Low condominium sales and a slowing market brought developers behind the old Newfoundland Telephone building in St. John's back to the drawing board last year, scrapping a plan for luxury condos in the derelict structure.
The building at 345 Duckworth Street, along with the former CBC building across the street and an adjacent parking garage, was slated to be converted to condos.
After several years sitting on the market with very little movement, Halifax-based developer the Hardman Group decided it was time to rethink at least one of the buildings.
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"The demand for the units wasn't high for condominium units so we revisited the project, looked at the numbers in terms of what rental income could be and felt that the building is better suited to be an apartment," said developer Colin Whitcomb.
According to Whitcomb, about a dozen people had their deposits on the condo development known as Mix refunded to them more than a year ago.
Once completed, the apartment development will look much the same as if it was condos: each unit is between 500-800 square feet and most have one bedroom.
While the rentals are expected to be on the higher-end, Whitcomb suspects the building will tap into a market not yet explored in downtown St. John's.
"The rental market in St. John's is very strong," he said. "There's not a lot of branded, multi-unit buildings in the city and absolutely none downtown."
The first step in turning the old Newfoundland Telephone building into rentals is to excavate land west of the building to make way for expansion, then obtain a building permit from the City of St. John's.
Opting for rentals instead of condos is a trend seen in Halifax, according to Chris Janes, senior market analyst with the Canada Mortgage and Housing Corporation (CMHC).
More affordable condos selling 'quite well'
High-end rentals typically appeal to people who want all the benefits of a condo without being locked into a mortgage, he said.
Janes said MLS data from up until the end of July shows there were about 280 active condo listings and about 62 sales in the St. John's area — a 50 per cent decrease from same period last year.
The average price is about $260,000, and Janes said that's a far cry from the average $400,000 condo in 2012.
One of the reasons why the market has slowed so drastically since the peak in condo sales three years ago is an oversaturated market, he said.
"Builders started getting overzealous, I think, back in 2012," Janes said. "We had I think almost 500 condo starts that year out of a total housing market of about 1,800 starts."
But not all hope is lost for condos in St. John's, Janes said. In fact, condos priced under $300,000 have been selling "quite well."
As for the former CBC building, Whitcomb said it's still being marketed as condos, but nothing is set in stone.
"I'm not 100 per cent sure that that's the best suit for that building," Whitcomb admitted. "There may be something more suited to the current market situation."