Please enjoy the following article Real Estate Journal: West Palm Beach development aims higher by Brian Bandell, Senior Reporter, South Florida Business Journal, featuring insights from Neil Merin. Click here to view the PDF article.
There’s a building boom in West Palm Beach, as more multifamily, hotel and office projects are built across the water from the billionaire playground of Palm Beach.
It’s easy to see why.
As many Florida municipalities aim to lure residents looking to relocate from higher-tax states, recent U.S. Census Bureau data shows that, compared with Miami-Dade and Broward counties, Palm Beach County has excelled at drawing residents from elsewhere in the U.S.
Experts credit its attractive housing values, lifestyle and growing accessibility to Fort Lauderdale and Miami for that uptick. It’s a combination that’s made West Palm Beach one of its fastest-growing cities.
West Palm Beach has better housing values compared to most of South Florida – without a lot of congestion, said Raphael Clemente, executive director of the West Palm Beach Downtown Development Authority. Expansion projects at its cultural venues, including the Norton Museum of Art and the Kravis Center for the Performing Arts, have made the city more of a leisure destination.
Also, West Palm Beach is the northernmost stop – so far – of the Virgin Trains USA passenger rail that connects with Fort Lauderdale and Miami. So people can live in West Palm Beach at a lower cost, but still have easy access to the entertainment destinations of Miami and Fort Lauderdale – and, eventually, Orlando.
The city is also revamping Clematis Street, its dining and entertainment district right near the train station, which could draw more Miami and Fort Lauderdale residents north.
“West Palm Beach has lagged Miami in terms of development and is starting to catch up a bit,” said Gopal Rajegowda, senior VP at the Related Cos., owner of Rosemary Square in the city. “While Miami might be overbuilt in some categories, West Palm Beach has a huge runway for more buildings to happen downtown.”
It’s been over a decade since a major Class A office building was delivered in downtown West Palm Beach, but two are now under construction, with a combined 502,000 square feet coming to market, according to NAI Merin Hunter Codman.
The Related Cos., led by billionaire Miami Dolphins owner Stephen M. Ross, is building an office complex at Rosemary Square, its mixed-use project formerly known as CityPlace. Billionaire Jeff Greene will include offices in his mixed-use One West Palm, slated to be the tallest building in Palm Beach County.
Many companies are looking to relocate to West Palm Beach, and the 360 Rosemary building will provide a modern building a short walk from the Virgin Trains station, Rajegowda said. Related Cos. is also completing common area improvements to Rosemary Square, and will soon break ground on an apartment tower.
Comvest Partners is the first tenant to sign a lease at 360 Rosemary.
Greene said the heavy preleasing activity for One West Palm probably won’t start until the building is about a year from completion.
“This is not a big preleasing town,” Greene said. “It’s smaller firms looking for 3,000 to 7,000 square feet.”
When you consider the new buildings and 285,000 square feet of vacant Class A space downtown, there’s a huge amount of office space to absorb over the next few years, said Neil Merin, chairman of NAI/Merin Hunter Codman. The two new buildings may attract tenants, but it will be at the expense of the older office buildings, he added.
“I wouldn’t want to buy an office building in downtown West Palm Beach now, thinking I can raise rents,” Merin said. “Because they are building on cash, they can undercut the market on rent.”
The Bristol Palm Beach has raised the bar for West Palm Beach condo prices, and inspired more developers to target the city.
The 69-unit Bristol smashed the city’s price record in March by selling a full-floor penthouse for $42.56 million. The prices per square foot there are comparable to Miami Beach.
For years, Palm Beach owned the luxury home market, and wealthy buyers wouldn’t consider West Palm Beach – but that has changed, said Taylor Collins, managing partner of West Palm Beach-based condo builder Two Roads Development. The Bristol proved wealthy buyers will pay premium prices for high-end projects downtown, he said.
The island of Palm Beach has virtually no land left for condo development, so most of the existing condo buildings are decades old, Collins said.
“If you want a new high-rise condo, the only place to get it is West Palm Beach,” Collins said.
Two Roads Development plans to launch sales this fall for the Forte, a 48-unit condominium along the Intracoastal Waterway. Collins said units at Forte will range from the high $3 millions to $8 million. The buyers are mostly Palm Beach homeowners seeking to downsize from their mansions and wealthy people relocating from the Northeast, he said.
Great Gulf has already started construction on the 84-unit La Clara, also along the water.
In addition to the condos, there are 1,069 apartments completed or under construction downtown, according to NAI/Merin Hunter Codman.
West Palm Beach has three hotels with a combined 602 rooms under construction downtown – the Canopy Hotel, the Ben, and a hotel in One West Palm.
“West Palm Beach is offering people an alternative for a staycation,” Merin said. “It’s seen as a cool coastal downtown area with activities on the water.”
Greene, who owns a Ramada Inn in the city, is concerned hotels are overbuilt there so new hotels will take business from older hotels. However, Greene’s confident the hotel he’s building at One West Palm will do well as the only Five Star hotel in the city, he said.
Business at the Related Cos.-owned Hilton Hotel connected to the Palm Beach County Convention Center has exceeded expectations, Rajegowda said. With demand for conventions exceeding capacity for rooms, they are considering a 250-room addition to the hotel, he said.
“When the Brightline [Virgin Trains] connects to Orlando, we will tap into a significant tourist base,” Rajegowda said. “The tourist who goes to Disney will have an easy way to stop in West Palm Beach for a few days.”