Palm Beach 2021 An in-depth review of the key issues facing Palm Beach County’s economy, featuring the exclusive insights of prominent business and political leaders.
CONTENTS
Contents:
34 Interview: Nick Uhren, Executive Director, Palm Beach Transportation Planning Agency
37 Interview: James Maus, Vice President of Space Business Unit Programs, Aerojet Rocketdyne
38 Interview: Clinton Forbes, Executive Director, Palm Tran
39 Interview: Clara Bennett, Executive Director, Boca Raton Airport Authority
41 Interview: Laura Beebe, Airport Director, Palm Beach International Airport
43 Professional Services: 44 A changing landscape: The pandemic gave professional services firms not only an opportunity to grow but to change the way they work
7 Economy:
24 Interview: Kelly Smallridge, President & CEO, Business Development Board of Palm Beach County 25 Interview: Ramsay Bulkeley, Executive Director, PBC Planning Zoning & Building Department
8 Economy in Numbers:
10 Walking on sunshine: Palm Beach County is thriving and there are few hazards on the road ahead
11 Interview: Verdenia Baker, County Administrator, Palm Beach County
12 Interview: Andrew Duffell, President, Research Park at Florida Atlantic University®
13 Interview: Jim Barnes, Village Manager, Village of Wellington
16 Roundtable: Mayor’s corner Fred Pinto, Mayor, Village of Royal Palm Beach Betty Resch, Mayor, City of Lake Worth Scott Singer, Mayor, City of Boca Raton
19 Interview: Faye Johnson, City Administrator, City of West Palm Beach
22 Market voices: Managing municipalities Ruby Childers, Downtown Manager, City of Boca Raton CRA Jonathan Evans, City Manager, City of Riviera Beach Andrea McCue, City Manager, City of Greenacres
26 Roundtable: Community development Rebecca DeLaRosa, Chief of Staff & Economic Development Director, City of West Palm Beach Renee Jadusingh, Executive Director, Delray Beach Community Redevelopment Agency Troy McLellan, President, The Boca Raton Chamber of Commerce David Scott, Director of Economic Development & Strategy, City of Boynton Beach
28 Interview: Julia Dattolo, President & CEO, CareerSource Palm Beach County
29 Perspective: Economic development Thuy Shutt, Interim Executive Director, Boynton Beach Community Redevelopment Agency
30 Interview: Donald Burgess, President & CEO, Chamber of Commerce of the Palm Beaches
33 Driving prosperity: Population growth, onshoring demand a strong backbone
45 Interview: Timothy Devlin, CoManaging Partner, Daszkal Bolton LLP
46 Interview: Connor Lynch, CEO, Plastridge Insurance Agency
47 Interview: Kurt Sylvia, Managing Director, The Sylvia Wealth Management Group at J.P. Morgan Wealth Management
48 Market voices: Legal trends Mark Bideau, Co-Managing Shareholder, Greenberg Traurig – West Palm Beach Tasha Dickinson, Partner, Day Pitney Robert Sacco, Office Managing Partner, Fox Rothschild Spencer Sax, Founding Partner, Sachs Sax Caplan PL
50 Interview: David Bowers, Shareholder and Member, Board of Directors, Jones Foster
52 Interview: Christine Gagnon, Partner & Co-Leader, Florida Life Science and Technology Group, EisnerAmper
54 Interview: David Norris, CoFounder, Cohen, Norris, Wolmer, Ray, Telepman, Berkowitz & Cohen
57 Residential Real Estate & Construction:
58 Residential Real Estate & Construction in Numbers:
60 Hot, hot, hot: A perfect storm of factors is driving residential real estate but affordable housing remains the county’s Achilles’ heel
61 Interview: Robert Rademacher, President, Kolter Homes
62 Interview: Mike Pappas, President & CEO, Illustrated Properties www.capitalanalyticsassociates.com
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Contents:
63 Interview: Michael Ging, Managing
Director Florida, Alliance Residential Realty
65 Interview: Dionna Hall, CEO, Broward, Palm Beaches & St. Lucie Realtors® and BeachesMLS
67 Perspectives: Shifting demands
Stephann Cotton, Founder & CEO, Cotton & Company Jon Isherwood, Division President, K. Hovnanian Homes Joe Morello, Business Development & Operations Manager, Somerset Financial Group Kevin Neal, Managing Director, Trinsic Residential Group
68 Interview: Michael Belmont, President, Minto Communities USA
70 Interview: Thomas Frankel, Founder, Frankel-Ball Realty Group
73 Commercial Real Estate & Construction:
74 As strong as ever: Commercial real estate has momentum on its side with little to hinder its progress
75 Interview: David Warne, COO, PennFlorida Companies
4 | Invest: Palm Beach 2021 | CONTENTS
76 Interview: Bradley Scherer, Founder & President, Atlantic Western Realty Companies
77 Perspectives: Monitoring market trends Dilip Barot, President & CEO, Creative Choice Group Robert Hamman, Managing Partner, Palm Beach, SVN Florida Commercial Randy Lebolo, Owner, Lebolo Construction Management Robert Primeau, President, Florida General Contracting Corporation Brian Sudduth, President, Miller Construction Company
William Hanser, Vice President & Managing Principal, LEO A DALY Mark Smith, Senior Vice President, Architecture, Director of Florida
78 Roundtable: Commercial landscape Dale Hedrick, CEO, Hedrick Brothers Construction Rex Kirby, President, Verdex Construction Alex Rosemurgy, CEO, Rosemurgy Properties Zach Young, President, Kast Construction
80 Interview: Rick Reikenis, President, Reikenis & Associates
82 Interview: Morley Greene, Chairman & CEO, Trez Capital
84 Market voices: Architectural minds Rick Gonzalez, President & Principal Architect, REG Architects, Inc.
Operations, GHP, Inc. Keith Spina, CEO, SpinaOrourke
86 Interview: Charlie Sisca, Managing
87 Interview: Jeff Hardin, Founder &
Member, Sisca Construction Services CEO, Straticon
89 Banking & Finance:
90 Banking on growth: The banking and finance sector is consolidating a foundation that will see it go from strength to strength
91 Interview: Richard Gieseler, Florida
92 Interview: Daniel Sheehan,
95 Interview: Charles Cross, Market
Regional President, M&T Bank Chairman & CEO, Professional Bank President South Florida, Seacoast Bank
96 Perspective: Inflation
Ward Kellogg, Chairman & CEO, Paradise Bank
97 Interview: Justin Cooper, Founder & CEO, Layla Capital
Palm Beach 2021 ISBN 978-0-9988966-1-8
111 Education: 112 Up to the challenge: Palm Beach County schools are working to leap over present and future hurdles 113 Interview: John Kelly, President, Florida Atlantic University 114 Interview: Debra Schwinn, President, Palm Beach Atlantic University 115 Interview: Ethan Shapiro, Head of School, Saint Andrew’s School 116 Interview: Ralph Maurer, Head of School, Oxbridge Academy
117 Interview: Daniel Gropper, Dean, Florida Atlantic University, College of Business
118 Interview: Ava Parker, President, Palm Beach State College
121 Tourism, Arts & Culture: 122 Great appeal: Tourism, arts and culture continue to be focal points of the local economy despite a hard year 123 Interview: Glenn Jergensen, Executive Director, Palm Beach County Tourist Development Council 124 Interview: Dave Anderson, General Manager, Palm Beach County Convention Center
99 Healthcare: 100 Long-lasting impact: The healthcare industry transformed with the pandemic and that transformation is expected to continue 101 Interview: Caitlin Stella, CEO, Joe DiMaggio Children’s Hospital 102 Interview: Rachel Blumberg, Executive Director, Sinai Residences Boca Raton
126 Market voices: Hospitality trends Nick Falcone, Managing Principal, NDM Hospitality & Rentyl Resorts Bernardo Neto, General Manager, The Ben Hotel Scott Webb, President, Kolter Hospitality 128 Interview: Jorge Pesquera, President & CEO, Discover The Palm Beaches 131 Interview: Dave Lawrence, President & CEO, Cultural Council for Palm Beach County
