Three new apartment buildings are scheduled to open within two blocks of each other in downtown West Palm Beach over the next year or so, adding over 800 units to the market in a move that local real estate insiders bet will put downward pressure on rents.
At the moment, the downtown West Palm Beach market has a little over 6,700 condominium and rental units, city estimates show, and average rents hover at about $2.25 per square foot, according to Jeff Greene, a real estate investor and developer who has made a number of big bets on the area and owns over 75 acres of land in West Palm Beach. The new buildings would increase the area’s inventory by about 12 percent. Unless demand suddenly leaps, that means a drop in rents.
“Unless there is a sudden surge in high-paying jobs that I’m not aware of or a surge of movement into downtown West Palm Beach of retirees, I don’t see where the demand is for 800-plus new luxury rental units,” Greene said.
Downtown rents have climbed 20 percent over the last four years, but the majority of that came in 2014 and 2015, industry observers said. Greene has increased his rents 2 to 5 percent annually over the past two years.
The Alexander at 333 Fern Street is scheduled to open in October with 205 units. It will be followed by a Park-Line property with 290 units rising across the street from the Brightline train station, and the 315-unit Broadstone City Center at 410 Datura Street.
With an eye to the competition, the Alexander is now offering prospective residents 45 days free rent. It’s a move that industry insiders think others will emulate.
Greene contrasted West Palm with the Southern California apartment market. “There you have a lot of people with high salaries, and supply is a problem,” Greene said. “Here, the problem is the opposite. You have loose zoning, where people can build whatever they want.” Meanwhile, demand is constrained for downtown apartments in West Palm, because there aren’t enough high-income people who can afford them.
Even if rents soften in the short-term, some remain bullish on the area. Lanae Barnes, a broker at Echo Fine Properties in Palm Beach Gardens, noted that even after a flurry of building downtown between 2002 and 2006 and the financial crisis of 2008-2009, the market did come back.
Job growth will be a key reason for the market’s future strength, Barnes said: The West Palm Beach area added 13,500 new private-sector jobs in the last year, census data show.
And there are plenty of new projects, such as the spring training baseball stadium that opened this year, and the ongoing renovation of the Norton Museum of Art. “The West Palm Beach location keeps on getting better,” said Neil Kozokoff, a principal at Parkland Companies, who just opened an apartment building north of downtown. “Whatever glut there is of new product will ultimately be offset by increased demand.”