The West Palm Beach commercial real estate market is heating up in a major fashion.
Last month, the Palm Beach Outlets mall sold for $278 million, the second biggest property transaction in county history, and the Phillips Point office complex fetched $246 million, the third biggest sale. Both went to institutional investors.
Then last week the historic Comeau office building in downtown West Palm sold for $12 million, more than double the previous highest price for the building.
As for the bigger sales, “it’s a trend we’re seeing across the whole South Florida region,” Ken Krasnow, managing director of CBRE in Boca Raton, told The Real Deal. “Over the last couple of years there has been a return of demand from institutional investors for these core assets in core markets.” That, combined with limited supply, has boosted prices, he said.
Krasnow and others note that investor demand for high-quality commercial properties has spread north from Miami-Dade County and Broward to Palm Beach.
“West Palm Beach is being considered as an extension of the overall South Florida market, whereas three to four years ago, people didn’t want to leave Miami and Fort Lauderdale,” Jonathan Satter, managing director of Avison Young in West Palm Beach, told TRD.
When it comes to Class A office space, West Palm saw a whopping 43 percent increase in asking rents during the three to six months ended March 31 — to $30 a square foot from $21 per square foot, according to CBRE. In some cases, rent approached $38 per square foot. And increases have continued apace since then, real estate pros report.
Palm Beach County is benefiting from an influx of companies and individuals that is boosting economic growth, they say. Last month, the diet products company Slim-Fast announced that it’s relocating its headquarters from Texas to Palm Beach Gardens.
As for supply constraints, “the outlook for new construction is limited, especially for office space. A lot of prime development land already has been bought,” Krasnow said.
All this, of course, begs the question of whether we are heading toward another bubble for commercial real estate in West Palm Beach. No, say Satter and Krasnow, thanks to the supply shortage. “We just don’t see the overbuilding that we saw in periods of the past,” Satter said. “The bigger risk is residential if the real estate market slows down.”