104 Interview: Seamus Lagan, CEO, Rennova Health
132 Interview: Michael Lessing, President & COO, Lessing’s Hospitality Group
106 Interview: Rafael Vasquez, South Florida Market Leader, Florida Blue
135 Interview: J. Michael Prince, President & CEO, USPA Global Licensing Inc.
President & CEO: Abby Melone Chief Financial Officer: Albert Lindenberg Regional Director: Jack Miller Senior Editor: Mario Di Simine Regional Editor: Max Crampton-Thomas Art Director: Nuno Caldeira Executive Director: Laura Hernandez Content Manager: Alejandro Sanchez Writers: Sara Warden, Esteban Pages, Caty Hirst, Cameron Saunders Digital Marketer: Andrea Salazar Office Assistant: Michelle Orellana Invest: Palm Beach is published once a year by Capital Analytics Associates, LLC. For all editorial and advertising questions, please e-mail: contact@capitalaa.com To order a copy of Invest: Palm Beach 2021, please e-mail: contact@capitalaa.com All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, without the express written consent of the publisher, Capital Analytics Associates, LLC. Whilst every effort has been made to ensure the accuracy of the information contained in this book, the authors and publisher accept no responsibility for any errors it may contain, or for any loss, financial or otherwise, sustained by any person using this publication. Capital Analytics Associates, LLC accepts no responsibility for the return of unsolicited manuscripts and/or photographs, and assumes no liability for products and services advertised herein. Capital Analytics Associates, LLC reserves the right to edit, rewrite, or refuse material.
Photo Credits: Book Cover:
Page 33 – Peter Gorman
Commercial Real Estate & Construction:
Sean Pavone
Page 36 – Photography by Sunman
TOC:
Page 38 – J erry Wyszatycki (Avatar Productions Inc.)
Page 73 – Sisca Construction Services; Margaritaville Resort Orlando
Page 3 – Margaritaville Resort Orlando Page 4 – Lessing’s Hospitality Group Economy:
Page 74 - Straticon
Page 100, 102, 108 – Palm Beach State College Page 105 – Ultimaxx Health Page 107 – GHP
Professional Services:
Page 76 - Kast Construction
Page 43 – Leo A Daly; Greenberg Traurig
Banking & Finance:
Page 111 – Palm Beach Atlantic University
Page 44 – Lebolo Construction Management
Page 89 – Peter Gorman; BrightStar Credit Union
Page 112, 114 – Florida Atlantic University
Page 7 – Fontainebleau Development; Discover The Palm Beaches
Page 46, 54 – Jones Foster
Page 10, 14 – W est Palm Beach Downtown Development Authority
Residential Real Estate & Construction:
Page 90 – Seacoast Bank Page 92 – West Palm Beach Downtown Development Authority
Page 12 – Shutterstock
Page 57 – K im Seng, Kimo Media; Kast Construction
Page 16, 23 – Discover The Palm Beaches
Page 60, 71 – Kast Construction
Healthcare:
Page 20 – Courtesy of Kolter Hospitality
Page 62 – Illustrated Properties
Page 28, 30 – City of Lake Worth
Page 66, 72 – Kolter Homes
Page 99 – Palm Beach Atlantic University; Palm Beach State College
Education:
Tourism, Arts & Culture: Page 121, 124, 130 – Discover The Palm Beaches Page 122 – Lessing’s Hospitality Group Page 133 – Delray Beach Downtown Development Authority Page 134 – Lucien Sirois
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6 | Invest: Miami 2017 | ECONOMY
Economy: By all accounts, Palm Beach County is poised for a strong postpandemic run. With a strengthening financial services sector to complement an already diverse economy and steady population growth on the back of a favorable climate and business-friendly taxes, the outlook remains sunny for Florida’s third-most populous county.
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Economy in Numbers: Palm Beach County, area Economic Summary:
Average weekly wages for all industries by county:
Unemployment rates for the nation and selected areas
Miami area, first quarter 2021 (U.S. = $1,289; Area = $1,213
10.5
United States
5.7 Palm Beach
$1,257
13.8
Miami area
5.6 13.6
Broward Co..
Broward
5.1
$1,155 15.2
Miami-Dade Co.
6.5 Miami-Dade
11.5
Palm Beach Co.
$1,231
4.8
0.0
10.0
Jul-20
20.0
Jul-21
Source: U.S. BLS,Local Area Unemployment Statistics
Source: U.S. BLS,Quartely Census of Employment and Wages
May 2021 Labor Trends: Palm Beach County Labor Force
May 2021
April 2021
May 2020
Change April 2020 April 2021
Change March 2021 April 2021
Percent Change
Percent Change
Civilian Labor Force
747,344
741,754
707,709
39,635
5.6%
5,590
0.8%
Employment
713,145
706,708
606,451
106,694
17.6%
6,437
0.9%
34,199
35,046
101,258
-67,059
-66.2%
-847
-2.4%
4.6%
4.7%
14.3%
–
–
–
–
Unemployment Rate Florida National
5.0%
5.2%
14.3%
–
–
–
–
13.0%
13.0%
13.0%
–
–
–
–
Source: Business Development Board of Palm Beach County
Gross Domestic Product:
All Industries in Palm Beach County, FL
All Industries in Miami-Dade County, FL
90M
180M
80M
160M
Thousands of U.S. Dollars
Thousands of U.S. Dollars
Gross Domestic Product:
70M 60M 50M 40M
120M 100M 80M
2002
2004
2006
2008
2010
2012
2014
2016
2018
Source: U.S. Bureau of Economic Analysis
8
140M
| Invest: Palm Beach 2021 | ECONOMY
2002
2004
2006
2008
2010
2012
2014
2016
2018
Source: U.S. Bureau of Economic Analysis
Palm Beach International Airport Traffic Report for the Period Ended July 2021: July 2021
12 Months ended July 2021
Percent Change
July 2020
Total Passengers
445,108
114,746
Total Estimated Seat Capacity (1)
12 Months ended July 2020
Percent Change
287.9%
3,772,672
4,786,241
-21.2%
509,881
298,878
70.6%
5,647,086
6,642,138
-15.0%
Estimated Load Factor (2)
87.3%
38.4%
48.9%
66.8%
72.1%
-5.3%
Total Cargo Tons (3)
2,389
2,558
-6.6%
31,228
29,175
7.0%
254,471
157,958
61.1%
2,818,689
3,285,399
-14.2%
Air Carrier Operations (4)
3,492
2,040
71.2%
38,190
44,226
-13.6%
GA & Other Operations (5)
6,132
5,443
12.7%
103,136
78,215
31.9%
Total Operations (5)
9,624
7,483
28.6%
141,326
122,441
15.4%
Landed Weight (thousands of lbs)
(1) Estimated Seat Capacity; Adjusted Innovata/OAG Scheduled seats, actual capacity may vary (2) Percentage Change in load factor is stated in absolute difference (3) Freight plus mail in US Tons
(4) Landings plus Takeoffs, includes cargo carriers (5) Per FAA Tower
Source: Palm Beach County Department of Airports
Population Projections: 2020
2030
2040
1,473,738
1,640,998
1,763,237 Source: Business Development Board of Palm Beach County
Palm Beach County area employment: West Palm Beach-Boca Raton-Delray Beach Metropolitan Division Nonagricultural Employment by Industry
Aug-21
Aug-21
Change
Florida
Percent Change
Aug-21
Aug-21
(not seasonally adjusted) Palm Beach International Airport Traffic Report for the Period Ended July 2021: Total Employment
Change
Percent Change
623,900
587,800
36,100
6.1
8,753,200
8,347,500
405,700
4.9
NA
NA
NA
NA
5,600
5,400
200
3.7
Construction
39,000
37,800
1,200
3.2
573,100
561,200
11,900
2.1
Manufacturing
19,900
19,200
700
3.6
381,500
372,500
9,000
2.4
Mining and Logging
Trade, Transportation, and Utilities
112,800
109,400
3,400
3.1
1,775,000
1,723,800
51,200
3.0
Wholesale Trade
24,200
22,300
1,900
8.5
353,800
339,200
14,600
4.3
Retail Trade
73,900
73,500
400
0.5
1,061,400
1,048,300
13,100
1.2
Transportation, Warehousing, and Utilities
14,700
13,600
1,100
8.1
359,800
336,300
23,500
7.0
Information Financial Activities
9,800
9,300
500
5.4
136,100
127,000
9,100
7.2
43,900
43,300
600
1.4
622,500
591,200
31,300
5.3
Professional and Business Services
120,600
116,000
4,600
4.0
1,408,500
1,352,400
56,100
4.1
Education and Health Services
107,200
100,200
7,000
7.0
1,336,000
1,285,200
50,800
4.0
80,800
66,600
14,200
21.3
1,082,400
930,600
151,800
16.3
Other Services
30,700
28,900
1,800
6.2
345,000
311,800
33,200
10.6
Government
59,000
56,900
2,100
3.7
1,087,500
1,086,400
1,100
0.1
Leisure and Hospitality
