In Boston’s luxury housing market, $17,000 a month buys a lot of bling.
Rent like that guarantees entree to the best neighborhoods, the finest restaurants and ceilings high enough to keep a pet elephant. But as prices soar to record levels, there is one thing that kind of money can no longer get you: An apartment at the ultra chic Mandarin Oriental.
The owners of the Back Bay complex are ending their leases with tenants in 25 apartments and converting those homes into condominiums. The one- and two-bedroom units are expected to command some of the highest prices in the condo sales market.
“The timing for this is impeccable,” said Kevin Ahearn, president of the real estate firm Otis & Ahearn, which is marketing the units. “There’s almost no inventory on the market at all, and demand is incredibly strong.”
A dramatic imbalance between supply and demand is driving condominium prices to record levels in Boston. Developers who have been constructing apartment buildings across the city are re-thinking their strategies. Some are beginning to produce condos for a city gobbling up units as soon as they hit the market.
In the Back Bay, the number of luxury condominiums available for sale has dwindled to about 30, an extremely low supply that is driving prices of the best units to obscene levels. So far this year, six units have sold for more than $2,000 per square foot, a price threshold rarely crossed in the city. One 3,500-square-foot condominium at the Four Seasons recently sold for more than $10 million, or about $2,900-a-square foot.
“It’s really amazing to watch,” said Larry Rideout, chief executive and co-owner for Gibson Sotheby’s International. “We’re starting to get almost a Manhattan feel with some of our real estate.”
The recent run-up in prices is caused by a rare confluence of factors. Boston’s population has jumped to about 650,000, an increase of more than 30,000 people in the last three years. While those new residents have generated more demand, the total inventory of units has not risen to meet it due to the economic downturn between 2007 and 2010. Construction of new condos stopped during that period.
The imbalance is affecting all segments of the condominium market. Units priced between $400,000 and $800,000 are also selling quickly, often for well over the asking price. But price increases have been particularly pronounced at the highest end of the market, which offers fewer options for buyers.
The Mandarin’s 25 apartments are expected to formally go up for sale in January. They range from 930-square foot one-bedrooms to two-bedrooms with 1,625 square feet. Buyers will get access to the Mandarin’s amenities, including the spa, fitness center, and 24-hour concierge service.
During the past year, units at the complex have sold for between $3.7 million to nearly $12 million, depending on their size and location within the building. Asking prices for the converted units have not been determined.
The seller, a subsidiary of the Irish Bank Resolution Corp., is also unloading 10 affordable apartments that were developed to comply with the city’s inclusionary zoning policy. Those units, which rent for between $1,400 to $2,000 a month, will be sold under a deed restrictions requiring that they remain affordably priced homes. The buyer would rent the units to their residents under those terms.
Representatives for the seller said leases for the Mandarin’s market-rate renters are not being renewed in order to make those units available for sale. Those units, contained in four floors at the western end of the complex, currently rent for between $4,700 and $17,000 a month.
Completed in 2008, the 14-story Mandarin complex on Boylston Street includes a five-star hotel with 148 rooms, 50 condominiums, 35 apartments, and restaurant space. Acclaimed chef Daniel Boulud recently opened Bar Boulud, a French-inspired bistro and wine bar, on the building’s ground floor.
A standard of luxury rarely seen in Boston — with prices to match — the Mandarin Oriental became an immediate center of attention that challenged the city’s traditional expressions of wealth.
But with the condo market now surging, it will get some significant competition in the years ahead. In Downtown Crossing, Millennium Partners is building 442 condominiums in a 625-foot tower on the site of the former Filene’s property. The 60th-story penthouse is being offered for $37.5 million.
On the South Boston waterfront, developer Joseph F. Fallon is also building 22 Liberty, a 109-unit building with sweeping views of Boston Harbor. Another large complex, with Boston’s second Four Seasons hotel, is also being planned at the edge of the Christian Science Plaza.