An aerial view over downtown West Palm Beach, where RH opened an 80,000-square-foot mansion-like business with a rooftop restaurant in December 2017.
Source: Indiehouse Films
WEST PALM BEACH, Florida – Retailers, restaurants, and other business owners want to be where the people are. And people are flocking to South Florida.
Some are withdrawing temporarily during the pandemic, away from the cold weather in the north. Others are making a longer-term change, and companies are committing to decades-long leases.
On Rosemary Square, an outdoor mall near downtown West Palm Beach, a furniture store is scheduled to open in West Elm and Urban Outfitters in the coming months. There are also a number of new restaurants, including a recently opened local fast-casual taco store, health-conscious True Food Kitchen and hip plant-based restaurant Planta.
Lucid Motors, the electric car company known as Tesla's competitor, opened its second South Florida location in Rosemary Square last month, operated by New York-based developer Related. It joined Lululemon, Anthropologie, Yeti, Tommy Bahama, Sur la Table, RH, and more than a dozen other retailers that are filled with visitors most weekends. After shopping, some grab a smoothie from Pura Vida, another addition to the complex, and listen to live music on a central lawn.
Source: Indiehouse Films
Across the water, on Palm Beach Island, activity around Worth Avenue is similarly bustling.
SoulCycle performs an outdoor popup. The spin courses are fully booked on the weekends and frequented by out-of-towers, who are often overheard discussing their plans to return to New York or Washington.
On Worth Avenue, a Rolls Royce lines up behind an Aston Martin behind a Porsche while couples get on and off at Tiffany, Chanel and Saks Fifth Avenue on a cloudless and mild Saturday afternoon. The upscale shopping street some refer to as the Fifth Avenue of the South has few vacancies. The notable exception is an empty Neiman Marcus store, which the luxury department store chain closed after filing for bankruptcy last year.
Fifth Avenue flight
Some business owners have shaped their decisions by the pandemic, choosing Worth Avenue across from Fifth Avenue.
Maurice Moradof and his mother Yafa Moradof left Manhattan in November 2020 to open Yafa Signed Jewels on Worth Avenue.
Source: Yafa Signed Jewels
Maurice Moradof and his mother Yafa Moradof fled Manhattan last November to place a long-term bet and open their second high-end jewelry store, Yafa Signed Jewels, on Worth Avenue. They took the step after a wave of looting and rioting related to the George Floyd protests broke out in Manhattan that summer. Businesses along New York City's main streets have been hard hit due to Covid restrictions, the loss of tourists and a decline in consumer spending.
"Business got a little weak," said Maurice Moradof of the Fifth Avenue location, which is still open as a studio. "And it got very dangerous in New York City. I wasn't feeling well anymore."
Since opening on Worth Avenue, the store has exceeded expectations, he said. The retailer signed a 25-year lease for the store, which is between a Lilly Pulitzer and Michael Kors.
"There's no recession in Palm Beach … The rich keep getting richer," said Maurice Moradof. "I won't see New York again for two or three years."
Worth Avenue in Palm Beach is one of the best upscale shopping streets in the world.
Jose More | Universal Images Group | Getty Images
Activity in the South Florida real estate market – towering cranes, the arrival of new tenants, rising rents, and few vacancies – paint a very different picture than the streets of SoHo and Fifth Avenue in New York City. And experts say that property in the Palm Beach market in particular is becoming increasingly popular.
"There's domestic migration from New York, New England, Toronto, Montreal … we're seeing people from Chicago and California, too," said Drew Schaul, senior vice president of advisory and transactional services at CBRE, a commercial real estate firm specializing in South Florida. "They lick their chops to be here."
Some Wall Street financial institutions have also made the leap, citing tax and lifestyle benefits for their decisions. Goldman Sachs is reportedly looking to the Palm Beach market for new office space, while Paul Singer's Elliott Singer has moved his headquarters from Midtown Manhattan to West Palm Beach.
According to Redfin, a technology-based real estate agent, 56.1% of apartment searches in Palm Beach County in the fourth quarter came from outside the county. Search queries from Chicago and Brooklyn are the most popular origins outside of the state.
"Everything that goes on in Palm Beach and the surrounding downtown West Palm is a great story," he said. "And one of the big catalysts I think was what Rosemary Square did to get new customers."
Even some internet-first brands are trying to test the waters in West Palm in the development of Related, which was known as City Place until a marketing overhaul in early 2019.
Three companies – Faherty, a men's and women's clothing retailer; Solid & Striped, a swimwear brand; and Mint & Rose, a shoe and accessory company selling products made in Spain, opened pop-up locations in Rosemary Square earlier this year. And they're all operated by Leap, a company that helps online retailers find space, sign leases, and open business.
"This is a great example of a market that will thrive," said Amish Tolia, Leap co-founder and co-director. "Rosemary Square draws from a variety of commercial areas … and we believe it will only get better from here."
Influx of new residents
"Based on what we see," said Toila, "we fully intend to do more in South Florida."
Lucid Motors opened its sixth US location in Rosemary Square in January.
What Toila and many other property developers are seeing is an influx of people eager to bring home to Palm Beach and the surrounding neighborhoods. The pleasant climate and the escape from high taxes were of great importance long before the pandemic. But right now.
According to a report by real estate agent Suzanne Frisbie of luxury company Premier Estate Properties, there were 289 single-family transactions in Palm Beach in 2020, up 122% year over year. The year ended "with often breathtaking, record-breaking highs," she said, which will spill over into 2021.
Private equity tycoon Scott Shleifer has reportedly just closed an oceanfront mansion in Palm Beach, paid more than $ 120 million, set a record for residential real estate sales in Florida, marking one of the most expensive home sales in the country.
Homes are flying off the market and booming construction for other living spaces is a sign that supply is still limited. For example, Related is still planning a pair of high-profile rental communities. You will be sitting in the site of an old Macy & # 39; s department store near Rosemary Square. It has also sped up the construction of a 20-story office tower, also next to Rosemary Square, as the pandemic drove demand that few could have predicted.
Retail rents are increasing
"25 years ago, as you can imagine, West Palm Beach was a very different place with a lot of seasonality," said Gopal Rajegowda, partner at Related's southeast office. "But the market was starting to mature. Indeed, it looked and felt like a real city."
"We are seeing the quality and caliber of people increase, and much of that is being driven by people moving here from the Northeast and the Midwest," he said. "Now we believe Covid is really accelerating growth to market."
As demand increases and more retailers and restaurants move to the area, commercial property rents in the South Florida market have also increased.
Retail rents in the Palm Beach area, which includes West Palm Beach, are up 2.6% over the past 12 months, compared to historical average rental growth of 1.7% according to CBRE data. By comparison, retail rents in New York are down an average of 4.9% year-over-year, compared to historic growth of 1.6%, the real estate firm found.
"It's just not as bad here as it is in many other parts of the country," said Marty Arrivo, founder and CEO of Acre, a real estate consultancy that helps rent space in South Florida.
"San Francisco is a disaster, Los Angeles is a disaster, New York is a disaster, Chicago is freezing," he said. "Now, in relative terms, all of these global brands are suddenly turning to South Florida saying, 'It's open for business, the weather is nice' – we need to focus if we don't have to focus here double us. & # 39; "