Source: Florida Department of Economic Opportunity, Bureau of Workforce Statistics and Economic Research
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Walking on sunshine: Palm Beach County is thriving and there are few hazards on the road ahead There are many reasons why Palm Beach County has been able to weather the COVID-19 pandemic better than many other parts of the country. Ultimately, however, it comes down to a diverse economy whose backbone has been propped up by an influx of financial services while the many advantages offered by the county, such as low taxes, have worked well to attract other sectors that include high tech, manufacturing and agriculture. It all comes together in a thriving economy that continues to grow, attracting an increasing number of people and companies from the Northeast and elsewhere in the nation. The positive ripple effect is being felt across sectors, from real estate to education. But it begins with the world of finance. In recent years, Palm Beach County has laid claim to being the “Wall Street of the South” and that moniker has never been more appropriate than this past year. During the COVID-19 pandemic, as those working in the financial services started meeting and working virtually, they realized they could have all the perks of working in a financial hub with 237 days of sunshine per year. Not only does the county now offer networking opportunities for entrepreneurs but it has also enjoyed 10
| Invest: Palm Beach 2021 | ECONOMY
a healthier economy than most during the pandemic, particularly as Northerners made their way south. With its strong education sector, flourishing residential real estate market performance and privileged geographic location, Palm Beach County has won recognition for its high quality of life and its variety of live, work and play activities. The county is Florida’s third-most populous, with 6.9% of the state’s population. Florida has always been a business-friendly state, with low taxes and incentives for new businesses. It’s a strategy that continues to pay handsome dividends for Palm Beach County, which is now one of the nation’s wealthiest, with per capita income that outstrips both state and national averages by about 50%. According to ratings agency Fitch, the county is one of only 22 in the nation with the highest AAA bond rating due to its diverse economic base, solid finances and moderate debt levels. This is one reason why Palm Beach County was able to perform so resiliently throughout the pandemic; another is its strengths in technology, manufacturing and agriculture. COVID-19 recovery Like all regions of the country, the elephant in the (
)
ECONOMY INTERVIEW
Silver lining The pandemic uncovered gaps that Palm Beach County is now working to close
Verdenia Baker County Administrator – Palm Beach County What have been the biggest takeaways from the pandemic era? I think one of the lessons we took away, which I like to call a silver lining, is identifying other ways to conduct business, such as Zoom calls. We did discover many gaps we were not familiar with, such as a lack of access to broadband. The county has had broadband projects underway for the last 15 years or so, but it has been a bit of a slow process. We are going to recommend to our board to allocate additional funding to continue working on expanding internet access to every part of our community. We also have formed a partnership with nonprofits, making certain they have the tools necessary for our children who attend programs at their locations. We have witnessed and welcomed the emergence of more entrepreneurs. People left their “traditional” work environments, found their niche and are not coming back to “traditional” office jobs. Of course, we strongly recommend and encourage individuals who become entrepreneurs to sign up and become certified small businesses so we may work with them as a governmental partner. Our Office of Equal Business Opportunity will continue to provide training and assistance on-demand, especially since we are seeing an increase in small, minority and women-owned businesses.
have a safe and affordable place to live. We work closely with our cities and with the development community to make sure we are leveraging our dollars in developing affordable housing.
How is creating a more equitable society a priority for Palm Beach County? The Board of County Commissioners have strategic priorities to make certain Palm Beach County is equitable. For the past five years, the board has set priorities for our budget and economic development is among them. They passed an ordinance reinstituting the small, minority, women-owned businesses ordinance, which allows us to set goals and give preference to those businesses. Housing and homelessness are also some of the board’s major goals for the county. Everyone should
What is the best way to keep Palm Beach County’s growth sustainable for the long term? We have good mechanisms in place to reach our goal to continue to have a sustainable community through our partnerships between the business community, government and academia. Not only will these relationships maintain our growth but we also are able to come together and identify future needs as we continue to recruit businesses into the county. Those businesses then continue to grow and expand. As they expand in Palm Beach County, they will boost the employee base. www.capitalanalyticsassociates.com
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Andrew Duffell President Research Park at Florida Atlantic University®
What makes Research Park a great soft-landing spot for international companies? First, it’s location. With modern transportation, South Florida has become the nexus between North America, South America and Europe; the easiest point to get to and from all three. Anybody looking to do business in the United States would do well to look here, particularly if they have plans for further expansion. Our metro region is home to 7 million people. Jupiter, at the northern end of the region is important, especially in a technology sense, because it has the Scripps Research Institute and the Max Planck Florida Institute. There is a great deal of scientific talent at that end of the region. The Research Park at FAU itself is next to a 30,000-student university in Boca Raton with research expenditures that are now around $70 million and trending up. We have one of the newest medical schools in the United States and Florida Atlantic University is the most diverse university in Florida: FAU is a minority-majority college. We are truly diverse, not predominantly any one race or ethnicity or group, which provides a tremendous opportunity to anyone who is learning or doing business here. What challenges are businesses facing? A challenge for everyone in business is figuring out when and how to bring people back after the pandemic and how much space they will need. It is an unresolved question. A challenge in remote work for companies like those we have that are developing new technologies is the spontaneous, one-to-one interactions. We’re used to having scientists and entrepreneurs literally bump into each other and talk about what they’re working on and then something new comes up. That’s not happening right now because so many people are remote. It’s being addressed somewhat with online forums but it’s obviously not the same. We are concerned about that because we will not see its effects for a year or so and we may see a dip in terms of new ventures that would have happened if people had been bumping into each other. We can overcome it but it is something that we will have to adapt to. 12
| Invest: Palm Beach 2021 | ECONOMY
Palm Beach is the third-largest county in Florida at 2,000 square miles.
