A downtown debate | An influx of luxury condos raises questions about sprawl, gentrification and Portland's changing demographics

For decades, Congress Street has been a barometer for Portland's economy ˆ— once a busy shopping corridor, then the struggling center of a depressed downtown and, most recently, the main artery of the city's self-designated arts district. Now, Congress Street is poised to take on another identity: prestigious residential address.

Condominium developers have descended on the street, armed with plans to replace a rundown retail store with a sleek, modern residential complex; to renovate a brick Victorian building as luxury abodes; and to convert the upper floors of several commercial buildings into new residences. Those projects are part of the broader surge in downtown condominium proposals that includes waterfront projects and a proposed 12-story, 94-unit building on Cumberland Avenue.

The number and scale of those proposals has many in Portland talking. To city officials, that conversation revolves around the potential economic impact of a newly minted residential neighborhood in the heart of downtown Portland. "The condominium development you're seeing is economic development," says Jack Lufkin, Portland's economic development director, imagining the effect residents would have on downtown Portland's street-level shops, galleries and restaurants.

Along with excitement, though, is plenty of head scratching about the trends driving development, and the potential long-term changes condominiums will bring. Count Jessica Tomlinson, co-founder of an organization trying to preserve living and work space for artists in Portland, among those with questions. Though she welcomes a downtown renaissance, she greets the arrival of condos with caution. "I really support a vital downtown, and this development happening is critical to get people downtown," says Tomlinson. "I'd just like to see a healthier balance."

Her concerns about balance stem in part from the fact that, with a few exceptions, the majority of the new dwellings are being marketed as luxury homes, typically priced between $400,000 and $600,000. By aiming at upscale dwellers, developers are betting on a coming condominium boom for Portland ˆ— which, characteristically, is seeing the trend emerge a few years after it's taken hold in the rest of the country.

Nationally, condominiums have been one of the hottest sectors in the real estate market, posting record sales in 2004. Last year, the median condominium sales price jumped 17%, outpacing the eight percent price gain for single family homes, according to the National Association of Realtors. To developers, Portland is the perfect place to extend America's apparent love affair with the condo. It's a walkable city, offering a taste of urban life ˆ— galleries, museums, restaurants and boutiques ˆ— at prices that, compared with most East Coast cities, seem like a bargain.

That's why the condominium projects already in the pipeline call for some 300 units to come on the market over the next few years ˆ— and doubtless many more if the trend continues. But that growth raises the inevitable question of how much condominium development is too much. Could a condo boom become a condo glut?

Developers and real estate agents in Portland say that given the high demand and relative lack of supply, Portland is in no danger yet of overbuilding in the market. John McIlwain, senior fellow for housing at the Urban Land Institute in Washington, D.C., agrees. He doesn't anticipate a condominium bust anytime soon, even in more frenzied markets like Atlanta, Boston or Washington, D.C. But how do developers and real estate professionals know when a market is overbuilt? "When the units stop selling," McIlwain deadpans.

Most questions about the course of condominium development are similarly open-ended. Given that Portland is at the beginning of what could be significant changes for its downtown corridor, it will be years before condo backers can quantify the impact those changes have on the city, or see which anticipated trends played out as planned and what surprises emerged.

That hasn't stopped Portlanders from pondering the possibilities, though. What follows are a few questions about how condominiums tie into broader regional or national demographic trends, and just what role they could play in Portland's economic development.

Who's going to buy them?
When imagining a new, bustling residential neighborhood in downtown Portland, the next logical step is to wonder who its residents might be. Almost without exception, Portland's condominium developers say they are aiming at a key audience: affluent, aging baby boomers.

Boomers, developers figure, are less inclined to retire in Florida like their parents did than to semi-retire in interesting places offering character, cultural amenities and natural resources ˆ— all things Portland has in abundance, says Charlie Hewitt. Hewitt, a New York-based artist, is working with four local partners to develop a 23-unit condominium building in a former retail store at 490 Congress St. He hopes the project, called Monument Plaza in reference to its proximity to Monument Square, will attract buyers from around the country. "We've got a lot of people from away, baby boomers, looking for a place to stage their lives," says Hewitt. "The design of this building has a lot to do with how I like to live ˆ— no driveway to shovel, no lawn to worry about, views of the water and the mountains, all right in the middle of the city."

The appeal of that lifestyle, Hewitt says, also extends to people currently living in the Portland suburbs. He and other developers are betting that local residents whose children are grown will be ready to give up large houses and recapture the feel of urban living they may have enjoyed when they were younger.

Since it takes more than a good location to lure those potential buyers, though, Monument Plaza also will feature high ceilings, granite countertops, hardwood floors, air conditioning, a security system, balconies and private courtyards. Those amenities help explain the prices: Though first-floor units start at $199,000, most range between $300,000-$400,000, with top-floor condominiums selling for $610,000.

Still, developers are banking on a trend for which there is as yet little statistical evidence. Anecdotally, though, the boomer migration seems to be an emerging force. Jessica LaPlante, a broker with Coldwell Banker Residential Brokerage in Portland who represents Monument Plaza, says she fields telephone inquiries daily about the project from interested buyers in Maine, as well as Massachusetts, Connecticut and New York. She's already reserved seven of the units, even though the building won't be finished for at least 10 months. "There's a demand for this kind of condo," says LaPlante. "From what I have experienced with little to no advertising, the response has been enormous."

