- Associated Press - Monday, May 23, 2016

SIOUX FALLS, S.D. (AP) - The pragmatist in Sarah Carnes told her it was time to quit renting.

“But given the point I’m at in life, I’m single and have zero desire to deal with the ramifications of owning a home, and I also help run a small business downtown, so I didn’t need to manage a household right now,” said Carnes, 29, CEO of marketing firm 9 Clouds.

She also wasn’t in a hurry to leave her downtown loft, where she has lived since moving to Sioux Falls in 2012 from the Twin Cities, the Argus Leader (http://argusne.ws/1XmNXut ) reported.

She lives within a five-minute walk of where she works, enjoys the quick access to the city’s bike trail and the sense of community she has gained through “way too much time at Queen City Bakery.”

“The nature of having a close-knit living space has been really nice for me,” Carnes said. “I’m still interested in the mortgage and that setup, but those options just weren’t available downtown.”

The residential market is changing, however.

Recently, Carnes became one of 16 buyers to commit to a condominium in the Jones421 project, one of several developments adding owner-occupied options to a downtown that up until now has had a limited supply.

“I know people have been wanting to have owner-occupied units downtown,” said Joe Batcheller, president of Downtown Sioux Falls Inc. “And it is kind of a new phenomenon for various reasons.”

Easier lending practices and buildings built to qualify as condominiums under city code have helped encourage owner-occupied housing, he said.

The condos that have sold downtown range from less than $200,000 to more than $1 million. Those more concerned about their cost of living are finding the money they save using a vehicle can offset a condo purchase downtown, Batcheller said.

“There are people, primarily millennials, who want to ditch the cost of car ownership,” he said. “And people want to own where they live. So the midrange condos will help serve that market niche. I think it’s encouraging.”

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Jones421, the project under construction at 421 N. Phillips Ave., has purchase agreements for 16 out of its 31 units - even though it won’t be ready for occupancy until the first quarter of 2017.

It’s owned by Jeff and Sheila Hazard, who have redeveloped several historic buildings downtown.

Their plan is to renovate the existing 1909 structure - a former seed company - and triple it in size by expanding to the south and adding a courtyard.

At one point, it could have been a combination of owned and rented units, but demand is strong enough it likely will be entirely owner-occupied.

Condos still available range from $189,000 to $685,000, with one to three bedrooms.

The smallest remaining unit is 690 square feet, and the largest is 2,500 square feet.

“We have ones that are downsizing, moving from the big house . and we’ve got younger people who have been renting and working really, really hard and can’t take the time to mow a lawn and like the downtown living,” Sheila Hazard said.

Anita Rau is one of those downsizing. She and her husband are selling their house in southern Sioux Falls and buying a 1,800-square-foot unit in the Jones421 project.

They don’t spend as much time downtown as they would like and want to be “where the action is,” she said.

“We had been searching (downtown), and in the last two or three years there hasn’t been a lot. So when we saw this project and looked at the area, it fit our goal to not be right in the heart of it but close to it.”

They like the nearby Falls Park West, are excited by the planned Levitt Pavilion entertainment area there and were sold by the view from the balcony of the third floor condo they decided to buy.

“The Hazards do an excellent job revamping things. It’s always quality work,” Rau said.

The developers’ reputation sold Carnes, too.

“That helped, too, being a new concept downtown, having confidence in the folks who are building it,” she said. “And I want to encourage the concept of Jones421, the idea of integrating the old and new and preserving the architecture of downtown.”

The residents also will have unique retail options available on the first floor.

The Hazards had planned it as commercial space and were considering trying to lease a significant portion to a restaurant but have decided to go a different direction.

Inspired by marketplaces in California and the Midtown Global Market in Minneapolis, they are planning a mix of micro-retailers that might need to lease spaces as small as 400 square feet.

The first floor totals about 15,000 square feet and would include common space for seating and restrooms.

“I want to have a mix: flowers, something that has a little bar, tap beer. I’ve got a guy who is real close on a coffee shop,” Hazard said, adding that such businesses could be a fit for the Downtown Sioux Falls Inc. retail incubator program. “At first, we were thinking a restaurant, and we had people interested, but this will be great.”

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As Jones421 draws residents to the Uptown area of downtown, Washington Square is attracting them to the south end.

The eight-story project east of the Washington Pavilion is scheduled to break ground around the end of the month.

Washington Square can accommodate 22 luxury condominiums on its upper three floors, and buyers are starting to move from a sign-up sheet to down payments now that approval has been granted from the South Dakota Real Estate Commission.