( ) room remains the COVID-19 pandemic. And like many others, Palm Beach County took steps toward recovery from the devastating COVID-19 pandemic in 2021. Throughout this year, the county has been able to top up funding with federal grants to support local businesses. It received $261 million from the CARES Act in 2020, which was spent on business grants and government expenses. A second payout, this time from the American Rescue Plan (ARP) Act in 2021 allocated $290 million to the county, which it intends to spend on compensating for losses incurred by COVID-19. West Palm Beach decided to use part of its funding for a bonus program for employees, the bulk of which will go to those in contact with the public during the pandemic, such as police and the fire department. Although GDP figures have not yet been released on a county level for 2020, Palm Beach County’s 2019 GDP was about $87 billion – or about 7.9% of the $1.1 trillion generated by the entire state. But the real picture is painted by per capita GDP, which reached $58,116 in the county, far outstripping the state average of $44,267. The good news is that Florida’s 2020 GDP is estimated to have dipped only slightly, to just below $1.1 trillion. As of July, unemployment was 5.1%, with the state having won back about 75% of the jobs it lost from February
CONSTRUCTION ECONOMY OVERVIEW
Jim Barnes Village Manager Village of Wellington
How is Wellington investing in its infrastructure? In October 2020, we had to adopt our budget in the midst of COVID and we were conscious of that. We didn’t necessarily drop everything, cut employees and cut projects, but we did tighten our belt in anticipation of reduced revenues. As we head into 2022, we’re looking at restoring the levels of service we provided pre-pandemic and adding investment to our local infrastructure, whether that’s in surface water or water and wastewater. We’ve heard horror stories of communities up North and even in Florida where the drinking water supply has been compromised because of lack of investment by elected officials. We’re not going down that road.
to April 2020. In the West Palm Beach-Boca RatonBoynton Beach statistical area, the unemployment number dipped even lower, to 4.8%. As of the end of August, 55% of those living in Palm Beach County are fully vaccinated, higher than the Florida average of 54%. The ramping up of the vaccination program in 2021 saw COVID case numbers fall significantly across Florida until the end of June, when cases began rising again. Worryingly, incidence peaked on Aug. 16 at an all-time high of 56,000 cases, although no further lockdown was imposed due to protection provided by the vaccine given that those vaccinated were less likely to get severely sick. However, as deaths continued to rise, reaching 415 on Sept. 3, medical professionals reported a surge in admissions among the unvaccinated. There are a variety of reasons why the vaccine campaign has slowed, including mistrust of the vaccine, the spread of misinformation, apathy and even racism. For some undocumented migrants, vaccination rates are low due to access to care issues, despite the fact this demographic is twice as likely to say they want the vaccine as soon as possible compared with white adults, according to the nonprofit health organization KFF’s COVID-19 Vaccine Monitor report.
How is Wellington helping the equestrian segment? We’ve tried to be a partner with the industry. From a promotional standpoint, our best tool is partnerships. There is a whole complement of businesses, organizations and professionals that support this huge equestrian industry, whether that’s the horse shows themselves, the professional competitors or the industries that support the equestrian community. With that kind of a need comes the ancillary needs of shopping, housing, dining and governmental services, such as recreation. We’re trying to create an environment and climate that is conducive for those businesses to stay here and thrive. How has Wellington managed the influx of residents to the village? At incorporation in 1996, we had a little over 22,000 people. In 2003, we had about 40,000 people. We’re now closing in on 70,000 people. Surprisingly, we have managed to maintain our small-town feel and a close-knit community. That’s important and is an unquantifiable, intangible aspect of community without a formula on how to get there. It’s a combination of a lot of different things, including residents who are involved in the community and want to keep things how they are. This is the one thing I like to point out that is different in Wellington versus other areas in the region. www.capitalanalyticsassociates.com
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ECONOMY OVERVIEW
In an effort to slow the spread of the virus, certain other measures have been put on the table. Some employers moved to mandate vaccines for employees and a number of businesses have called for a return of the mask mandate. However, efforts faced hurdles from Gov. Ron DeSantis, who filed executive orders prohibiting the mandates, enforcing fines for those businesses and organizations that attempted to require masks or vaccines. But in August, a U.S. District judge in the Southern District of Florida found in favor of cruise lines that want to require all passengers to provide proof of vaccination and granted an injunction against enforcement of the executive order. Several publicschool students also filed legal actions that would allow mask mandates to be enforced. Later, the federal government even got involved, with President Joe Biden announcing that the administration would take legal action against states that attempt to block mask mandates. This prompted a surge of mandates across Florida, including schools in Palm Beach County, which imposed a mask requirement and removed a previous opt-out clause. There is little surprise that organizations want to stem the surge of the virus, given that hospital systems are at risk of being overrun. On Aug. 17, Palm Beach County leaders declared a state of emergency as a result of a shortage of hospital resources for COVID-19 patients. Landscape Despite the continued threat of COVID-19, the economic picture for Palm Beach County looks strong. The
Palm Beach County has 6.5 million potential consumers and a labor force of 3.1 million people.
county’s proposed budget for FY22 is up 9.25% on 2021 to $5.9 billion. About $2.4 billion is proposed to come from the fund balance, with $1.5 billion in property taxes, $627 million in interfund transfers, $575 million in intergovernmental revenues and $426 million in charges for services. Public safety takes up the biggest
Laura Simon Executive Director – Delray Beach DDA
We have a strong hospitality industry in our community. Tourism is our No. 1 industry. We have 11 hotels in our district and over 120 restaurants. All are suffering from a shortage of employees. The challenge that all the businesses are facing is that the summer is busier than it normally is. We need full staffing. In past summers, you were able to relax servers so that they could take jobs in Chicago or in Northern cities that are busier in the summertime and then come back here in winter. It’s been different this year. So, some are providing cash incentives for people to come to work. We’re seeing what we can do to help. We’re providing employee parking, which is not something we normally do, to encourage workers to choose us over other cities.
14
| Invest: Palm Beach 2021 | ECONOMY
ECONOMY OVERVIEW
slice of the budget at $1.4 billion, followed by $1.18 billion in reserves, $689 million in transportation and $631 million on general government. The county is also proposing to reinstate 2021 millage rates (4.7815) from the 2022 rolled-back rate (4.5917) , which is expected to generate an additional $42 million. Palm Beach County has several key sectors, but some of the most important for economic development are agribusiness, healthcare, equestrian, IT and telecoms, business and financial services, manufacturing and aviation. Agricultural land accounts for 36% of the county’s land mass and the county leads the nation in production of sugarcane, sweetcorn and bell peppers. It also produces rice, lettuce, radishes and many more products. Healthcare contributes 17.1% of the county’s jobs as of 2019 and the growing financial service sector totals 18%. The equestrian industry is perhaps more niche but with the highest concentration of sport horses in the world during the season, Palm Beach County — and the Village of Wellington, in particular — is home to major events, such as the 12-week Winter Equestrian Festival. The county has also been an aviation and aerospace hub for decades, especially after Pratt & Whitney established operations in the 1990s. ( )
®
oundtable:
Mayor’s corner Across the county, mayors are addressing the most pressing needs of their cities and building toward a brighter future.
