Back in December I wrote a post about how you can't count on preserving the view from your condo in Chicago. It's a scary thought and many condo buyers want to know what the financial impact of losing a view might be. So I'm always on the lookout for some way to measure the cost of having your condo view blocked. It's not easy.
There is currently a real life example playing out at The Residences At River Bend in the Fulton River District at 333 N Canal. For some time now this building has been living with the looming threat of development right across the river at Wolf Point. Even as far back as 2007 Crain's was reporting on a joint venture developing the Wolf Point project. So the potential development has been no secret but it's fate has been far from certain.
As you can see in the Google Earth image below The Residences At River Bend are on the west bank of the Chicago river with a yellow arrow pointing to the left. Directly east is Wolf Point with a yellow arrow pointing up. (Those arrows are not really in the river. I added them myself.) So one of the key selling points of The Residences, the east facing view down the river of the city, will go away if and when Wolf Point is developed.
Well just a couple of weeks ago the Chicago Plan Commission unanimously approved the Wolf Point project which will result in 3 high rise buildings being built on the site. Although the developers must still get approval from the City Council's Zoning Committee and the full City Council, Crain's reports that with the backing of the Alderman the project is "all but certain to win final approval". If you click on the Crain's link you will see a rendering of the proposed project. You would think it would destroy the view from The Residences, though you should still be able to see around the buildings.
Well, with this threat looming one would expect condo prices at 333 N Canal to have severely declined as it became more and more certain that Wolf Point would be developed. So I pulled up the history since late 2006 and normalized the prices by taking out parking and calculating the price per square foot for all transactions and plotting them in the graph below as a function of time. It's a fairly crude analysis but with all units facing east it should be a reasonable approximation. I also calculated a 12 transaction moving average so that you could get some idea of the trend over time.
Interestingly, I don't think there is a lot of evidence that prices per square have fallen at 333 N Canal as a result of greater certainty that Wolf Point would be developed. Yes, prices fell about 20% since late 2006 but that is pretty normal given the bursting of the housing bubble. In addition, prices/SF at The Residences are still considerably higher than at other buildings in the surrounding area.
So how do we explain this? There are three possible explanations that I can think of:
- Prices always factored in a 100% certainty that Wolf Point was going to be developed soon.
- Prices have been factoring in a 0% chance that Wolf Point will be developed and only from this point forward will we see the impact.
- People don't believe the impact of the Wolf Point development will be that great.
Personally, I just can't believe #2 so I'm stuck with some combination of 1 and 3. I guess time will tell whether or not there is any further price deterioration in this building or if the view is compromised that much.