In December, I spent a month writing about Hawaii real estate. Several of the articles showcased new and planned high-rises in the Kaka’ako area of Honolulu that were almost exclusively targeting foreign investment and wealthy local buyers wanting to trade their nest for a high-rise perch. You may also recall that many of these buildings were selling out in days.
The big Kahuna in the area is Howard Hughes’ 10-plus-year development called Ward Village covering 60 acres. They are not alone. One high-rise that hadn’t broken ground is called Vida … well, “was” would be the more accurate term as of last Friday. Developers cancelled the project after “only” selling approximately 40 percent of the 262 units (priced from $1 million) despite being on sale for 18 months. In Hawaii real estate if you’re scrabbling for sales after 18 months, something’s wrong.
In Dallas, a 40 percent pre-sale before the first shovel of dirt was moved would be occasion to rejoice, but markets are different.
What Went Wrong?
One of the issues is surely an oversaturation of super-expensive high-rises in the same area. There are over 1,000 lux condos being built in a six-block radius. Most of them are targeting foreign buyers seeking a safe haven to park cash, but Vida was aimed at more local buyers. The units were larger (starting at 1,418 square feet) than you’d get elsewhere for the money (opening price of $705 per square foot) and promised all manner of upgrades and slick finishes – Sub-Zero/Wolf appliances, Asko dishwashers, walnut flooring, guest suites, etc. However, the location was problematic, being in a slight no-man’s land but more importantly, many of the units were likely to be walled in by future development (from Howard Hughes).
The local wealthy may also balk remembering that Kaka’ako is/was an area of tumbledown warehouses that will, for the time being, surround the complex (until they’re also developed). Other projects in the area, built in the 1980s when the area was first “ripe” for development. The movement lost steam, fizzled and hurt property values.
But all in all, a decent deal on paper given the prices (where $1,000-plus per square foot is almost trivial).
Running Out of Rich People?
Oahu developers, like Dallas, have been almost exclusively focused on picking the pockets of the super-rich high-rise shopper. The timing and tugging of the Ward Village project may have cleaned out the available local wealthy population capable of springing for a $1 million-plus condo (and HOA dues starting at 93¢ per square foot).
I’ve said it before, even in hot, hot Dallas, there are only so many rich, high-rise buyers … and let’s face it, we’re not a Hawaiian-grade second home destination. Developers need to start thinking about high-rise housing for the rank-and-file buyer. In Dallas, the last “middle class” high-rises were The Beat in the Cedars and downtown’s 1505 Elm and Metropolitan that were built/converted about a decade ago.
Within a stone’s throw we’re already seeing the Ltd. Edition at Fairmount and Turtle Creek, the unnamed lux rental high-rise across Fairmount, Bleu Ciel and of course Museum Tower, all hair-pulling for the same multi-millionaire buyers. Many of these buyers are already moving into the Stoneleigh or are currently living at the Ritz, One Arts Plaza, Vendome, Azure, and W Residences. So stiff is the competition that rumor has it Bleu Ciel recently poached a buyer from Ltd. Edition.
Sure there are all these relocating corporate HQs moving into the metroplex with their alphabet soup of highly paid VPs, SVPs, EVPs, CEOs, CTOs, CMOs, CIOs, and COOs. Unfortunately, I think they’re way more likely to stick close to their offices and schools, all of which are located closer to Santa’s North Pole digs than the urban core of Dallas.
Certainly some of these luxury high-rises Ltd. Edition have taken their sweet time getting out of the ground, but I wonder how long it will be before a future opulent project falls off the rails in an oversaturated market.
Isn’t it time for developers in Dallas to consider building high-rises for buyers who don’t need to validate their success with Sub-Zero appliances and private elevators?
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