Fred Pinto
Mayor Village of Royal Palm Beach
What are some of the biggest projects Royal Palm Beach has recently completed? One of the biggest initiatives we had recently is additional lighting up and down Okeechobee Boulevard, all the way down to the end of town. In 2010, we had torrential rains and several flooding issues ensued across the village. It was clear that we had to upgrade our stormwater management system. We’ve been doing that for the last eight years and will continue to focus on the issue. What is your outlook for Royal Palm Beach? My outlook for 2022 is very bright. The numbers look very good. We’re planning for further down the road using a strategic view. All our courses of action consider the benefits for our citizens. That is the motive behind getting our city hall up and operational, for instance. We’re going to continue to look at different ongoing projects. We’ve got a major project going on at State Rd 7 and Southern Boulevard, which is a great initiative. One of the focuses of that project is to provide a family entertainment venue. With our shifting economy, we’re looking at ways to bring back restaurants and other small businesses while investor appetite is more on the residential side of such projects. We’re working on that issue to come up with a solution that will be satisfactory not only for all stakeholders involved but for our residents as well. We will continue to make sure our economy is on the right track and prevent anything that could derail it. We will avoid wrong turns and rest on our laurels and we’ll continue to look forward, analyzing what is out there, fostering positive effects for our citizens and steering clear of any negative factors. 16
| Invest: Palm Beach 2021 | ECONOMY
ECONOMY ROUNDTABLE
Betty Resch
Mayor City of Lake Worth
What are the most pressing needs for the city in terms of infrastructure? A couple of years ago we passed a US$40 million bond for streets to address their delayed maintenance. That work is close to completion. As a community right on the Intercoastal, flooding has been a growing problem. When a king tide comes in, unfortunately, we’ll have streets and front yards full of water and sewers will overflow. We’re working hard on that at this time. It’s a high priority on our list. We just authorized money to replace the outfalls and strengthen our coast. We’re upgrading and hardening our electric utilities, adding a tie line so if we get cut off from Florida Power & Light (FPL) distribution system, we’ll have an alternate line on which to depend. What is your outlook for the city? We are working to increase our visibility as a wonderful destination and as a great place to live. We want to be recognized as the vibrant, exciting, interesting, artistic community that we are. Education is also a focus of the new commission. We’ve created an education task force. Lake Worth has five elementary schools, a middle school and a high school. North Grade Elementary is where most of the Guatemalan children go and there are 24 dialects in that school. We are working to celebrate the cultural richness that is Lake Worth-specific. I believe you should be proud of your heritage and preserve it. Embrace who you are. We are committed to engaging all of our students to know their heritage and at the same time embrace the opportunities that living in Lake Worth Beach has to offer.
Scott Singer
Mayor City of Boca Raton
How is the city navigating its specific set of challenges? Our biggest challenge is dealing with the growth that comes from being an attractive place to live, work, learn and play. Boca’s strong planning for the future has prepared us for the effects of our success. We have to have infrastructure for a larger city. We have roadway infrastructure and we’re expanding mobility options and using new technology. The challenge has come from development outside of our city. The county has become a lot more developed. Land in the agricultural reserve, which was strictly agricultural, is now being used to develop thousands and thousands of residential units. It’s outside of our city limits, so it’s outside of our control. But those people still come through our city to shop, work, play, learn. They also use I-95, and we have to be mindful of that. How are you preparing for the future of Boca Raton? We recently broke ground on the first new public school in Boca Raton in the last 15 years, adding 1,200 student seats. This is in addition to the rebuilt Addison Mizner and Verde K-8 Schools. The new school reflects a rare partnership between a city and a school district because Boca donated city land for the school district to use for the new site. This innovative partnership helps address what would otherwise be an overcrowding issue because so many young families are moving to Boca Raton. We’ve always been a young community but we’re seeing this more than ever, with a drop in our median age. We also have the Brightline station due to come in 2022. It’s going to be a tremendous game changer for our local economy and to the benefit of the residents and businesses. www.capitalanalyticsassociates.com
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ECONOMY OVERVIEW
Hotel occupancy in Palm Beach County in July 2020 was almost 68% ( ) Of course, that’s not to say that no one has suffered during the pandemic. For the travel and tourism industries, the picture has been altogether different. At the beginning of the pandemic, the biggest job losses were seen in travel, tourism, leisure and entertainment as face-to-face contact was limited by lockdowns. While some restaurants were able to adapt to offer takeout services, businesses like hotels were not so lucky. Tourism provided 60,000 jobs in the county before the pandemic and leisure and hospitality employed
95,900 in February 2020. After plummeting in April, the number has partially recovered to about 80,000 as of July 2021. The green shoots began to emerge in the last few months of 2020 as the holiday season kicked off, although Palm Beach International Airport still saw numbers that were down 35% on the year. As cases return to an upward trend, the industry remains wary of the implications of the virus and potential future lockdowns. But as it stands, the Palm Beach International Boat Show came back in person in March and the numbers show booming business over the summer. In July, hotels in Palm Beach County posted nearly 68% occupancy. One of the main indicators of a location’s economy is its home prices and real estate in Palm Beach County is gold. In the second quarter of the year, cash sales represented 52.3% of all Palm Beach County home sales due to the high demand. Total home sales in the quarter were up 95.1% year over year to 11,813, with single-family homes and condos increasing by 63.8% and 142.9%, respectively. With such high demand for housing, the county is in the midst of a seller’s market, with multiple highly qualified buyers often bidding on the same property. As a result, sellers have been able to ( )
ECONOMY INTERVIEW
Agilility Becoming more agile and analytical have been key to managing the pandemic
Faye Johnson City Administrator – City of West Palm Beach What strategies did the city of West Palm Beach implement to manage the pandemic? Overall, we had to embrace a new vernacular and become more agile and analytical. Some of the specific strategies we put in place to keep the city moving forward included transitioning to a hybrid work structure of in-office and telework schedules as well as Zoom meetings. Staying open for business, albeit in a new format, and maintaining our business-friendly culture were critical. We continued to issue building permits, process development applications, and perform required inspections. This paid off in dividends such as attracting more business interest in our city, maintaining and in certain aspects outpacing building and permit revenue. Some specific strategies to assist the business community included developing a new service delivery model of online submittals and approvals, drop boxes for building and licensing applications, expanding sidewalk dining and creating provisions for curbside delivery. What challenges and opportunities have resulted from people relocating to the city? The city of West Palm Beach is a great location for new businesses and residents. This is due to a variety of reasons, such as the quality of life, safe environment and having a full service, responsive government. There are so many wonderful opportunities and things to do and see in our city that makes it shine and be an attractor. However, there are challenges. We’re managing the growth and heightened interest in the city with a reduced workforce that hasn’t fully recovered from the economic recession in 2009. It has only become more difficult given the effects of the pandemic. Staying agile, analytical and innovative is helping us keep our heads above water.
What are your priorities for the city of West Palm Beach? For FY2021, we lost $7 million in revenue due to the pandemic. This forced us to cut 54 vacant positions along with other significant reduction measures to develop a balanced budget. Being able to provide quality service for businesses and residents during the pandemic speaks volumes. We want to remain attractive to companies and residents who want to do business and live in the city. As an organization, sustaining a customer-service focus, managing our finances, addressing neighborhood needs and keeping up with our infrastructure demands are key priorities. Our city is in a robust period of economic development and neighborhood revitalization. The outlook for the city is good. We see ourselves as the epicenter of the exciting things occurring in Palm Beach County. www.capitalanalyticsassociates.com
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ECONOMY OVERVIEW
Laurel Baker CEO – Palm Beach Chamber of Commerce
I think the outlook for Palm Beach County is dynamic. Palm Beach County has a low unemployment rate. I walk the dog at 6:30 and I see significant numbers of workers coming to construction sites six days a week. We have one by my house that is 23 stories. Another one is going to break ground in the next 12 months at 27 stories. It’s very promising and there are more investors coming down, purchasing properties, redoing streets. Hopefully they’ll be bringing retail as well as restaurants. There’s business expansion and population growth. Those are all good markers.
