Market Update – Inventories Remain Stubbornly High
Market Update – Inventories Remain Stubbornly High
“The Batterymarch Insider” is a brief snapshot of our current market thinking and some highlights of what we see going on in the downtown Boston market. As always, our “terms of use” apply. We encourage you to subscribe.
In this issue:
Market Update – Inventories Remain Stubbornly High
New and Noteworthy – $3,200+/sf in Downtown Crossing?
Mandarin Oriental, PH2B – “The Great Blight of Dullness” – Well Sold
190 Beacon Street – Great Unit, Even Better Price – Well Bought
What’s Catching Our Eye
Market Update – Inventories Remain Stubbornly High
The downtown real estate market has been robust. Year-to-date, Back Bay condominium sales are up 26% over the trailing four year average. Good quality, reasonably priced units are getting snapped up within days of listing. Are we looking at the same market mania the suburbs have been experiencing? We think not.
Unlike the suburbs, the strong demand for downtown properties is being met with increased supply. As of this writing, there are currently 145 condominiums for sale in the Back Bay, up 36% versus the trailing four year average. The supply of condominium units for sale currently stands at 5.8 months, a 53% increase over the average of the last four years.
What gives? Clearly the suburban market strength is largely driven by low interest rates. But to a large extent, the suburban market is a zero-sum game. People looking to trade up are faced with the conundrum of selling their primary residence for a fancy price and going into the market and buying a larger home at an even fancier price. Many of these would be sellers are sitting on the sidelines, which is exacerbating the tight inventory problem.
Contrast this to the high end downtown market where many owners have multiple properties and their city condominium may not be their primary home. We’ve previously commented on the underutilization of downtown condominiums. All one needs to do is walk down Commonwealth Avenue just after sunset and take note of all the dark units, often entire buildings. Unlike in the suburbs, most of these sellers aren’t upsizing or downsizing, they’re cashing out.
Demographics and new development are also playing a big role in the city market. Aging baby boomers, who years ago sold their center entrance colonials in Wellesley and bought two bedroom condominiums downtown, are moving deeper into retirement and have less need for their city properties. Add to this the wave of new supply coming from major developments that the market will need to digest (see our report “The Great Boston Building Boom”).
Downtown real estate market participants should keep a close eye on the supply/demand balance. As we see it, that balance is delicate.
New and Noteworthy
1 Franklin, unit PH4A - $13.5 Million in Downtown Crossing – This 4,200 square foot, 59th floor unit has stunning westerly views, but $3,214/sf in Downtown Crossing? The sad reality is that this area has been pretty hard hit by the pandemic. We think that there are better options for that kind of dough.
480 Beacon St, unit PH2 – After nearly 200 days on the market, the price of this penthouse triplex was cut for the third time. Now offered at $5.25 million ($1,556/sf), a 20% reduction from the original asking price. We can’t blame them for trying, but 20 year old (+/-) renovations should trade at a discount, not a premium, in our view.
We’re not big fans of triplexes, but with parking for three cars, good outdoor space, and an elevator, this one is starting to get interesting. Just don’t underestimate the cost of a comprehensive renovation.
Well Bought/Well Sold
Mandarin Oriental, unit PH-2B – “The Great Blight of Dullness” – Well Sold
Penthouse 2B at the Mandarin Oriental (776 Boylston Street) changed hands last week for $14.125 million ($3,809/sf), just shy of the asking price of $14.5 million.
If you’re looking to live in the lap of luxury, it really doesn’t get any better than this - top notch hotel service and even your own elevator to whisk you to your private rooftop terrace. The views are stunning and the finishes are top notch. Here’s our problem - we don’t love the building.
The Mandarin sits on the longest block in the Back Bay, it’s about three times longer than the average east west block. In her groundbreaking book, “The Death and Life of Great American Cities,” the late Jane Jacobs depicts long city blocks as non-pedestrian friendly and contributing to what she called the “great blight of dullness.”
We’re also not big fans of properties that are connected to shopping malls. Step out of the back entrance and you’re smack dab in the Prudential Center Mall, right in between Lulu Lemon and Under Armor. We suppose it’s nice that during a blizzard you can “walk the mall” without the need of an overcoat.
We actually don’t have a problem with the valuation. If you want high-end finishes, they don’t come cheap and we’d venture to guess that the cost of recreating this unit would be meaningfully more than the price paid. We also recognize that hotel service buildings are few and far between in Boston, but this location just isn’t our cup of tea, this was – Well Sold.
190 Beacon St, unit 3/4 – Great Unit, Even Better Price – Well Bought
Unit 3/4 at 190 Beacon Street has a new owner after just two days on the market. The sale price came in a $2.85 million ($1,160/sf) for the 2,455 square foot 3 bedroom mid-building duplex with one car garage parking. The unit features Bulthaup cabinetry, new high-end appliances, 14 foot ceilings in the main living areas, and new HVAC (air handlers and condensers).
The catch is that there isn’t an elevator and readers of our work know that is usually a deal killer for us. We’re overlooking the lack of elevator on this one for a few reasons. First, the unit is located in the middle of the building, so you‘re not hiking to the summit with every trip. Second, the unit owners appear to have plans to install an elevator and have amended the master deed to reflect that. Third, valuation at $1,161/sf represents great value for this unit at this location.
The seller on this one used a suburban-based sales agent and we can’t help but wonder if they left some money on the table as a result. In any event, the seller got a quick deal and the buyer got a great unit at an attractive price, this one was very – Well Bought.