Thursday, April 30, 2009

Alberta Arts District now part of Bizzaro World

From the Daily Journal of Commerce:

While looking at potential properties to renovate within the Alberta Arts District, developer Brad Fowler saw a lot of artists who didn’t have a place to live, work and sell their goods. In his view, they were missing live-work units, where occupants can employ all three uses.
“There’s efficiency to living where you work,” he said.
Fowler saw an opportunity to capitalize on the district’s arts scene, which led to his latest redevelopment project, the Alberta Arts Building.
He’s developing the project with his partner Phil Cohn through their company, Fowler Andrews LLC. Construction is expected to begin in June and last about six months.

Live-work units are new to Fowler, a developer for 20 years. The Alberta Arts Building will be his first such project.
It won’t be his last. In 2010, around the time that construction stops on the Alberta Arts Building, Fowler will start a new development at Northeast Sixth Avenue and Couch Street. That project will be a mixed-use building and include seven live-work units on the ground floor. It will also feature 3,800 square feet of ground-floor retail and 69 market-rate apartments.
Real estate professionals say that targeting one group of professionals in an area, like Fowler is doing in the Alberta Arts District, is a prudent decision.

“Customers looking for artwork will go to a cluster to save on transportation costs,” Mildner said, “especially when the goods are imperfect substitutes.”
But because these are Fowler’s first live-work units, he doesn’t know what the rental rates will be. He’s seen little market research relating to live-work units.
What he has seen, however, is that most live-work units are sold, not leased. That observation concerns him as he prepares to lease the units.
“It’s worked well as a for-sale product because of the costs associated with it,” he said, but added that selling real estate is too risky in the current economy. “I mean, you can build it for $250 per square foot and sell it for $400 per square foot and make the numbers work. (But it’s) not so easy when you rent.”
At $1.2 million, the project is expected to cost less than other live-work buildings because it’s a renovation of an existing tilt-up concrete building, said the project’s architect, Don Vallaster, a principal with Vallaster Corl Architects.

For Fowler, the concern is whether his project will be able to recoup its budget.
“If anything, there’s an unmet demand in Alberta,” he said. “But right now, I have no idea how they are going to rent.”

This is like a time warp back to 2005 when any project would be a success. I don't understand how projects like this pencil out.