The thriving setting of Palm Beach attracts Fifth Avenue retailers during Covid

WEST PALM BEACH, Florida – retailers, restaurants and other business owners want to be where people are. And people are moving to South Florida en masse.

Some are doing a temporary retreat during the pandemic, away from the cold northern climate. Others are making a long-term shift, and companies are following through, committing to decades-long leases.

At Rosemary Square, an open-air shopping center located near downtown West Palm Beach, a West Elm furniture store and Urban Outfitters are scheduled to open in the coming months. They will be joined by a number of new restaurants, including a newly opened local fast-casual taco shop, the health-oriented True Food Kitchen chain and the modern Planta restaurant.

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

Across the water, on Palm Beach Island, activity around Worth Avenue is just as busy.

SoulCycle is running an external pop-up. Her spinning classes are scheduled on weekends and are attended by people from out of town, who are often heard discussing their plans to return to New York or Washington, DC – eventually.

On Worth Avenue, a Rolls Royce lines up behind an Aston Martin behind a Porsche, while couples get in and out of Tiffany, Chanel and Saks Fifth Avenue on a warm, cloudless Saturday afternoon. The luxury shopping street, which some might call Quinta Avenida do Sul, has almost no vacancies. The notable exception is an empty Neiman Marcus store that the luxury department store chain closed after filing for bankruptcy last year.

Some entrepreneurs had their decisions influenced by the pandemic and opted for Worth Avenue instead of Fifth Avenue.

Maurice Moradof and his mother Yafa Moradof fled Manhattan last November to place a long-term bet and open their second luxury jewelry store, Yafa Signed Jewels, on Worth Avenue. They acted after a wave of looting and riots related to George Floyd’s protests took place in Manhattan over the summer. Businesses along New York City’s main streets were taking a heavy hit due to Covid’s restrictions, the loss of tourists and reduced consumer spending.

“Business was getting a little weak,” said Maurice Moradof of the Fifth Avenue location, which is still open as a studio. “And it became very dangerous in New York. I didn’t feel comfortable anymore.”

Since opening on Worth Avenue, business has exceeded expectations, he said. The retailer signed a 25-year lease on the store, he said, which lies between a Lilly Pulitzer and Michael Kors.

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

Activity in the South Florida real estate market – towering cranes, the arrival of new tenants, rising rents and few vacancies – gives a considerably different picture of the streets of SoHo and Fifth Avenue in New York City. And experts say that properties on the Palm Beach market, in particular, are increasingly in demand.

“There is domestic migration from New York, New England, Toronto, Montreal … we are seeing people from Chicago and California as well,” said Drew Schaul, senior vice president of advisory and transaction services for CBRE, a specialized firm in the south. from Florida. “They are licking their ribs to be here.”

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

According to Redfin, a technology-based real estate broker, 56.1% of home searches in Palm Beach County during the fourth quarter came from outside the county. Searches from Chicago and Brooklyn were the most popular origins in other states, the company said.

“Everything that is happening in Palm Beach and around the center of West Palm is a great story,” he said. “And one of the great catalysts, I think, is what Rosemary Square did to attract new customers.”

Even some pioneering brands on the Internet are looking to test the waters in West Palm in the development of Related, which used to be known as City Place until a marketing overhaul in early 2019.

Three companies – Faherty, a men’s and women’s clothing retailer; Solid & Striped, a beachwear brand; and Mint & Rose, a shoe and accessory company that brings products from Spain – opened pop-up locations in Plaza Rosemary earlier this year. And they are all operated by Leap, a company that helps online retailers find vacancies, sign rental contracts and open stores.

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

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

What Toila and many other real estate developers see is a flow of people looking to make Palm Beach and the surrounding neighborhoods a home. The comfortable climate and high tax evasion were attracted a long time ago, even before the pandemic. But especially now.

There were 289 single-family transactions in Palm Beach in 2020, an increase of 122% over the previous year, according to a report by real estate broker Suzanne Frisbie of the luxury company Premier Estate Properties. The year ended “with record-breaking and often surprising highs,” she said, which are spreading to 2021.

Private equity magnate Scott Shleifer just closed a beachfront mansion in Palm Beach, paying more than $ 120 million and setting a record for Florida home sales and setting one of the most expensive home sales in the country.

Houses are abandoning the market, and the expansion of construction to other residential spaces is a sign that the supply remains restricted. Related, for example, is still planning a pair of high-profile rental communities. One of them will sit 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 close to Rosemary Square, as the pandemic generated a demand that few could have foreseen.

“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 in the Related’s Southeast office. “But the market started to mature. And, effectively, it started to look like a real city.”

“We see the quality and caliber of people increasing, and much of that is being driven by people who move here from the Northeast and Midwest,” he said. “Now, we believe Covid is really accelerating growth in market maturity.”

As demand increases and more retailers and restaurants move into the area, commercial property rentals in the South Florida market also increase.

Retail rentals in the Palm Beach area, which includes West Palm Beach, have increased by 2.6% in the last 12 months, compared to the historic average rental growth of 1.7%, according to CBRE data. For comparison, in New York, retail rents fell 4.9% compared to the previous year, on average, compared to historical growth of 1.6%, the real estate agency found.

“It’s not such a bad 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 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, all of a sudden, relatively speaking, all of these global brands are turning to South Florida and saying, ‘It’s open for business, the weather is good’ – we have to focus if we weren’t already focusing here. double. ‘”