In the late 1990s, Aaron Lafky and his partners sketched out the idea for an East Coast-style block of walk-up homes with street-level offices and corner stores between downtown Bend and the Old Mill District.

It seemed like a novel idea at the time.

Bend had yet to build its first roundabout. Downtown had yet to take flight.

The safe money was in the suburbs where developers could crank out homes for a seemingly bottomless market.

”It was a real risk to take that approach,” said Lafky, a landscape architect who has worked in residential real estate in Bend for most of the last 20 years.

But when Lafky released the first units at Mill Quarter in August, buyers, who had only floorplans and sketches to go on, jumped at the chance to get into the homes.

During a sealed-bid auction, the largest townhomes sold for just shy of $1 million.

In a subsequent sale involving two additional units, buyers bid up the townhomes to $1.1 million. One woman drove from Olympia, Wash., to watch her name be drawn out of a hat for the last unit.

Buyers were paying up to $400 per square foot – values more closely associated with urban markets like Portland’s trendy Pearl District.

Real estate professionals and developers say the Mill Quarter project and others like it are tapping into a huge market for urban living. The demand has fueled record growth in condominium sales nationwide.

The National Association of Realtors reported that the number of condominium transactions is expected to set a record again this year after nine consecutive record years. Condos now account for roughly 13 percent of the total residential real estate market.

The growth has spurred developers to look outside the traditional East Coast markets to places like Bend, where buyers are snatching up properties as second homes and retirees are trading in lawn mowers for low-maintenance luxury.

A market explosion

There are currently six condominium projects planned or under way in downtown Bend and the Old Mill District. There are five other high-end townhome projects around downtown and the Old Mill, not including Mill Quarter, in the planning or construction phases.

The most recent project was announced last week. Developers told the City Council that they plan to build 37 high-end condominiums on the site of what is currently the City Center Motel and the Primrose Apartment building a block from City Hall.

”There has just been an explosion of condominium living not just here in Bend but worldwide; it’s such an amazing trend,” said David Swan, a partner in the Primrose project, which has been dubbed City Center Plaza.

But unlike some markets where condominiums can offer a way for first-time home buyers to enter the market, Bend developers, for now, are focusing on the top of the market.

For example, one unit at Northbrook on Mirror Pond, a project on Brooks Street downtown that is set to open in December 2006, is listed at $1.7 million. The smallest unit, at 1,500 square feet, starts at $769,000.

Broker Carolyn Priborsky at Coldwell Banker said buyers already have plunked down a required 5 percent deposit on three of the eight units.

”We get, on average, five calls per day (on the project),” Priborsky said. ”We’ve received interest from people who live in Idaho, Wyoming, California and Montana – just about everywhere. We had somebody fly out from Alabama (to look at the property).”

Boomers feed rush

Bend’s condo projects have attracted interest from buyers all over the country, say those involved in the sales. While those sellers who already have begun taking reservations weren’t willing to provide personal information about buyers, they described them as affluent and mobile.

Many were seeking second homes for vacations and future retirement residences.

Many of the buyers came from outside the area where they are living in larger markets like Portland and Seattle.

They are drawn by Bend’s climate, outdoors and lifestyle and they’re buying at prices that they consider reasonable compared with the places they’re leaving or other U.S. resort destinations with bigger names and pricetags. For these buyers, $1 million don’t seem outrageous.

In some cases, equity-rich buyers coming from larger cities are plopping down cash for units.

It’s not the way Lafky and his partners envisioned it.

Lafky, who eschews a suit and tie in favor of khakis and a button-down cotton shirt and keeps a framed picture of Jerry Garcia on his office wall, concedes that Mill Quarter originally were designed to fetch prices half as high as today’s.

”I don’t understand it,” said Lafky. ”But (buyers) keep showing up.”

He said the prices reflect the market and the cost of building, which has escalated dramatically with rapidly rising price of labor and raw materials.

Not all of the buyers are snowbirds and retirees.

Luke Jans, 25, picked up one of the smaller units for less than $700,000. A Portland-native who has lived in Bend for about three years, Jans travels for his Internet marketing business.

He already owns a condominium less than a mile away from Mill Quarter but wanted the chance to be closer to downtown.

He never considered investing his money in a traditional home.

”I wasn’t looking for a house, that’s the thing,” Jans said. ”I was looking for something that offers more of a maintenance-free lifestyle.”

But by in large, the emergence of the luxury condo market mirrors a huge demographic shift as baby boomers begin to retire.

”This coincides with the leading edge of the baby boomers,” said Walter Molony, spokesman for the National Association of Realtors in Washington, D.C. ”They’re empty nesters seeking a similar yet easier-to-maintain lifestyle. They want lots of amenities – laundry facilities in the unit, not in the basement. … That creates a real demand for the upper-end units.”

In Bend, developers are building most of the upper-end condos and townhomes in and around downtown and the Old Mill District because of the proximity to shopping, dining and entertainment.

”We seem to be dealing with a group of buyers who is very mobile and they enjoy dining at a fancy restaurant and cruising the shops,” Swan said. ”The downtown becomes their backyard.”

They’re willing to pay for the convenience.

Swan said he and his partner haven’t yet decided a price for their units, which range from 800 to 2,000 square feet.

But like others, they are planning a project that doesn’t skimp on luxuries. One feature they are considering is a sliding glass wall that opens out onto a deck, creating a sort of seamless indoor and outdoor summer environment.

Add stainless steel appliances, wood floors and cabinets, granite countertops and buyers can expect prices in the neighborhood of $400 per square foot, Swan confirmed.

Local real estate agent Becky Breeze and her husband are building a 42-unit condominium project in the Old Mill District. Breeze already has sold most of her units. She said buyers know what they want and they don’t balk at prices.

”They want to live in a custom home,” Breeze said. ”And they don’t want to sacrifice quality. They want to be close to walking trails and the mountains. They’re really mobile and they have a lot of money,” she said.

Bend not alone

Bend isn’t the only smaller city in the Northwest seeing six-figure condos and townhomes. Resort and vacation hot spots around the region are watching the luxury condo market take flight.

In Coeur d’Alene, Idaho, population 36,000, five high-end condo projects are in the works, according a June article in the Spokane Spokesman-Review. The article put sales prices for the units between $450,000 and $2.5 million.

In Bellingham, Wash., whose population is slightly larger than Bend, developers just proposed an 18-story condominium project with roughly 80 units downtown.

Local Bellingham broker Gragg Miller, whose firm has handled some of the recent condominium transactions, has heard talk of prices approaching $600 per square foot in Bellingham.

”I’ve lived here all my life and I still don’t know how they are going to get those kind of prices,” he said.

In Portland’s Pearl District north of downtown, the average price is hovering around $550 per square foot. But some of the most desirable units, typically on the top floors of high rises, can command up to $900 per square foot, said Marilyn Anderson, principal broker with Hoyt Realty in Portland.

Buyers all want the premium property built with the best materials and offering the most dramatic views, she said.

In Los Angeles, the condo craze has been so dramatic that the City Council intervened. Fearing that the city was losing much of its affordable housing to high-end redevelopment, the council placed a temporary moratorium on those type of projects earlier this month.

In Bend, developers say the city is a long way from meeting the demand for high-end urban housing.

”We have more buyers than we have product,” said Lafky.