The past year saw the beginnings of a recovery for investors and developers of apartment buildings in Salt Lake County, but the same can't be said for the saturated condominium market where projects - most of them owned by lenders through foreclosures - had trouble finding buyers even at "give-away" prices.
That was the report from Van Dam & Associates Tuesday in the firm's annual Forecast '89 review of the Salt Lake apartment and condominium markets.According to company president Lee H. Van Dam, the Salt Lake apartment vacancy rate dropped from 14.1 percent to 10.5 percent in 1988, although not all projects showed that much improvement. Despite the drop in vacancies, he said a large number of apartment complexes still remain in a "distressed" condition (foreclosure, Chapter 11, receivership, forced sale, and others).
Nevertheless, 1988 was a much better year than '87 for apartment complex owners as rents firmed up overall and landlord "giveaways" became less common.
But there were no major apartment projects constructed during the year, with only 84 multi-family units permitted in the county by Sept. 30, and Van Dam sees no significant construction of apartments during the coming year. "The numbers still don't work," he said.
Van Dam predicts apartment vacancies will continue slowly downward during 1989, reaching single-digit levels by mid-year. Larger, newer units will improve faster than smaller, older ones. Rents will continue to firm with some increases seen in the most desirable projects.
"Overall, the recovery will continue at a modest pace over the next several years," he said.
But there is no such light at the end of the condo tunnel, Van Dam made clear.
"Most projects have only been able to nibble a little bit from their inventory of unsold units," he said. "Sales have been slow and difficult. Absorption is only about a third to a fifth of what was projected several years ago."
There were no new major condo projects built in '88 - and won't be for several more years, Van Dam predicts - but some existing complexes added a few new units. Prices, however, have remained at 1987 levels.
"A great deal of money has been lost in the condo market," said Van Dam.
And 1989 will be much the same. He predicts another slow year for sales as the current inventory will take another 3-5 years to be absorbed. Prices will remain at current depressed levels in order to generate sales and lenders will continue to offer below-market financing terms to attract buyers.
Van Dam termed 1989 "another frustrating year" for lenders, who own most of the unsold condo units having been forced to take them back from owner/developers. "The recovery will continue to be slow and painful."
Van Dam and Associates specializes in property management, brokerage and real estate consulting services for apartment and condominium properties and other commercial real estate.