Apartments trump condos in downtown Champaign housing boom

Apartments trump condos in downtown Champaign housing boom

CHAMPAIGN – After Ryann Hubbard Monahan graduated from the University of Illinois, she didn't pack up and leave Champaign-Urbana for a job in Chicago, St. Louis, New York City or elsewhere.

She stayed in town and, after marrying Chris Monahan in February 2009, moved into his condominium at One Main in Champaign and embraced the downtown experience.

"We loved our condo. We were close to coffee shops, food venues and downtown art festivals and concerts. It was so easy to go and take advantage of all the city has to offer," the local television reporter said. "I didn't have the downtown Chicago experience. This was my downtown experience," she said about living in One Main.

The condo, however, is now up for sale after they decided to buy their "dream home" in southwest Champaign, Monahan said.

"I miss it. I miss sitting on my balcony and reading the paper in the morning," she said.

In the last decade, the number of apartments and condos available to people who want to live downtown Champaign has grown. More apartments above businesses have been renovated and new, higher-end condominiums have come on the market, including Uptown on Columbia at Hickory and Columbia streets, One Main at One Main Plaza and M2 on Neil at 301 N. Neil St.

But as the economy has shifted in the past two years, with more workers facing furloughs and uncertain employment futures, and as 100 percent-financed mortgages became not as common as they were during the housing boom, it appears demand for apartments is outpacing condominium sales.

Within about a year after One Main opened in 2004, the 23 condominiums in the five-story commercial, office and residential building had sold, said Cynthia Faullin, sales executive with One Main Development. Next month, about a year after the first condo owners started moving into M2 on Neil, the second project for One Main Development, 10 of the 51 condo units there have sold, according to Faullin.

M2 recently started offering some of its units – a total of 19 one-and two-bedroom units – for rent.

"They are flying off the page," Faullin said. "In downtown Champaign, I think there is a huge market for rentals."

The unfinished units in M2 rent from about $1,100 to $2,000 a month.

"What's nice is a number of these (rental) units will turn into purchases," she said. The tenants might purchase their current units or they might buy east-facing units. (The rentals are west-facing units).

In some cases, the new M2 tenants are people who have started a new job and are hesitant to buy a condo right away, or they have accepted a one-year appointment at the University of Illinois and want to find out if that appointment will be extended for three or five years before making a purchase, she said.

Enticing potential buyers now are tax credits and low mortgage rates, but compared with previous years, it's not as easy to get a mortgage. Lenders like to see higher credit scores and down payments, Faullin said.

People 35 years and younger who live in downtown Champaign may earn a decent salary, but they may not have a lot of money saved for a down payment on a higher-end condo, said Michael Markstahler, who developed the Uptown on Columbia condo project several years ago and who rents apartments in the downtown area north of One Main and M2.

Once those residents start having or planning to have children, they tend to buy a house elsewhere in town for the same amount of money, he said.

Downtown Champaign is "a joy," Markstahler said. "We have a diamond."

However, "as long as it takes 12 minutes to drive in (to downtown), you're not going to live there. Unless you're younger. Unless you want to be in the clubs, the bars, going to galleries and openings and you want that experience of walking out the door and into excitement," he said. It's just so easy to drive to and from downtown Champaign from the outlying residential areas, he said.

Originally, Uptown on Columbia was going to be a much bigger project with a total of three phases. But he scaled back those plans.

"I made a mistake. I'm lucky. I made a mistake on a six-unit project," he said.

He is now bullish on the market for apartments. The Uptown on Columbia condos are now leased out. And he is renovating apartments in The Hickory building nearby.

Until the late '90s, many of the upper floors of the buildings in downtown were empty or were storage rooms, said T.J. Blakeman, a Champaign city planner. He credits the city's redevelopment incentive program with boosting the number of apartments available on the upper floors of several downtown buildings, including apartments above businesses like Christopher's Fine Jewelry, Guido's bar and grill, Boltini Lounge and Cakes on Walnut.

The program, which has now ended, started in 1994 but didn't really pick up until after 2000, he said. The city spent about $3.6 million in the redevelopment incentive program, which helped leverage almost $21 million in private redevelopment, he said.

All told, about 60 new apartments were added to the downtown tax increment financing district and the nearby East University TIF district, according to Blakeman's calculations.

"The demand has been still very strong for apartments downtown," he said.

What has made apartments more attractive recently?

"Not too long ago, people would get out of a rental situation as quick as they could," Faullin said. But things have changed. "People are just hesitant. They've seen how quickly the economy can shift," she said.

Is there a certain segment of people who want to buy a condo in downtown Champaign?

Yes, said Markstahler and Faullin.

Markstahlher described the buyer demographic as a group of fairly high-educated people with a higher level of income, who don't have children or have grown children. They're the type of people who like the idea of living in a secured building because they might just close the door and leave to travel for a month, he said.

Faullin said so far they've sold M2 condos to people of every age, from the mid-30s to the mid-80s.

And one incoming family to M2 does have children of high school and college age.

The Strausers are doing the opposite of what the Monahans did. Dolly and David Strauser left behind a five-bedroom house in southwest Champaign for a two-bedroom unit in downtown Champaign. They'll be moving into M2 in May.

Dolly Strauser said the idea "to simplify our lives" was sparked by a vacation in London, during which they stayed at a bed and breakfast in town.

"We loved it. We got up and we walked out. Everyone lived in smaller quarters, but you go to the park, you walk and you bike more," she said.

To make sure moving to downtown Champaign was something they wanted to do, the Strausers rented a unit in the downtown area for about a year. They got rid of their Suburban and became a one-car household. They started biking and walking more.

Strauser said they loved the M2 condos, especially features like the big windows and the modern kitchens. What also helped them decide to buy in M2 was when County Market opened on Springfield Avenue within walking and biking distance of downtown and when rentals of the Zipcar became available in downtown Champaign. Another plus: being close to the train station.

Their boys – 18, 17 and 15 years old – are all on board, she said.

After taking a break from holding open houses over the winter, M2 is now hosting the events again from 1 to 3 p.m. on Sundays. People coming through have tended to be a mix of those who are moving to Champaign from other parts of the country or have been here for a couple of years, she said.

As the economy has shown signs of stabilizing, the open-house traffic has picked up, and compared with the One Main open houses, the visitors to the M2 events have tended to be people who are genuinely interested in buying a condo, Faullin said. They're not tire-kickers.

With the recent move of companies such as the engineering firm Clark Dietz to downtown Champaign, more employees may want to live downtown as well, Blakeman said.

And putting the M2 units up for rent not only brings in cash flow to the developer, it also brings more people into the building and to downtown Champaign, Faullin said.

In Markstahler's view, a downtown "used to be where you buy your suit. It used to be retail center." In 2007, the Champaign City Council voted to allow residential units to be located on the ground floor in the central business district. And some of the apartments now under construction at The Hickory are on the ground floor.

With the city allowing residences on the first floor, the downtown can become more of a "village experience," he said, a cultural center home to specialty shops, arts, music and food.

"And having more people living and being in the village – I think that's very exciting," he said.