis near the Church Ranch light-rail station in Westminster to include 235 rental units. The apartments and 54 condos will be developed in the project’s first phase.
“The early condo phases are expected to be fairly small,” said Scott Choppin, founder and chief executive of Pacific Urban. “It arguably makes sense not to do any for-sale until we see where the market goes.”
McStain Neighborhoods pulled out of a project near the Mineral light-rail station. It may get involved in the project again in the future, said Eric Wittenberg, the company’s president and chief executive.
The 17-acre project, being developed by Quadrant Properties, is zoned for 280 residential units, said Rick Patten, principal of the firm.
“It’s a unique infill piece,” he said. “But even with that, the market is a little soft for housing right now.”
Margaret Jackson: 303-954-1473 or mjackson@denverpost.com
