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West Palm Beach landlords are testing the depth of demand for units with monthly rents in the $3,000 to $4,000 range.
A new generation of apartment buildings in downtown West Palm Beach is changing the city’s skyline and — with two-bedroom units asking more than $3,000 a month — reshaping expectations about how much tenants are willing to pay for rent.
More than 1,000 new apartments have come on the market, and 251 additional units are under construction. Landlords now are testing the depth of demand for premium units with monthly rents in the $3,000 to $4,000 range.
“We think they’re a little high,” said Dan Gallien, owner of Rent 1 Sale 1 Realty, a Royal Palm Beach-based brokerage that has represented numerous tenants in downtown West Palm Beach buildings. “Actually, a lot high.”
At Park-Line, the tower near the Brightline train station, fully 54 percent of the building’s 290 units have been leased, the landlord says. One-bedroom units go for $2,100, and some two-bedroom apartments are priced at as much as $3,258 a month.
That’s in line with the asking rents at other new buildings downtown. At Broadstone City Center, units rent for as much as $2,870 for a two-bedroom, 1,086-square-foot apartment.
At The Alexander, prime two-bedroom units with 1,693 square feet of space go for $3,995 a month. The building touts 12-foot ceilings and ocean views from some apartments.
Spending $40,000 a year on rent once seemed a financially foolish strategy. However, in a trend that has grabbed the attention of apartment developers, affluent Americans have cooled a bit on homeownership.
The U.S. homeownership rate was 64.2 percent in the first quarter of 2019, well below the record high of 69.2 percent set in 2004. Many real estate experts say millennials will prove less likely to buy homes than their baby boomer parents, who believed that paying a landlord was akin to throwing away money.
“Renting is a good thing now,” Gallien says.
Even so, downtown West Palm Beach’s apartment boom strikes some developers as a bit too much of a good thing, at least for now. While 251 new rental units are under construction at the site of the former City Hall, four other apartment projects that have been approved remain on hold.
Billionaire developer Jeff Greene in 2017 won city approval to build 348 “micro unit” apartments downtown. However, fearing a glut of new apartments, Greene since said he has decided not to move forward with the project, known as Banyan Place. Greene also shelved Clematis Place, a project slated for 169 apartment units.
Also approved but not under construction are a second phase of Loftin Place and the 400 units planned for the Transit Village project.
In a building spree that is reshaping downtown, 1,069 new units have been completed, 251 units are under construction and 1,110 more have been proposed:
Bargain hunters in search of a tenant’s market might be disappointed, Gallien said. While home sellers consider a listing price a starting point for negotiations, multifamily leasing offices tend to stick to their published rental rates.
“Generally, you’re not negotiating a price with an apartment landlord,” Gallien said.
Even if apartment demand proves a bit soft for now, there are signs that downtown soon could have more workers eager to rent downtown apartments. Next door to Park-Line is the site of 360 Rosemary, a 300,000-square-foot office building scheduled for completion in 2021.
A few blocks away, Greene has broken ground on One West Palm, a development that will include 200,000 square feet of office space. Despite making a big bet on demand for downtown office space, Greene also has complained about what he considers West Palm Beach’s less-than-robust labor market.
“We don’t have that dynamic economy with high wages that other places have,” Greene said in December.