How West Palm Beach won COVID’s real estate wars

Twenty-eight years too early is how developer Stephen Ross describes his firm’s arrival in West Palm Beach, the Florida city he’s now helping transform with a trio of new office towers, ultra-luxury condos, and soon, a university.

Two-plus decades ago, the mega-developer and founder of Related Cos. struggled just to lease, and re-lease, retail space in the city’s downtown amid high turnover.

“You couldn’t keep tenants because there wasn’t enough year-round business,” said Kenneth Himmel, president of Related Ross, the Florida-centric firm spun off from New York City’s Related. “Everything was fine during the winter . . . and then in the summertime, there was no one.”

What a difference a few decades — and a pandemic — make.

While Miami may grab headlines with blingy condo towers and island enclaves, the bigger urban transformation post-COVID is happening 70 miles north in West Palm Beach — a city of 124,000 that’s becoming a co-mecca for the nation’s wealth.

“It almost overnight became an extension of the old Palm Beach,” said Rick Rose, who gives walking tours of that opulent town’s historic Worth Avenue — and owns a vacation rental business in West Palm Beach — just across the Intracoastal Waterway. He’s doubled the number of homes he manages for investors in recent years.

The number of millionaires in Palm Beach and West Palm Beach combined grew 93% in the decade through 2023, the third largest increase in the US  behind Austin and Scottsdale, according to advisory firm Henley & Partners.  The Palm Beaches have attracted millionaires at a greater rate in the past 10 years than Greenwich and Darien, the tony Connecticut coastline towns where Wall Street money traditionally settles.

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Well-heeled newcomers pushed Palm Beach County to the top of the pile in the national reshuffling of affluence. Between 2020 and 2021 new residents to the county (with West Palm as its seat)  brought $7.03 billion in new taxable income — more than any other place in the U.S., according to the Economic Innovation Group.  In 2022 (the latest data available) households moving into Palm Beach County had an average adjusted gross income of $260,100 — far higher than Miami-Dade’s $175,600, according to the Miami Association of Realtors.

These new arrivals are not just buying gated enclaves for leisurely weekends on the water. They’re moving their businesses and employees with them, taking up prime office space in West Palm Beach —and triggering the development of more. They’re inspiring a boomlet of new luxury condos (with Manhattan prices and pedigrees) along the city’s waterfront.

And they’re luring in a college. This week, Nashville’s Vanderbilt University presented plans for a $520 million graduate school campus focused on business and artificial intelligence. Wealthy locals, including Related’s Ross, are raising $300 million to help the university build out that campus, which Vanderbilt estimates could create 35,000 local jobs over 25 years.

“I hate to use the words ‘good’ and ‘COVID’ in the same sentence,” said West Palm Beach Mayor Keith James, in an interview after he’d attended an April groundbreaking for a condo tower where prices start at $5.9 million. “But COVID had been good to the city,” he said.

What may have started with Ken Griffin’s Citadel operating its hedge fund from the Palm Beach Four Seasons during 2020’s COVID lockdown, has yielded a more enduring and conventional workforce across the water in West Palm Beach in 2024.  Goldman Sachs, BlackRock, and Steven A. Cohen’s firm, Point72, have opened offices there.

In May, JPMorgan Chase, the nation’s largest bank, said it too would establish a West Palm presence , with a new 13,000-square-foot space in Related’s 360 Rosemary tower. Hotelier Richard Born, whose BD Hotels owns the Mercer and the Bowery hotels in Manhattan, is investing in his first non-New York lodging property in West Palm Beach, with a future 201-room hotel anchoring a 40-acre redevelopment district called Nora.

The plans for Nora (nicknamed for its location along North Railroad Avenue) — began in 2018, when NDT Development and Place Projects, wagered that greater West Palm could use a pedestrian-friendly neighborhood of restaurants and retail. They, along with Wheelock Street Capital, got to acquiring old industrial land, rezoning it and searching for tenants — the quality of which improved immensely once the pandemic hit, and it became clear to niche retailers that money was moving in.

“There’s early COVID tenants, there’s mid-COVID tenants, and there’s today’s tenants,” said Ned Grace, co-founder of NDT Development.

