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.
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.
