Home Business Thriving Palm Beach scene draws Fifth Avenue retailers during Covid

Thriving Palm Beach scene draws Fifth Avenue retailers during Covid

An aerial view over downtown West Palm Beach, where RH in December 2017 opened an 80,000-square-foot, mansion-like store with a rooftop restauratnt.

Source: Indiehouse Films

WEST PALM BEACH, Fla. — Retailers, restaurants and other business owners want to be where the people are. And people are moving to South Florida in droves.

Some are taking a temporary retreat during the pandemic, away from the cold weather up North. Others are making a longer term change, and businesses are following by committing to decades-long leases.

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

Lucid Motors, the electric car company known as a Tesla competitor, opened its second South Florida location last month at Rosemary Square, 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, on most weekends, are filled with visitors. After shopping some grab a smoothie from Pura Vida, another recent addition to the complex, and listen to live music on a central grass lawn.

Rosemary Square

Source: Indiehouse Films

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

SoulCycle is running an outdoor pop-up. Its spin classes book up on the weekends and are frequented by out-of-towners, who are often overheard discussing their plans to go back to New York or Washington, D.C. — eventually.

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

Fifth Avenue flight

Some business owners have had their decisions shaped by the pandemic, and have opted for Worth Avenue over Fifth Avenue.

Maurice Moradof and his mother Yafa Moradof left Manhattan in November 2020 to open Yafa Signed Jewels on Worth Avenue.

Source: Yafa Signed Jewels

Worth Avenue, in Palm Beach, is one of the premier upscale shopping streets in the world.

Jose More | Universal Images Group | Getty Images

The activity in the South Florida real estate market — towering cranes, the arrival of new tenants, escalating rents and few vacancies — paints a considerably 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 more and more sought-after.

“There’s domestic migration from New York, New England, Toronto, Montreal … we’re seeing people from Chicago and California, as well,” said Drew Schaul, senior vice president of advisory and transaction services for the commercial real estate firm CBRE, specializing in South Florida. “They’re licking their chops to be here.”

Some Wall Street financial institutions have made the leap, too, citing the tax and lifestyle perks for their decisions. Goldman Sachs is reportedly eyeing the Palm Beach market for new office space, while Paul Singer’s Elliott Management has moved its headquarters to West Palm Beach from midtown Manhattan.

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

“Everything that’s going on in Palm Beach and in the surrounding downtown West Palm, it’s a great story,” he said. “And one of the big catalysts, I think, was what Rosemary Square has done attracting new customers.”

Even some internet-first brands are looking to test the waters in West Palm, at Related’s development, which used to be known as City Place until a marketing overhaul in early 2019.

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

“This is a great example of a market that’s going to thrive,” said Amish Tolia, co-founder and co-chief executive of Leap. “Rosemary Square does pull from multiple different trade areas … and we believe it’s only going to get better from here.”

Influx of new residents

“Based on what we’re seeing,” Toila said, “we fully intend to do more in Southern Florida.”

Lucid Motors opened its sixth location in the United States in January, at Rosemary Square.

Source: Related

Retail rents on the rise

“Twenty-five years ago, West Palm Beach, as you could 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, effectively, it’s started to look and feel like a real city.”

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

As demand ticks up and more retailers and restaurants move into the area, commercial real estate rents in the South Florida market have picked up, too.

Retail rents in the Palm Beach area, which includes West Palm Beach, are up 2.6% over the past 12 months compared with historical average rent growth of 1.7%, according to CBRE data. For comparison, in New York, retail rents are down 4.9% from a year ago, on average, compared with historical growth of 1.6%, the real estate firm found.

“It’s just not as bad of a story here, as it is in many other parts of the country,” said Marty Arrivo, founder and CEO of Acre, a property consultancy that’s been helping lease space around South Florida.

“San Francisco’s a disaster, Los Angeles is a disaster, New York is a disaster, Chicago is freezing,” he said. “Now all of a sudden, relatively speaking, all of all these global brands are turning to South Florida and going, ‘It’s open for business, the weather’s nice’ — we’ve got to be focusing if we weren’t already focusing here. We’ve got to be doubling down.'”