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The roster of Nora’s tenants so far might give Northeast transplants a sense of home. New York’s H&H Bagels is coming, as well as Van Leeuwen Ice Cream, with its debut Florida location. Broadway Restaurant Group will open its first eatery outside of Boston (a taqueria and oyster bar), Pastis will be the hotel’s main restaurant, and a luxury clothing boutique called Mint will stake its first location there outside Long Island and the Hamptons.

“There’s a real city that’s emerged where people can live and work in the downtown that didn’t exist. And really it has existed since COVID,’’ Grace said.

Downtown West Palm Beach’s population stood above 10,000 at the end of last year — three times what it was 20 years ago, according to  the Downtown Development Authority.

“We’re just not that retirement and hospitality community that everybody thought of,’’ said Professor Ken H. Johnson, a real estate economist at Florida Atlantic University’s College of Business. “I think we’ll look back on that with nostalgia.”

In 2021, with pandemic migration fully underway, real estate investors poured $2.53 billion into West Palm Beach — nearly four times what they had just the year before, according to MSCI. In 2023, investors sunk in another $859 million.

Amid a national crisis of empty office towers, office rents in West Palm are climbing, as demand for Class A workspace is still rolling in. Related razed a movie multiplex last year and has plans to build two new office towers –with a combined 1 million square feet — in its place.

The site today is still just a patch of dirt, but one future building there, 15 CityPlace, has tenant commitments for 60% of its space, said Jordan Rathlev, a senior vice president at Related Ross, who’s overseeing the firm’s development of more than 2 million square feet of office space downtown.

New York’s Related, which took a foothold in West Palm with a winning bid for a government redevelopment contract in 1996, had eventually become the city’s largest commercial property owner.  And last month, Ross, its founder, threw himself fully behind that status: the 84-year old developer stepped away from the Big Apple firm he began more than 50 years ago, and spun off its Florida division into a new venture that bears his name.

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The firm, Related Ross, has longer-term plans in the city that include: at least three more office towers, an 400-room Hilton Signia hotel — and a role as master placemaker. It’s seeking to amplify the city’s medical offerings (reportedly luring a Cleveland Clinic), and it’s trying to cultivate financial firm talent locally, by getting a Vanderbilt business school to town. Himmel describes that effort as a successful “intercept” of Vanderbilt’s rumored interest in finding a Florida location.

“One of our partners who attended a football game sat in the box with the chancellor and chairman of the board and literally, for three hours, sold West Palm Beach,” Himmel said.

It’s not just commercial property that’s been altered by so much in-migration.  West Palm Beach’s residential market has been remade too.

Just five years ago, in the second quarter of 2019, a luxury home in West Palm Beach — defined  as the top 10% of houses on the market by price — was anything listed at or above $680,000 (a figure that doesn’t even buy a one-bedroom apartment in Manhattan), according to Miller Samuel Inc. and Douglas Elliman Real Estate. In the second quarter of this year, that luxury threshold was $1.75 million.

“I see this as a market reset, rather than a peak and trough scenario,” said Jonathan Miller, president of Miller Samuel.

So do the waves of developers who are arriving at the shores of West Palm Beach to build exclusive condos at eye-watering prices.  Savanna, an investment firm with a portfolio of New York City office buildings, is making its first Florida investment there:  a 275-unit condo called Olara, where units start at $2 million. Miami builder David Martin is planning a hotel and condominium project — Mr C. Hotel & Residences — in conjunction with the Cipriani family, the first foray in West Palm for his firm, Terra Group.  Mr. C.’s  146 units, which began sales in November, are priced between $2 million and $6 million, he said.

Related Ross too is undertaking its first ultra-luxury condo in Florida: the 108-unit South Flagler House, designed by Manhattan’s architect to the billionaires, Robert A.M. Stern. The priciest unit there is seeking $72.5 million.

The firm held a groundbreaking ceremony for the project in April, with West Palm Beach’s mayor, government officials and real estate brokers, gathered  to celebrate the 3.4-acre sand patch along the Intracoastal Waterway that would eventually sprout one of the city’s priciest condo towers — nearly three decades after Related first envisioned West Palm as a future place of growth.

“We saw this 28 years ago,” Ross said in his public remarks.  “But unfortunately we had to wait a long time.”

Oshrat Carmiel is the publisher of Highest & Best , a newsletter on South Florida real estate and wealth migration, and a former real-estate reporter for Bloomberg News.

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