The booming Palm Beach scene draws Fifth Avenue retailers during Covid

WEST PALM BEACH, Fla. – Retailers, restaurants and other entrepreneurs want to be where the people are. And people are moving to South Florida en masse.

Some withdraw temporarily during the pandemic, away from the cold weather in the north. Others are making a change in the longer term, and companies are following by committing to decades-long leases.

In Rosemary Square, an open-air shopping mall close to downtown West Palm Beach, a West Elm furniture store and Urban Outfitters will open in the coming months. They will be joined by a slew of new eateries, including a recently opened local fast-casual taco shop, health-driven True Food Kitchen chain and hip plant-based restaurant Planta.

Lucid Motors, the electric car company known as a Tesla competitor, opened its second South Florida location in Rosemary Square last month, which is operated by New York-based developer Related. It joined Lululemon, Anthropologie, Yeti, Tommy Bahama, Sur la Table, RH, and more than a dozen other retailers that are filled with visitors on most weekends. After shopping, some grab a smoothie from Pura Vida, another recent addition to the complex, and listen to live music on a central lawn.

Across the water, on Palm Beach Island, the activity around Worth Avenue is also bustling.

SoulCycle runs a pop-up for outside. The spin classes book over the weekend and are attended by out-of-towners, who are often overheard about their plans to move back to New York or Washington, DC – eventually.

On Worth Avenue, a Rolls Royce is behind an Aston Martin behind a Porsche, as couples in and out of Tiffany, Chanel and Saks dive Fifth Avenue on a cloudless and balmy Saturday afternoon. The chic shopping street, what some might call Fifth Avenue of the South, has hardly any vacancies. The notable exception is an empty Neiman Marcus store that the luxury department store chain closed after filing for bankruptcy last year.

Having let the pandemic shape their decisions, some business owners have chosen Worth Avenue over Fifth Avenue.

Maurice Moradof and his mother Yafa Moradof fled Manhattan last November to make a long-term bet and open their second luxury jewelry store, Yafa Signed Jewels, on Worth Avenue. They made the move after a spate of looting and riots linked to the George Floyd protests in Manhattan over the summer. Businesses in New York City’s high-street shopping areas were hit hard by Covid’s restrictions, the loss of tourists and declining consumer spending.

“The company was starting to get a little weak,” said Maurice Moradof of the Fifth Avenue location, which is still open as a studio. And it got very dangerous in New York City. I didn’t feel comfortable anymore. ‘

Since it opened on Worth Avenue, things have exceeded expectations, he said. The retailer signed a 25-year lease for the store, he said, which is in between a Lilly Pulitzer and Michael Kors.

“There is no recession in Palm Beach … The rich are getting richer,” said Maurice Moradof. “I don’t see New York coming back for the next two or three years.”

The activity in the South Florida real estate market – skyrocketing cranes, the arrival of new tenants, rising rents, and low vacancy – paints a significantly different picture than the streets of SoHo and Fifth Avenue in New York City. And experts say real estate in the Palm Beach market, in particular, is growing in popularity.

“There is domestic migration from New York, New England, Toronto, Montreal … we also see people from Chicago and California,” said Drew Schaul, senior vice president of advisory and transaction services for commercial real estate company CBRE. , specializing in South Florida. “They lick their chops to be here.”

Some financial institutions on Wall Street have also made the leap by citing the tax and lifestyle benefits for their decisions. Goldman Sachs is reportedly looking to the Palm Beach market for new office space, while Paul Singer’s Elliott Management has moved its corporate headquarters to West Palm Beach from downtown Manhattan.

According to Redfin, a technology-based real estate brokerage, 56.1% of home searches for Palm Beach County in the fourth quarter came from outside the county. Searches from Chicago and Brooklyn were the most popular out-of-state sources, the company said.

“Everything that’s going on in Palm Beach, and in the surrounding downtown West Palm, is a great story,” he said. “And one of the great catalysts, I think, was what Rosemary Square did to bring in new customers.”

Even some internet-first brands are trying to test the waters in West Palm, developing Related, formerly known as City Place, until a marketing overhaul in early 2019.

Three companies – Faherty, a retailer of men’s and women’s clothing; Solid & Striped, a swimwear brand; and Mint & Rose, a shoe and accessories company that brings products from Spain, opened pop-up locations in Rosemary Square earlier this year. And they’re all managed by Leap, a company that helps online retailers find spaces, sign leases, and open stores.

“This is a great example of a market that is going to thrive,” said Amish Tolia, co-founder and co-chief executive of Leap. “Rosemary Square pulls from multiple different trading areas … and we think it will only get better from here.”

“Based on what we’re seeing,” said Toila, “we plan to do more in South Florida.”

What Toila and many other real estate developers see is an influx of people looking to house Palm Beach and the surrounding neighborhoods. The comfortable climate and escape from heavy loads have long been major draws, even before the pandemic. But especially now.

According to a report by real estate agent Suzanne Frisbie of luxury firm Premier Estate Properties, there were 289 single-family transactions in Palm Beach in 2020, 122% more than the year before. The year ended “with often stunning, record-breaking highs,” she said, continuing into 2021.

Private equity tycoon Scott Shleifer reportedly just closed an oceanfront mansion in Palm Beach, paid more than $ 120 million, and set a record for Florida home sales, marking one of the most expensive home sales in the country.

Houses are flying off the market and the rapidly growing construction of other housing is a sign that the supply remains limited. Related, for example, is still plotting a few high profile rental communities. One sits on the site of an old Macy’s department store near Rosemary Square. It also accelerated the construction of a 20-story office tower, also next to Rosemary Square, as the pandemic boosted demand few could have predicted.

“Twenty-five years ago, West Palm Beach, as you can imagine, was a very different place with a lot of seasonality,” said Gopal Rajegowda, a partner at Related’s Southeast office. “But the market started to mature. And in fact it started to look and feel like a real city.”

“We see the quality and caliber of people increasing, and much of it is driven by people moving here from the Northeast and Midwest,” he said. “Now we think Covid is really accelerating the maturity growth of the market.”

As demand grows and more retailers and restaurants move into the area, commercial real estate rents in the South Florida market have also risen.

Retail rents in the Palm Beach area, which includes West Palm Beach, are up 2.6% in the past 12 months, compared to a historic average rental growth of 1.7%, according to data from CBRE. By comparison, retail rents in New York are on average 4.9% lower than a year ago, compared to a historic 1.6% growth, the real estate firm discovered.

“It’s just not as bad a story here as it is in many other parts of the country,” said Marty Arrivo, founder and CEO of Acre, a real estate consultancy that has helped rent out space in South Florida.

“San Francisco is a disaster, Los Angeles is a disaster, New York is a disaster, Chicago is freezing,” he said. “ Now, relatively speaking, all these global brands are suddenly turning to South Florida and saying, ‘It’s open for business, the weather is fine’ – we need to focus if we’re not already focusing here. . We have to double. ”