With Wall Street firms tripping hand over foot to get out of New York, where taxes and crime are both on the rise, places like Palm Beach, Florida, are the beneficiaries. We have noted numerous firms, including names like Point 72 and Goldman Sachs, branching out and/or leaving New York altogether in favor of greener pastures in Florida, since the pandemic started.
Amidst the Wall Street exodus, Palm Beach office space demand is off the charges. The city has officially become a "hot market" for commercial real estate, according to a new report from BNN Bloomberg. As a result of the boom, Manhattan developer Related Cos. "has been accelerating investments in West Palm Beach and now controls about a third of its downtown office stock," the report notes. Related is the company behind NYC developments Hudson Yards and the Columbus Circle tower.
Now, the company is betting on a continued boom in South Florida even after Covid restrictions are lifted.
Kelly Smallridge, president of the Business Development Board of Palm Beach County, told BNN: “The pandemic has really showed executives that they could do business anywhere, Developers are at the drawing board right now to develop more space to accommodate all of this growth. We’re on fire.”
Related has bought three buildings in West Palm Beach this year, including one that will house Point 72. It'll now own 1.6 million square feet (149,000 square meters) of offices in the area.
New York-based Cohen Brothers Realty has also proposed a 400,000 square foot office tower in West Palm, the report notes. Developer Jeff Green has a mixed use project called One West Palm currently under construction, as well.
Gopal Rajegowda, a partner at Related Southeast, said: “We feel West Palm is one of the fastest-growing commercial markets. With more people thinking about lifestyle now, a lot of these companies say, ‘hey, we want to be in South Florida, so why don’t we put a stake in the ground now?’”
BNN estimates that about 59,000 people from the New York area spent "at least eight weeks" in Southeast Florida last year. 42% of those went to Palm Beach County, which gained 11,000 new residents during 2020.
The city's 360 Rosemary tower is now more than 95% leased, compared to 30% six months ago. Mark Pateman, managing principal with Cushman & Wakefield Plc’s West Palm Beach and Boca Raton offices, said: “It would normally take way longer to lease. I am seeing a lot of non-local brokers walking through our buildings dragging Florida brokers in tow.”
One of the reasons Palm Beach is filling up so quickly is because of its small size. It has about 2.9 million square feet of office space, compared to 253 million square feet in Midtown Manhattan. Because of its small size, it's also tough to consider West Palm's boon as a major sea change.
Pateman concluded: “We’ve got a good run here, we have another two years of tailwinds from Covid, but is New York going away? Absolutely not. It’s overstated to say this is a paradigm shift.”