If the boomer influx ultimately materializes, it could upend Portland's recent demographic trends. Between 1995 and 2000, Portland recorded the 10th highest rate of inmigration for residents aged 25-39 anywhere in the country, according to U.S. Census statistics.
Who could get displaced?

Directly or indirectly, new arrivals to a neighborhood tend to drive out existing residents. Downtown condominium developments across the country have sparked debates about the problems of gentrification. But from San Francisco's Mission District to New York's SoHo, no one has yet figured out a solution.

To Jessica Tomlinson, what's happening to the artists in Portland's arts district offers a microcosm of a larger gentrification debate. "People want to live downtown because it's full of arts and culture and is a vibrant place," says Tomlinson. "The irony is, the people who make it a vibrant place ˆ— the artists ˆ— can't afford to live here anymore."

In recent years, Tomlinson says, Portland's rising housing costs have forced local artists to find living and work space in surrounding communities such as Westbrook and South Portland, or even farther away in Saco and Lewiston. A proposed condominium development at 547A Congress St., a block from Forest Avenue, will replace what Tomlinson says are "five floors of artists' studio space."

Hoping to stem the exodus, Tomlinson and Portland resident Rose Marasco teamed up in 2000 to create Portland Artists Dwellings and Studios, an organization aimed at preserving affordable space for artists in Portland. PADS currently is working with a developer (who Tomlinson declines to name) to create a large live-work facility reserved for artists, offering units priced well under $200,000.

So far, though, the group has struggled to achieve that goal because the rising cost of property in Portland. In 2000, PADS toured the vacant Nissen Bakery building on Washington Avenue, which could have accommodated a good mix of studio space and residential. But once Tomlinson considered the asking price and the cost of the substantial renovations required, the finished units would have cost more than $200,000, she says.

That was nearly five years ago, and the situation has only gotten worse. "Time equals money in this climate, and the longer you wait the higher your acquisition costs [for a property] get," she says. (The Nissen building has since been redeveloped into a commercial facility, but at least two artists lease studio space in the building.)

It's a dilemma developer Richard Berman also has experienced. He originally planned for condominiums at his Brick Hill project at the former Maine Youth Center in South Portland to cost about $180,000. Now he says they'll likely cost about $220,000. "Construction costs are at $100 per sq. ft. or higher, land acquisition costs have gone up, everything's gone up," Berman says.

Tomlinson wonders why the situation hasn't galvanized Portland residents and city officials the way the city rallied around its working waterfront in the late 1980s. "The city says arts and culture are important to Portland's identity, but who's taking action to sustain it?" says Tomlinson.

One potential solution may be in the works: The city recently began discussing a plan to turn the former Sacred Heart School on Sherman Street into live-work space for artists. The city-owned property, which formerly housed the school department's multicultural center, has been vacant since 2003, and Tomlinson says its large classrooms could offer the kind of large spaces that working artists typically need. The plan, however, is still in the exploratory phase with Portland's housing committee.

Will condos exacerbate or alleviate sprawl?
The rising cost of housing in greater Portland has been a major contributor to the area's sprawl problem. Between 1997 and 2003, the median home price in greater Portland increased 74%, to $189,700, while the median income in the area only grew 47%, to $58,500, forcing people to move farther and farther from the city to find an affordable house.

"Portland has really been a beacon for young people, and I know the city wants to keep young families here instead of forcing them out to the fringes of Cumberland County," says Caroline Allam, an economic and community planner with the Greater Portland Council of Governments. "It seems to me we should be building condos in the $150,000 range if we want to attract those younger families and creative entrepreneurs."

Hitting that price range, as developers like Richard Berman point out, isn't easy given the costs to acquire property and then the cost of construction in Portland. But even though downtown condominiums priced at $400,000 and up don't directly help middle-class buyers, they don't exacerbate the sprawl problem either, says Alan Caron, president of Yarmouth-based GrowSmart Maine. In fact, GrowSmart supports the addition of any housing in greater Portland ˆ— even high-end housing ˆ— because increased housing supply anywhere in the market helps relieve pressure, and prices, overall, Caron says. "We tend to see the logic in commercial space more readily: A big, new office building comes to town, and surrounding property owners complain that the new supply drives existing prices down," says Caron. "When we get to housing, somehow we forget that phenomenon."

Jeffrey Cohen, a developer planning a new, 12-story condominium development at the intersection of Cumberland and Forest avenues, believes his project can relieve pressure on other neighborhoods in the city. Although he's counting on baby boomers to buy condominiums, he's also expecting the two-bedroom, two-bath units, which he anticipates will sell for $250,000-$500,000, to appeal to young professionals and first- time homebuyers currently scrapping with other buyers for houses on and off the peninsula. "People want to live in Portland, but they've got to have a place to live," says Cohen. "Generally, they don't right now."

The city of Portland also says it is making progress on its plan to offer 4,000 new housing options in a variety of formats and price ranges. As of last January, city officials say there are almost 1,400 new housing units completed, under construction, approved or pending approval in the city ˆ— a mix of subsidized housing, apartments, condominiums and single-family homes. "You're going to see housing created at all pricing levels," says Lufkin.

Exactly where that housing is created, and how it redefines the landscape and economy of Portland, won't be known for years to come. But expect the discussion to continue while the condos rise downtown.