( ) command favorable terms, including all-cash offers or inspection waivers. Palm Beach County’s strong economic performance has also attracted attention from some major businesses. During the 2020-21 period, several companies relocated or expanded within the county – the largest being mortgage lender NewDay USA. The company set up offices in West Palm Beach taking up 50,000 square feet at 360 Rosemary, providing 600 new jobs. Logistics giant Amazon also launched new operations in the area with a 120,000-square-foot facility that provides 200 new jobs. Orlando-based building firm Finfrock expanded its operations into Palm Beach County with a 140,000-square-foot manufacturing facility in Belle Glade, providing 200 jobs.
Palm Beach County has reached unemployment rates as low as 3.5% since the pandemic started.
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| Invest: Palm Beach 2021 | ECONOMY
Employment For the first few months after the pandemic struck, Palm Beach County’s unemployment rate outstripped the national average. However, since August 2020, the figure has remained below the national average, demonstrating the economy’s resilience. Palm Beach County’s unemployment rate even dipped as low as 3.5% in December, almost at pre-pandemic levels and about half the national rate. As of July, the rate was at 4.8%, lower than the country’s 5.4% and the state’s 5.1%. Although not completely out of the woods, with unemployment still slightly elevated compared to prepandemic levels, the county is in a much better position in terms of jobs. However, the balance has shifted over the last 18 months: rather than people not being able to find jobs, it is now a case of jobs that are crying out for people. In mid-August, Palm Beach County had 6,608 job openings, compared to 4,516 for that period in 2020.
ECONOMY OVERVIEW
In the tourism industry, for example, pent-up travel demand, combined with the limitation on international vacations, has been driving an influx of tourists to Florida, but employers are having trouble finding the needed employees. In an effort to draw back more employees, companies are introducing higher wages, bonus incentives and benefits, such as health and dental insurance and paid vacation. There has also been an increase in Palm Beach Countyhotels and clubs seeking foreign workers. According to the U.S. Labor Department, 40 clubs and hotels in the county have filed applications for 2,632 H2B positions, paying from $10.09 to $28.60. Some point to the federal stimulus packages, which expired on Sept. 6, as a reason for the lackluster recruitment drive experienced in the summer of 2021. As part of the efforts to mitigate the impacts of the pandemic, the federal government topped up unemployment benefits by an additional $300 per week and child tax credits by up to $300 per child. In Florida, DeSantis withdrew the state in June and is now facing legal action over the move. However, some have pointed to other reasons for the worker shortage, including lingering fear of the virus, a lack of adequate childcare and changing family circumstances caused by the pandemic. Other reasons for lack of staff in certain sectors are career changes, burnout culture and increased automation. In Palm Beach County’s case, rising rents could also be a factor given that West Palm metro rents are up almost 10% year over year to about $1,872 per month.
Palm Beach County’s jobless rate in July 2021 was 4.8%, below the national average Government Palm Beach County has always leaned toward candidates from the Democratic party, although there is a strong turnout for the Republican party. Biden won the county’s vote only narrowly with 55.98% in the 2020 presidential elections. The county’s elected government is a Board of Commissioners consisting of seven District Commissioners and a County Administrator, with one of the commissioners elected mayor and one elected vice mayor. Those positions currently belong to Dave Kerner and Robert Weinroth, respectively. Constitutional office positions of Sheriff, State Attorney, Public Defender, Property Appraiser, Tax Collector, Clerk of the Circuit Court and Comptroller, Supervisor of Elections and Judiciary are also elected. The county comprises 39 incorporated ( )
Jessica Del Vecchio Economic Development Manager – City of Boca Raton
We are a highly diversified economy because of all the asset classes we have here – commercial, retail, residential. In terms of economic development initiatives, we go after corporate headquarters, that is our target. It’s another way for us to diversify. On the healthcare side, Orangetheory Fitness is based here. SBA Communication, Office Depot, ADT and other major employers are here. We have 100,000 residents and 13,000 businesses, several of which are large-sized corporations. Throughout COVID, 11 companies moved to Boca Raton. More than 25% of those are in the financial services industry because financial services follow wealth. Investment firms, wealth managers, commodities traders and hedge funds all go to where the money is. We saw that kind of influx.
www.capitalanalyticsassociates.com
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Market voices: Managing municipalities
Ruby Childers
Downtown Manager City of Boca Raton CRA
Downtown sells itself. We’re fortunate that everyone understands the beauty and value of being in Boca Raton, which carries over to Downtown. Restaurants had to make adjustments to their operational strategies but they’ve been creative in overcoming the obstacles the pandemic introduced. We’ve recognized the struggles of the hospitality industry and we’ve been working with different agencies to support them. We had a workshop geared toward the hospitality industry for the restaurants and another upcoming workshop is being hosted by the city and the county. Many employees are returning to the industry and they’re continuing to thrive in their business activity. The city and the downtown have been flourishing and it shows. It’s important to note that Downtown Boca is eclectic and unique. We have small shops, restaurants, culture and everything in between. Our tagline is, “Come Early, Stay Late,” and people are certainly doing that. Our restaurant and nighttime economies are booming and I believe that’s going to continue.
In light of some of the opportunities that have come out of this pandemic, it has really allowed us as a community to coalesce around one another, to help one another. We’ve implemented programs in our community to facilitate investments from the municipality to the smallbusiness community. We’ve also provided some assistance to our residents. It has allowed local governments to look at our business operations and really get at the heart of why we are in existence, and that is service to the public. It has allowed us to come together and look at some of the basic necessities that we hadn’t realized, in some cases, that our community needed. We went from community feedings to vaccinations and informing our residents on a bi-weekly basis about what’s going on in the economy. We’ve adapted and become more connected to our community.
Andrea McCue City Manager City of Greenacres
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Jonathan Evans
City Manager City of Riviera Beach
There’s no place I’d rather be than the City of Greenacres. We have created a true community with our residents. The City has been great stewards of our residents’ dollars and we will be debt free in two years. From an infrastructure perspective, we’ve been able to spend our dollars wisely and invest in amenities and projects that improve the quality of life for our residents. We’ve finally embarked on public art in the City, which has been well received and it’s a great representation of what we are as a community. When Lawrence Carter Swain founded the city of Greenacres 95 years ago, it was his hope to develop a community that was a good place for people to live. It is our hope that in the work we’ve done and how we’re moving forward Greenacres will not only be a good place to live, but also a great place to live, work and play.
| Invest: Palm Beach 2021 | ECONOMY
ECONOMY OVERVIEW
Palm Beach County holds 42,000 different arts and cultural events throughout the year.
( ) municipalities, with some of the most well-known and growing cities being Palm Beach, Boca Raton, West Palm Beach, Delray Beach, Jupiter and Boynton Beach. The region is consistently ranked as one of the best to live in. Niche ranks Palm Beach County the No. 1 healthiest and the fifth-most diverse county in the state. It ranks 10th in Florida for outdoor activities and for young professionals. The ranking names it the 21st best county in the nation for retirees. Within the county, the company ranks Grandview Heights as the best place to live, followed by Highland Beach and Boca Raton. One reason for the county’s success is the proactiveness of the government to attract and foster investment. The county’s Business Development Board (BDB), headed by Kelly Smallridge, was set up in 1982 and has sought to attract investment, high-quality jobs and train workforce to bridge the gaps to economic growth. The services provided by the BDB include but are not limited to providing advice and support on permitting, incentives, suppliers and utility rates. The nonprofit has been instrumental in attracting some of the biggest names to Palm Beach County. The government also ensures the population’s needs
are satisfied by holding regular public consultations. In August, the Palm Beach North Chamber of Commerce named Kathleen Dempsey as its new Director of Community Engagement and part of her role will be to seek community feedback. The Palm Beach Transport Planning Agency also launched a Local Initiatives program in 2021, which provides $20 million per year for smaller scale transportation projects proposed by the public. The County Commission also holds weekly Comments by the Public meetings, where citizens are invited to address issues under its jurisdiction. Demographic shifts In-migration during the COVID-19 pandemic drove Palm Beach County’s population growth in the past year but the overall trend suggests a slightly different picture. The 2020 census showed that net in-migration over the last 10 years was just 172,057 – a 13% increase. This is still faster than the 6.7% growth rate the county experienced between 1990 and 2000 and the county remains the third-largest in the state at 1.49 million residents but others are now gaining on it. ( ) www.capitalanalyticsassociates.com
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ECONOMY INTERVIEW
Business action Over 90 financial services companies have moved to Palm Beach County, some with assets of $40 billion to $50 billion
Kelly Smallridge President & CEO – Business Development Board of Palm Beach County One solution, which is in super-early discussions by the county, is a potential bond to jumpstart workforce housing. A second solution we’re undertaking right now is an analysis of all the publicly owned land in our county at the municipal and state level. We are determining whether or not there is enough land to encourage a government to contribute some of it toward new workforce housing units. We would like to jumpstart hundreds of new units and because of the cost of development and the cost of land, the business community will have to play a role in encouraging governments to help offset land costs, perhaps through a public-private partnership.
