West Palm Beach condo market finally shows signs of reviving
Question: When will we start seeing some new condo projects get started in Downtown West Palm Beach? What is the buyer pool for that market?
Answer: Downtown West Palm Beach is finally showing signs of reviving some seven years after the South Florida condo market crashed in 2007.
For the last three years, prices of condo and townhouse resales and rentals have been steadily recovering, prompting some developers to consider launching – but not yet constructing – new projects once again in Downtown West Palm Beach.
During the last South Florida real estate cycle that began in 2003, developers created 17 new condo towers with nearly 3,400 units in the Downtown West Palm Beach area. As of the first quarter of 2014, less than 100 units remained unsold from the previous boom, according to an analysis of Palm Beach County records.
As of Aug. 14, developers have proposed building a dozen new condo towers with nearly 2,125 units in the Downtown West Palm Beach area, according to the preconstruction condo projects website CraneSpotters.com. (For disclosure, my firm operates the website.)
This total number of announced units – which has been bolstered by a new six-tower project with more than 1,050 condos proposed by a joint venture involving the Related Group – makes West Palm Beach the third most active South Florida preconstruction market behind only Greater Downtown Miami with nearly 18,300 proposed units and the Hollywood-Hallandale Beach area with nearly 3,000 units.
West Palm Beach’s preconstruction condo activity ranks it ahead of other active markets such as Aventura with some 2,110 proposed units, Sunny Isles Beach with nearly 1,925 new units and Miami Beach’s 1,355 units.
Unlike other parts of South Florida where condo construction is underway, the developers in West Palm Beach have focused their time on planning projects but not necessarily building new units.
To date, no new condo towers have launched construction in the Downtown West Palm Beach area.
This current phase of developers announcing projects but hesitating to start construction could be ending soon based on improving condo market conditions in West Palm Beach.
Currently, about 210 condo and townhouse units are on the resale market in Downtown West Palm Beach at an average asking price of about $270 per square foot as of Aug. 14, according to the Southeast Florida MLXchange.
In the first seven months of 2014, buyers acquired more than 160 units at an average asking price of about $241 per square foot. The current pricing represents an 18 percent increase over the average resale price of $204 per square foot in the same seven-month period in 2013.
The current average resale price for a Downtown West Palm Beach condo represents a 55 percent increase from the first seven months of 2011 – the bottom of this market – when units traded for $155 per square foot.
It is worth noting, the average resale price of a condo unit in Downtown West Palm Beach is still 19 percent below the average price of $298 per square foot at the peak of the South Florida real estate market in 2006, according to the data.
A combination of rising rental rates and shrinking levels of available inventory are also contributing to the expectation that the West Palm Beach area could be getting some new condo unit inventory in the near future.
Today’s rental rates in Downtown West Palm Beach are up nearly 50 percent from 2010 when the median price per square foot for a lease was less than $1.20 monthly, according to the data.
Downtown West Palm Beach currently has nearly 130 units available for lease on the rental market at a median asking price of $1.75 per square foot monthly.
In the first seven months of 2014, tenants leased an average of 60 units per month at a median price of $1.75 per square foot. The current lease price represents a 22 percent increase compared to 2013 when the median monthly rental price for a Downtown West Palm Beach unit was $1.44 per square foot.
The unanswered question going forward is whether developers in the Downtown West Palm Beach preconstruction condo market will be able to expand beyond their historical market of domestic buyers and begin to tap into the strong pool of foreign buyers who are actively purchasing presale units in Miami-Dade and to a lesser extent Broward.
Thought Of The Week: 8 Preconstruction Condo Units Listed For At Least $10 Million Each
Accurately gauging prices in the South Florida preconstruction condo market can be difficult as few developers list their proposed units in the Multiple Listing Service database of properties for sale.
The lack of presale condo listings makes it challenging to obtain a clear understanding of how the South Florida preconstruction condo market is performing beyond the continuous marketing efforts by developers.
It is against this backdrop that a sample of the current listings reveals that at least eight preconstruction condo units are currently on the market at a minimum price of at least $10 million each in South Florida as of Aug. 14, according to the Southeast Florida MLXchange.
The Mansions At Acqualina project in Sunny Isles Beach is home to the two most expensive presale listings currently on the MLS at $24.55 million and $21.5 million, respectively.
A penthouse in the planned Echo Brickell project in Greater Downtown Miami ranks No. 3 with an asking price of $17.5 million.
Rounding out the top five most expensive South Florida preconstruction condo listings is a $17 million unit in the Chateau Beach Residences in Sunny Isles Beach and a $15.79 million penthouse in the Ritz-Carlton Residences in Miami Beach.
The newly completed Regalia condo tower in Sunny Isles Beach is home to the remaining three new condo units currently on the MLS with a minimum price of at least $10 million each.
Overall, less than 200 presale condo units are listed on the MLS out of a total of more than 16,300 units in preconstruction towers that are currently being marketed for presale east of Interstate 95 in South Florida, according to CraneSpotters.com
Peter Zalewski is a real estate market consultant as well as a non-practicing licensed real estate broker and columnist for The Real Deal. He founded Condo Vultures LLC, a consultancy and publishing company, as well as Condo Vultures Realty and CVR Realty brokerages and the Condo Ratings Agency, an analytics firm. The Condo Ratings Agency operates CraneSpotters.com, a preconstruction condo projects website, in conjunction with the Miami Association of Realtors. Questions and comments on the column can be sent to email@example.com. The TRD editors will choose which submissions will be addressed.