Real estate investors – the city of West Palm Beach wants you.
A far-reaching economic development plan that was the focus of a City Commission workshop last week presented proposals to create jobs, grow the tax base and attract business to West Palm Beach. But resonating through the 49-page document was real estate development—or specifically how the shortage of product in almost every category—would be a key sticking point for economic growth. “Real estate is going to play a big part in it,” said Kevin Crowder, economic development director of Redevelopment Management Associates, the contractor running the city’s community redevelopment agency. “Real estate is one those themes that drives everything else.”
After hitting record lows in 2010, the city’s construction is rebounding. Last year, the value of new construction doubled to more than $1 billion—up from 2010 when developers created about $102 million worth of new projects. But in a city where demand for all product types continues to outpace supply, West Palm Beach officials and promoters want to put building cranes against the skyline.
“I applaud the forward-thinking approach of the City of West Palm Beach, as we strongly believe that addressing the lack of office space will help position the city for quality economy development,” said Kelly Smallridge, president & CEO of the Business Development Board of Palm Beach County Inc. “We need to see some dirt turned and shovels in the ground. Right now there are no new offices in the works. There are proposals, but nothing in the works.”
One of the first campaigns centers on two major corridors where urban decay and blight have left the available commercial space undervalued and rundown, and where city staffers say investors could create an economic revival.
Earmarked are Pleasant City—a tract extending north from the central business district, along Rosemary and Tamarind avenues—and the Broadway corridor from 25th Street to the city’s northern limit at 59th Street. It’s a development region where the city is building a charter school, the CRA is offering incentives for business, the city plans crime-prevention measures and where the state designated an enterprise zone to attract investment and create employment.
Another campaign would rezone the area to take advantage of existing successful firms, like the Rybovich mega yacht marina and refitted boatyard on North Flagler Drive, and create business clusters. But that’s not going to happen without real estate investment.
“A major issue with recruiting new marine companies to the Broadway corridor at this time is the lack of available space for lease. There are currently only three buildings out of 77 that are actively marketing space for rent, resulting in a surprisingly low vacancy rate of only 3.9 percent,” according to the city’s economic development strategy. “Until leases expire or new construction and significant redevelopment of the corridor begins in earnest, there will not be enough vacant space available to build a successful marine cluster. One solution to this issue is to maintain a relationship with property owners and actively promote their properties to targeted businesses when existing leases are close to expiring.”
Building Incentives
But even if these steps worked to create a new commercial zone, retail still would be lagging. Along the 4.2-mile stretch along South Dixie Highway between Okeechobee Boulevard and the northern and southern city limits, the city sees potential for new retail and restaurants in its suburban strip malls.
The problem there, though, is the buildings and roads need a major face-lift to attract shoppers, who by the city’s count leave the area and head to neighboring towns for retail shopping, spending $166 million annually. That’s why the economic strategy would offer incentives to support infrastructural maintenance for the retail sector.
“The goal of this plan overall is to create the first roadmap to set the city on a course for economic diversity and improvements in the overall quality of the life,” said Chris Roog, West Palm Beach’s economic development director. “This plan tells us how to be very strategic in terms of where to add residential development and where to add some commercial.”
Major restaurant and retail leases—like Tequila Cowboy Bar and Grill’s 11,000-square-foot deal and BRIO Tuscan Grille’s 7,000-square-foot lease at City Place—are driving absorption. And citywide, brokers say the retail vacancy rate is healthy, hovering around 7.3 percent, according to data from CBRE Inc. The city’s proposal would marry retail and residential development, allowing one sector to feed the other.
Home values are already on the rise according to the Realtors Association of the Palm Beaches, which shows a 25.8 percent spike in the median sale price of single-family homes between February 2013 and February 2012. City staffers want to ride that momentum by increasing local homeownership. About 43.5 percent of the city’s housing is owner-occupied—lower than the 65 percent national average. One recommendation is to create homeownership incentives that target commuters who work in the city but live elsewhere.
Another recommendation, this time from the Urban Land Institute’s technical assistance panel, proposes multifamily development as the best strategy for meeting housing needs, generating income for investors, taxes for the city and creating utilities revenues for the municipality. “The timing of the economic development strategy rollout is absolutely perfect,” Smallridge said. “We are seeing a tremendous amount of interest in the downtown West Palm market.”
Source: DBR