How would you characterize the financial companies that are moving to Palm Beach County and their impact? Today, the names coming to Palm Beach County are larger than they were pre-pandemic and this is validating Palm Beach’s presence as a great place to do business. Some of the larger names that have made the move to Palm Beach are Point72, NewDay USA and Elliott Management. Overall, there are over 90 financial service companies that have made the decision to move here. Prior to COVID, after branding the county as the Wall Street of the South, we were lucky if we attracted a firm with $500 million in assets under management. Today, we have firms coming in with $40 billion to $50 billion in assets under management. What solutions are being explored to solve the workforce housing shortage? 24
| Invest: Palm Beach 2021 | ECONOMY
In what ways is Florida at a disadvantage to other states in terms of relocation or expansion opportunities? Florida has a real issue with the lack of major state incentives. We continue to advocate for the renewal of the Qualified Target Industry Tax Refund Program, which was a great incentive package at the state level. Oftentimes, we find ourselves behind states like Georgia, North Carolina, South Carolina, Virginia, Tennessee and Texas. About four years after Gov. Rick Scott’s term ended the state decided to do away with this major incentive tool. This really took the wind out of our sails because when the state would come to the table with the larger package, we would complement that with city and county incentives. While the state package alone is not a lot of money, when you couple it with city and county incentives, you actually get a fairly nice package that you only have to utilize when absolutely necessary. We would probably use this package only two to three times per year but those two or three times were big deals. So, this is where I believe we need the biggest help and are at a disadvantage. Some site selection consultants don’t even consider Florida an option because we don’t have the state-level incentive package.
CONSTRUCTION ECONOMY OVERVIEW
The latest Census shows the median income in Palm Beach County is $63,299 ( ) The most recent census also showed that the prevalence of white people in Palm Beach County had decreased while Hispanic or Latino people had increased. The 2020 census showed 53.5% of those surveyed in the county identified as white, while 23.4% identified as Hispanic or Latino. This compared with 57.9% and 20.2%, respectively, in 2013 estimates. But the proportion of Black or African American residents of the county grew in the period to 19.8% from 17.4%. The Asian population also increased marginally to 2.9% from 2.4%. While by no means balanced, this shows that the county’s population is becoming more multiracial. The census also found that the county’s median income is $63,299, outstripping Florida’s median income of $55,660. Likewise, the $78,370 median family income was above the state’s median $67,414. This is hardly a surprise given the concentration of the ultrarich living in the Palm Beach County area. With around 44 billionaires living in the county, the super-rich have continued to flock to the county during the pandemic as a result of the businessfriendly environment, sunny climate and tax benefits. Several high-profile financial services firms, including Goldman Sachs, have moved operations to the county, bringing with them more white-collar workers and high earners. Public sector initiatives There is significant value to be found in these types of company relocations. Firstly, counties can increase the number of high-paying jobs they provide, therefore increasing competitiveness and in-migration. With in-migration comes benefits, such as higher federal funding levels through the census count, a larger tax base and increased purchasing power. Property values also benefit from a population influx, as Palm Beach County has witnessed in the last year. As a result, the county offers several incentives ( )
Ramsay Bulkeley Executive Director PBC Planning Zoning & Building Department
How would you characterize the market from the perspective of your department? We’ve seen a major drive in the warehouse and logistics space. Amazon’s most recent landmark with us is a 1-million-square-foot warehouse, added to another three Amazon warehouses that have come through our pipeline. Housing is also demonstrating a strong performance. Homes are just flying off the shelves, which drives a different problem in terms of affordability. The median house value is $500,000, which a lot of people can’t afford. Even though everyone wants to come down to South Florida and we have everything set up for everyone to come down here, they do struggle on the housing side. We’re trying to promote workforce housing with different financial brackets so people can come down here and live affordably. What extra steps are you taking in terms of building codes to ensure standards are kept up? We had a public meeting following the Surfside building collapse. As it stands, the Florida building code and how we enforce it in Palm Beach County has enough checks and balances that we should not have to worry about that. On a bigger scale, though, there have been discussions around changing legislation with regard to what condo boards are required to or not required to do as far as maintenance goes, added to certification checks. Some municipalities have them at 40 years while people say it should be shorter than that. We are also discussing what should be required in that inspection, beyond paperwork. We’ve been in all the discussions but it is a long-haul game because it requires coordination with 39 different building directors across the county. What is your overall near-term outlook? Housing is a big priority for us, as is transportation. But we will remain laser-focused on getting good quality affordable residences so people can afford to live and work here. www.capitalanalyticsassociates.com
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®
oundtable:
Community development Economic development leaders discuss their communities and their priorities emerging from the pandemic.
Rebecca DeLaRosa
Chief of Staff & Economic Development Director City of West Palm Beach
How will the influx of new residents and businesses impact the area? We’re thrilled that the economy will continue to grow in the City of West Palm Beach due to companies moving here but, ultimately, it’s about sustainability. When the city is looking at incentives and encouraging companies to move here, we’re looking at the sustainability for their employees as well as public safety. A common trend in our city entails companies and their employees engaging in philanthropic efforts across our diverse community. There are approximately 146 nonprofits in the City of West Palm Beach. Another mayoral priority is ensuring we continue to maintain diverse growth. Inclusivity as it relates to growth is very important for the mayor, so when we talk about being inclusive, it’s about what diversity looks like in the city. What are the city’s key priorities? Priorities for the city are directly derived from our residents and include initiatives such as public safety, communities for all, housing, infrastructure needs and economic development. We are working through the budgetary process, which will commence in October, including the advancement of both our five-year plan and Economic Development Plan. We are also looking at marketing and support for our local business associations and support for our growing income areas. We have a diverse community, ranging from billionaires to extremely low-income communities, so there will be a focus on local businesses incubators, our laborshed and working with our education systems. The Palm Beach County Business Development Board has created an education task force and it’s critical for the city to participate. 26
| Invest: Palm Beach 2021 | ECONOMY
Renee Jadusingh
Executive Director Delray Beach Community Redevelopment Agency
What is the impact of relocations on the local economy? We have a number of targeted areas in our district. The West Atlantic Avenue area has always been a focus of our investment. We have a few vacant parcels and we’re starting to do development ourselves rather than turning things over to developers. We’re finding that people talk a lot about affordable homes but they also need affordable office space. We own a couple of buildings in the commercial quarter in the West Atlantic Avenue area and we’re going to be putting up a two-story building for people who are trying to start businesses, especially if they are from the surrounding neighborhoods. There are other areas that are still on the outskirts of town that are not getting as much attention. Those are the areas where we provide a higher amount of funding assistance for buildouts because we’re trying to attract people to those areas. What infrastructure projects is the CRA involved in? We are funding several infrastructure upgrade projects that are managed by the City of Delray Beach. These projects will provide much needed improvements to the infrastructure in three residential neighborhoods within our redevelopment area: NW Neighborhood, SW Neighborhood and Osceola Park. We’ll be doing all sorts of work including sidewalks, landscaping, sewer improvements, alleyways and lighting improvements. The neighborhoods will be completely overhauled with all the bells and whistles residents have wanted for many years. These projects represent over $10 million in improvements thus far and more to come. We are also investing in making improvements to Pompey Park in the coming years to completely overhaul the park facility.
