There’s Something Happening Here….

 

I don’t mean to brag, but just like The Beach Boys sing: I get around.

Mind you, not as much as I used to—my tank is half full these days, but I compensate by reading, surfing the web and listening to podcasts. We live in a wonderful world of content that resides at our fingertips.

If I see a movie or read a book I like, chances are I can find a podcast featuring the writer or a website that includes links to their work so I can go deeper.

Lately, I’ve been reading a lot about Florida real estate, especially South Florida real estate and what’s happening to our market.

If you’ve lived in Florida long enough, you’ve seen the booms and you’ve seen the busts. You’ve marveled at the prices paid for homes and buildings only to see those jaw dropping deals look like bargains a few years later. But this time it feels different. This time it feels like the very nature of our region is changing.

As I write this, our market is red hot. We are seeing prices that defy description. Land in downtown Delray is trading at $6 million an acre. Homes that a few years ago were selling in the high $200s are selling for four times that price today.

It all seems…well… it all seems  unreal.

And yet….

A whole lot of value has been built in Delray Beach and Boca Raton.

Yes, there’s traffic.

Yes, there are bad drivers and rude people.

Yes, we tend to complain about those things and a host of other maladies real or imagined.

But…

By just about any measure, this is a great place to live.

As a result, people are willing to pay a premium to live here.

After all, we check a lot of boxes.

Good weather + quality of life+ no income taxes = a robust real estate market.

Add in years of low interest rates, easy credit, and lots of money sloshing into the system and you get inflated values.

Yes, real estate is rising just about everywhere, but something different is happening here.

So, what do I mean?

Ok, a few random thoughts based on “getting around” talking to real estate people, reading articles etc.

• Big finance is all in on South Florida. West Palm Beach is reeling in the firms, Goldman Sachs etc. So is Boca. And Palm Beach Gardens. Wall Street, anxious to have a post -Covid hedge against being locked down in NYC, sees our area with all its wealth and proximity to Palm Beach as a very attractive option compared to NY, New Jersey and Connecticut.
• West Palm Beach, under the able leadership of Mayor Keith James, is having a “moment.” I’ve always felt West Palm had potential beyond the ups and downs of Clematis Street or the various iterations of Rosemary Square or whatever it’s called this week. For a while, I thought the condos were going to crowd out the ability to land businesses, but there seems to be room left over for economic development and job creation. No less an authority than the Wall Street Journal is singing the praises of West Palm, noting that it has been “discovered” by many Palm Beach types who once never thought of crossing the bridge to own real estate or open businesses.
  One of the more exciting developments is the vision taking shape at Palm Beach Atlantic University. I had an opportunity to look at a scale model of the campus vision in the beautiful board room of the university. The plans include a major investment in health care on campus, a lifelong learning residential component and a center that will train future leaders while celebrating free enterprise. If it comes to fruition, it will be a big leap for downtown West Palm Beach.
• The University of Florida is also flexing its muscles in Palm Beach County with plans to partner with some of the life science institutes that have sprouted here. I’m a little wary of how this encroachment affects FAU, but the UF brand and political muscle can’t help but make a difference in our region.
• Speaking of FAU, I’ve had recent meetings with board members, President Kelly and professors. FAU’s ambitions are impressive. The best is yet to come at FAU. Keep a close eye on their medical school–what they are building there is beyond exciting it’s potentially transformational.
• Lynn University (Disclosure: I serve on the board of Trustees) also has a grand vision that I am immensely proud of. Covid was a wild ride for educational institutions, and I’m endlessly impressed by the team at Lynn which consistently pivots to ride the waves of change. That’s good news for Boca and the surrounding area because Lynn radiates a whole lot of positives for our community.
• We are also seeing health care take a major leap. The Baptist network—which runs Bethesda and Boca Community—has taken medicine to a new level. I also remain a strong booster of Delray Medical (Disclosure: I spent seven years on the board) and its sister hospitals owned by Tenet.

Health care has become a major economic driver and is essential in a world impacted by pandemic (s). In order for an area to maintain and grow its value, a good health care system is not an option, it’s table stakes.

• There’s a lot of money moving into Boca/Delray. Take a drive through Lake Ida or Tropic Isle or La Hacienda (off of North Federal) and you almost can’t believe your eyes. So, here’s what’s happening—no judgment just observation. Older homes are being purchased for big money only to be leveled and replaced by even more expensive homes. In many cases, the new residents are replacing people who have lived here for decades and have decided to cash out and either move out of the area and or downsize. The new residents may only live here a few months a year. They are here to have fun at the beach and on Atlantic Avenue. They may never get involved in the community and they may never vote here. They are here for the amenities (again no judgment, we plan to do this in Maine in years to come so I get it.) Regardless, this changes the flavor of neighborhoods and the community. If I were still a policymaker, I would be keeping a close eye on this dynamic.
• The wealthy and seasonal demographic moving to our community is also impacting schools. Enrollment in Delray Beach public schools is plummeting. This is a sea change from an earlier era when the School District had to add portables to keep up.
• All these dynamics puts the squeeze on middle class families and those striving to get to the middle class. I often wonder where people who serve as essential workers will live. It is a huge challenge to create attainable housing when land and construction costs are soaring. Usually, the best way to lower costs is to add supply to meet demand. But long and uncertain entitlement processes and an aversion to density makes it hard to add supply—especially in areas near employment centers. Regardless, it will take a huge effort to provide the housing we need to accommodate those currently frozen out of the market. It isn’t fair to put it all on the development community who simply can’t make the numbers work without significant help from government.

Every study I’ve read lately is calling on government to step up with financing tools to bridge the gap but that will require political will, a willingness to take some risks to ensure housing opportunities and some policy innovation that frankly, to date. we haven’t had.

There’s more but that’s enough to chew on for now.

It will take a village to re-imagine our future. It’s coming whether we prepare for it or not, but it will be better if we prep.

Let’s just say that Florida seems to be the new “golden state”—as the bloom fades on “California Dreaming” “Here comes the Sun(shine)” state.