Providence, R.I.—Standing in Waterplace Park, next to the slender canal of the Woonasquatucket River, a visitor to Providence could probably look up and see most of the more than 1,000 apartments and condominiums now planned or under construction here.
When their work is done, developers hope to create a new housing market in this once-quiet town of universities and empty Victorian-era factories.
The new neighborhood is in the heart of Providence, in the shadow of the Providence Place shopping mall, the office towers of downtown, and the dome of the state capitol. It’s also next door to an Amtrak train station, with Boston just a 40-minute train ride away.
“We’re becoming almost a suburb of Boston,” said Steve Dylag, principal with Keystone Consulting, a local market analyst. Developers are counting on drawing commuters with jobs in Boston to their luxury projects. Wealthy Providence-area households are also beginning to return to the city, and the city’s population is expected to grow about 5 percent a year for the foreseeable future.
By the end of the year, workers will finish two super-luxury high-rises overlooking the train station: 193 condos at Waterplace, right next to the park; and another 103 condominiums at the Residences at the Westin, a 32-story, red brick tower mixing hotel rooms and condos. Prices at both projects range from about $400,000 to more than $2 million.
That’s shockingly expensive for Rhode Island, where the median price of a single-family home was just $265,000 in 2006, according to the Warren Group, a Boston-based real estate firm.
Providence’s housing watchers are eagerly waiting for construction to start on a third condominium tower located just south of the park on downtown’s once-busy Westminster Street.
Blue Chip Properties, the developer of One Ten, had planned to build 140 super-luxury condominiums by the end of 2008, although the number of condominiums is reportedly being reduced to make room for a new W Hotel at the project.
But the area near the train station already has one struggling condominium project, in a neighborhood of old factories just west of downtown. In late 2005, condominium converters reportedly paid $81 million, or about $245,000 per unit, to buy Jefferson at Providence Place from apartment developer JPI, which had only just finished developing and leasing up the property.
The condo converters, the Athena Group of New York and Rhode Island’s Paolino Properties, changed the name of the property to 903, in honor of the project’s ZIP code: 02903. Unfortu-nately, the 330 condominiums at 903 have sold slowly, and unsold condos are now being offered for rent by the developer.
Rental developers break ground
New rental apartments are also under construction on a lot just north of the train station. This February, developer R.S. Roth, Inc., began work on Capitol Cove after years of delays due to the rising cost of construction. Capitol Cove will bring a mix of 248 mid-priced rental apartments and condominiums to the market starting June 2008. The developer is keeping the ratio of rentals to condominiums flexible to allow for changes in the growing condominium market.
Capitol Cove is right next to one of the strongest existing rental properties in the market: Avalon at Center Place. Owned and managed by AvalonBay Communities, Inc., Center Place charges rents that start at $1,399 a month for a 719-square-foot one-bedroom unit, including a washer and dryer, and rise to $3,750 for a 1,542-square-foot, three-bedroom penthouse.
You’d think local apartment managers would be worried about competition from new rental units or unsold condominiums entering the rental market.
But local developer Cornish Associates is more concerned with bringing a critical mass of people to downtown, or “Downcity.” Since 2001, the company has opened more than 200 apartments in downtown Providence. The Peerless, Cornish’s biggest downtown project, is now 92 percent occupied with residents that pay an average of $1.40 per square foot in rent.
The Promenade at the Foundry is the other top apartment property in Providence, according to Dylag. Just a 15-minute walk from the train station, the 25-acre, historic factory complex on the Woonasquatucket River has been rehabbed into 220 loft apartments with 12- to 14-foot ceilings, exposed brick, and stainless steel appliances. Rents average between $2 and $2.34 a square foot, and start at $1,100 a month for a studio and $1,900 for a 1,250-square-foot two-bedroom unit.
The Foundry’s rents are high compared to the apartment market in the rest of the city, where an average studio rents for about $1,000 a month and average two-bedroom units rent for $1,500. All of those rents are down slightly from 2006, according to a survey of 81 apartments by apartmentratings.com.
Apartment owners in the Providence area seem to be holding onto their apartment assets after a flurry of sales in 2005 and early 2006. Capitalization rates, or the income from a property expressed as a percentage of its sale price, range from 5.3 to 6.1 percent, Dylag said.
The occupancy rate ranges between 90 percent and 95 percent in Providence, with several new properties stalled around 90 percent, according to Dylag. Even so, he can’t think of a single property on the market that is offering prospective tenants concessions like a month’s free rent.
Considering all the new construction going on, that’s a promising sign for property owners in Providence’s multifamily market.