“The prospective condominium buyers’ reaction has been very positive and fairly consistent,” co-developer Chris Houwman said.

“They look forward to living in an urban environment that offers arts, culture, entertainment, retail, as well as active living and wellness. And they want to contribute to the downtown and to the community and continue to be engaged. They all appear to be extremely active people, which is a huge benefit to the Pavilion and other places like it down there.”

Tom Everist said he and his wife, Barb, have “a penciled-in spot” in the building.”

“We’re downsizing. It should suit us perfectly. We want to stay involved in the Sioux Falls community and don’t want to totally leave, so this is the perfect place to come in and out and have a place to stay,” he said.

“We always aimed at downtown. Before this, you were looking at a converted loft space, which is wonderful but a different experience than new construction.”

They like Washington Square’s proximity to entertainment and restaurants and say, not jokingly, that they know about half the people moving into the building.

“They’re all kind of contemporaries, and we’ve been friends for 40 years, so that’s an added benefit,” Everist said.

Joe Kirby is one of them and said he has been interested in eventually living downtown since the 1980s when he became involved in development there.

“I know downtown would be a place that would eventually be fun to live,” he said. “We’re also downsizing and simplifying our lives, and that seems a great way to do it.”

He and his wife, Jennifer, are working with the architect of Washington Square to design their condo.

The building “is very high quality,” he said. “It’s going to stand out in the community.”

About half of the square footage available in the building has been reserved. The condos that are left range from 1,700 to 2,700 square feet. They are sold as shell space from $245 to $280 per square foot. Owners then pay for their own finishes when they are ready to build out the space.

A rooftop terrace will include a community room with 270-degree views, a fitness center, outdoor patio, dog run, and flower and vegetable gardens. Owners will own a portion of the common space and pay monthly maintenance dues.

Once construction starts, it’s expected to take 18 months, although individual condos could take longer depending on finishes.

“We’re in no rush. When it happens, it happens,” Kirby said. “I’ve waited a long time for it.”

Buyers also are making commitments thinking this will be one of the last residences they purchase, Houwman said.

“They know while they’re here they might lose a spouse, and it’s comforting to know there will be a network of friends and things to do in the area. That was a different comment I wasn’t expecting, but I’ve heard it several times now,” he said.

On the lower floors, the building is planned for retailers, offices and parking.

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Signature Cos. pioneered downtown residential sales when it built The Residence at 13th Street and Second Avenue two years ago.

Of the seven town houses in the first phase, three have sold. Interest on the others is increasing, said Jim Costello, a Realtor with Keller Williams Realty Sioux Falls.

“We do open houses and get a lot of interest. It’s amazing. It seems like there’s been a lot of talk about residential housing downtown and the vibrancy,” he said. “We get all different types of people … people that work downtown and want to be downtown, and people who want to take advance of the amenities, the bars and restaurants.”

Town houses range from $288,000 for 1,645 square feet to $450,000 for 2,300 square feet.

They are multistory units, and a couple have or could include elevators, Costello said. All include two-car heated garages, fireplaces and rooftop access.

“I’ve met people who have moved to Sioux Falls from other areas of the country, and they’re used to this type of building, and it intrigues them because they haven’t seen anything like it in Sioux Falls,” he said.

Future phases will add more buildings and common garden space. Some of those town houses are slated to sell for as low as $175,000.

“I think a lot of younger people who come through love the idea and love the concept, but when you’re talking $300,000 it’s not doable,” Costello said. “But for some, it is affordable with interest rates being low.”

Signature Cos. is still discussing when the next phase will start.

“Nothing is set in stone yet,” said Jeremy Beating, a broker associate with the company. “It’s going to be built out. We just don’t know if we’re going to get it started this year or not.”

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For those who decide to buy a piece of downtown residential real estate, the resale market is mostly untested.

In the case of Washington Square, “the people who are looking at it all are very well-heeled and can do what they want to do even though maybe one year or 15 years from now if they decide they want to sell the market is probably going to be pretty thin,” said Jay Zea with Re/Max Professionals Inc. “But you never know.”

If the market kicks off downtown, condos “absolutely will hold their value,” said Tony Ratchford of Keller Williams. “There are a lot of professionals downtown who really like downtown and see it as a place to live and work and have fun.”

Baby boomers with income who like the active lifestyle of downtown will help drive the market, he added.

“And because of the limitation of the land, it’s not like you can just go buy another quarter acre and pop in houses,” Ratchford said. “So I think it will go the way of Minneapolis and some of the bigger urban areas, as long as they keep it neat and clean and energized.”

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Information from: Argus Leader, http://www.argusleader.com

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