After rising sharply in 2014 and 2015, rents in West Palm Beach have begun to flatten, especially downtown, as more product rolls out and residents vote with their feet against large rent increases.
“It’s definitely leveling out,” Jeff Greene, who owns rental units in two buildings downtown (The Strand and City Palms), told The Real Deal. “This year there are essentially no rent increases” in those buildings. Some residents of the Strand report that their rents are increasing only 2 percent this year after jumping 15-20 percent in the previous two years combined. A one-bedroom unit rents for about $1,550 a month there.
Overall in West Palm Beach, rents for all-sized apartments averaged $1,313 a month in February, up 8 percent from $1,217 a year earlier, according to Reinhold P. Wolff Economic Research. The 2015 figure represented an 11 percent increase from $1,095. Some of the current stagnation came after February.
Rents have been weighed down by the opening of Loftin Place with 259 units at 805 North Olive Street late last year and the 85-unit Alexander Lofts at 326 Fern Street earlier in 2015.
“A brand new building upsets the apple cart, of course,” Greene said. “It competes with existing product. Since we have a small downtown, that’s a lot to have all at once.” Any recent efforts to raise rents substantially in his buildings have been met with vacancies, Greene said.
Nader Salour, whose Cypress Realty developed Loftin Place, told TRD the surge in rents that occurred in 2014 and 2015 couldn’t last. “Rents can’t continue to go up,” he said. “Whether this is a permanent trend or just a temporary supply and demand issue is the $64,000 question.”
Rents were low for years after the real estate bust of 2007-09 left many of the new condo units in downtown West Palm vacant. Supply outstretched demand for a long period of time. “That’s why we’ve seen the increases, and there’s now more of a balance in supply and demand,” Salour said. “You can make an argument for rents staying stable.”
You can also make an argument for rents moving higher, but only if more people decide to live downtown, whether it’s locals or people coming outside the area, he said.
Several new apartment buildings are planned for downtown, and that obviously won’t boost rents, Greene noted. “My hope is demand will pick up,” as projects including the new baseball stadium in West Palm Beach, the renovation of the Norton Museum of Art and the All Aboard Florida train line attract more residents, Greene said. “Making West Palm Beach a more attractive city brings population to keep buildings filled.”
In the meantime, some residents are looking to rent west of downtown — from the Palm Beach Lakes Boulevard corridor to Wellington. In the former area, rents total about $1.50-$1.65 per square foot, compared to $2-$2.50 downtown, Greene said.
“I’m seeing my clients go west because they have no other options,” Heidi Cole, a realtor for Waterfront Properties and Club Communities, told TRD.