11-13-2007
The Monarch Going Rental

ZOM Inc. has again changed its mind about whether units in the currently-under-construction Monarch should be rented or sold. You may recall that The Monarch was initially announced as rental apartments, but switched to for-sale condos two months ago. The timing on that decision wasn't great - Austin's housing inventory has been piling up in the last few months. About twenty percent of The Monarch's units were sold between then and now, but that wasn't enough for ZOM, so they cancelled those contracts and plan to rent the entire building. Construction is expected to be completed next spring.
Switching from condos to apartments is generally seen as a sign of a flagging market (not as clear a sign as rising inventory, but still). Generally, rental developers can get away with cheaper finishes and fixtures, so apartments require a smaller capital investment than condos, but given the timing of the flip-flops it is not clear that is the case here.
The move may also be a sign that the Austin rental market is strong. The Monarch will have less competition downtown as a rental than it would as a condo. There are several other downtown condo projects planned or under construction, and most of them are more marketable than The Monarch. Currently, there are only a handful of other large rental properties competing for high-end, downtown renters. Adding The Monarch to the mix will substantially increase the downtown rental supply.