Low interest rates, commercial sales spike also highlights
The sale of the three Fleet Bank buildings in downtown Providence, steadily increasing home sale prices and a spike in commercial real estate sales were some of the highlights of the first half of 2003 in the real estate market.
Providence-based construction company Gilbane Properties announced in March that it would purchase two of the Fleet buildings – 1 Financial Plaza and 15 Westminster St. – for a total of $48 million.
Oak Brook, Ill.-based Inland Real Estate Acquisitions acquired the remaining Fleet building at 111 Westminster St. for $21.3 million on April 18, confirming rumors that had been circulating throughout the commercial real estate industry for almost a month. Fleet will occupy the entire building as its Rhode Island headquarters.
“This (sale) was not because (Fleet) wanted to get rid of the real estate,” said Joe Cosenza, chairman of Inland Real Estate Acquisitions. “They wanted to get it off their books. It eliminates them from having to depreciate it in the books and this (deal) is a deductible item.”
Commercial real estate has seen an increase in the number of freestanding buildings purchased as a result of the continuing low interest rates so far this year. Buying seems to be the smarter choice, said Michael Giuttari, president of NAI MG Commercial Real Estate Services.
“Interest rates are low and people start thinking too much; they decide to buy a building because it looks like a lot less to buy” rather than rent, he said. “If you have that money for the down payment, it’s a good idea.” One problem many run into, however, is coming up with $125,000 for a down payment for a $500,000 building.
“The lease side is stagnant,” Giuttari said. “And the inventory is fairly low.” But where there are suitable buildings for sale, there is activity, he added.
Another real estate trend is the resurgence of the office condominium, which had been non-existent in the market for a decade, he said. There was also a surge of new construction in the industrial real estate market earlier this year – there are six new buildings in the works at Highland Industrial Park in Woonsocket.
A war and subsequent rebuilding efforts in Iraq and a local economy still recovering from a recession didn’t deter home sales in Rhode Island during the first half of 2003. Sales only decreased 8.1 percent in the first three months of 2003, while prices remained high, according to a report from the Rhode Island Association of Realtors.
According to the report, 1,675 existing single-family homes were sold during January, February and March, compared to the 1,810 similar homes sold in 2002 during the same period. The median sales price increased during that three-month period, from $164,800 in 2002 to $210,000 in 2003.
“The reduced supply of existing homes for sale is keeping the number of transactions down and delaying others on home purchases,” said Sal Moio, president of the Realtors association and owner of Henry W. Cooke Co. “We haven’t noticed any softening in the real estate market yet because our inventories are still fairly lean and demand continues to outpace supply.”
Providence saw an increase in projects aimed at revitalizing the downtown area and bringing in new real estate. Four projects are in varying stages of completion; a number of them are considered luxury apartments and condominiums.
The Cosmopolitan at 100 Fountain St. will offer the most luxurious condominiums so far in the heart of the city – with each unit priced at $499,000 to $1 million. Jefferson at Providence Place apartments, scheduled to be completed in November, will have 330 luxury apartments ranging in price, with the largest ones costing $2,600 to $2,700 a month.
East Side Commons, the newest development from Pennsylvania-based Toll Brothers
Inc., will have condominiums ranging from $260,000 to $450,000.