ECONOMY ROUNDTABLE
Troy McLellan
President The Boca Raton Chamber of Commerce
How do the chamber and city promote sustainable growth? We don’t want growth for growth’s sake. Growth has to be balanced, intelligent and right, and for it to be right you have to understand the history of your community and its dynamics. Boca Raton has done a great job with this over the decades. Growth is as sustainable as you make it. Boca has a reputation of being a little tough on development, so if you’re going to develop here, you need to understand that you’re going to go through a certain rigor. But it’s this rigor that continues to make Boca so unique and special. When you have a community like Boca Raton with its assets and unique dynamics, growth is always going to be an opportunity. What that growth ends up being is a result of the partnership between the private and public sector. As long as there is certainty and transparency to the development process, successful growth will continue to occur. What makes Boca Raton an attractive market for business? The entrepreneurial soil in Boca Raton is very rich. We have a very entrepreneurial mindset, great quality of life, K-12 public schools that are all rated “A,” the best park system in any city our size in the country, amazing residential inventory and three college/universities/academic institutions within five miles of each other: Florida Atlantic University, Lynn University and Palm Beach State College. With all of these great assets, I believe we will continue to be attractive to the entrepreneurial segment. Of course, it also helps that we live in a low-tax state and have a pro-business governor.
David Scott
Director of Economic Development & Strategy City of Boynton Beach
How is the city preparing for new residents and what challenges and opportunities do you see coming? Working with our partners, such as the Business Development Board, we have identified the new residents who are relocating to South Florida, and more specifically, to Palm Beach County. With the influx of new residents, the city is preparing for the demands the new workforce and their families will have on existing and aging infrastructure and systems such as education, hard infrastructure, transportation, and housing. The city is reviewing its housing policies to keep homes affordable. We continue to evaluate our programs and offerings to ensure an enriched quality of life for our residents. When looking at transportation for our community, we are considering a multimodal approach, sidewalks, roads, bike lanes, and bike-share. We ensure that any new policy or programs not only support the new workforce but fully engage our existing residents and communities. We are also enhancing our efforts to support the gig economy, the generation of startups and entrepreneurs that make up our future small businesses. What is your outlook for the city of Boynton Beach over the near term? The city of Boynton Beach considers itself part of the regional ecosystem that includes West Palm Beach, Boca Raton, Delray Beach, Fort Lauderdale and Miami. We remain relatively affordable, making us attractive to developers and homebuyers. We are a coastal city with a beautiful waterfront and amenities. We are poised for explosive growth and expansion. www.capitalanalyticsassociates.com
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Julia Dattolo President & CEO CareerSource Palm Beach County
Why is there high unemployment in some sectors and yet continued demand for labor as well? When you look at the jobs, they were already there. They just weren’t being filled because of COVID or because some companies cut back on their workforce. Now that the community has opened up and we are open for business, all the jobs have flooded back into the market. We’re trying to get people into those jobs sequentially. Some people may have children at home or might not have had the immunization yet, and since they are not ready to come to work, there is now an imbalance. How is CareerSource a community resource? We’ve been a connector in every sector. We’re putting people back in jobs by connecting our talent with the businesses. That is our mission and we accomplish that through virtual job fairs, industry-specific recruiters and word of mouth. We have a youth and young-adult program that is putting youth into internships and jobs. We awarded $12.2 million in grants to businesses and employees for job training and educational assistance during the past five program years. We also awarded over $2.2 million dollars this year in education scholarships to help upskill our workforce. What is unique about Palm Beach County and what are the challenges? Palm Beach County is a picture postcard; it is a great place to live and work. It’s everything all in one: you have every industry here, a diverse labor force and literally no personal income taxes. Palm Beach County also has a lot to offer in terms of its education system, both public and private. The affordability of housing is one of the biggest concerns. If you’re bringing your company to Palm Beach County, you have to think about what you can afford and what is available here. When companies come here, among the things they look for is the location for their company and where will their employees live, where will their children go to school and where will they receive their healthcare services. 28
| Invest: Palm Beach 2021 | ECONOMY
Local authorities use the one-penny sales surtax to build or upgrade Palm Beach County’s infrastructure.
( ) for companies to locate and expand in the region. Through the Department of Housing and Economic Sustainability, companies can access worker training, an ad valorem tax exemption, a film and TV grant program and a job growth local incentive fund. The Port of Palm Beach also has a full-service Foreign Trade Zone, which provides manufacturers and exporters millions of dollars in savings through duty relief or deferment. The Palm Beach County Section 108 Loan Program also provides funding for projects that yield public benefits and meet one of the U.S. Department of Housing and Urban Development’s National Objectives. On a state level, there are targeted industry incentives, such as the QTI tax refund program, CITC tax credit scheme and HIPI incentive grant. The Economic Development Transportation Fund was set up to allocate funds that would benefit projects that provide scope for economic development in Florida. Other special opportunity incentives include those for rural and brownfield projects. Utility Florida Power & Light (FPL) also provides an economic development rate through its Office of Economic Development, which assists companies with strategic planning,
ECONOMY OVERVIEW
project coordination, site selection, rate options and more. In its proposed 2022 budget, the county opted to increase its contribution to the community redevelopment agencies (CRAs) by almost $800,000. And the town of Jupiter in northern Palm Beach County announced this year that it would increase its budgetary allocation to its community investment program by a staggering 344% to $26.4 million, with some of the funding coming from the local CRA. Other CRAs are not sitting on their laurels, either. In Boynton Beach, the CRA purchased a stretch of buildings adjacent to its Hurricane Alley redevelopment project and is looking to work with existing businesses to maintain their tenancy. Global factors Florida is known as the gateway to Latin America and, combined with its skilled and expanding talent pool, favorable business climate and connectivity, it is no surprise that international companies are setting up shop in the state. Only last year, maritime technology company V2Techs relocated its operations from the Netherlands to West Palm Beach. The company said it will employ 30 people by 2022.
Perspective: Economic development
Thuy Shutt Interim Executive Director – Boynton Beach Community Redevelopment Agency Our goal is to try to build awareness among newcomers about all the goods and services that we have available within proximity of their homes. We can’t directly influence where they shop or go but we can certainly share all the information about our local businesses through our CRA newsletters and social media platforms, in addition to providing cross-promotional opportunities among the businesses. Also, along with our economic development initiatives, a large part of what we do as a CRA is to facilitate redevelopment opportunities. Examples would be two affordable housing projects where we’ve partnered with private developers to develop CRA-owned properties. One of these is the Ocean Breeze East Apartments, which is a 124-unit affordable multifamily rental in the heart of the Boynton community. The same developer, Centennial Management Corp., is doing another 125 units on MLK Jr. Boulevard, These projects address the need for quality affordable housing for existing and new residents.
www.capitalanalyticsassociates.com
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Donald Burgess President & CEO Chamber of Commerce of the Palm Beaches
What is preventing a full economic recovery? One thing that is hampering a full economic recovery is the broken supply chain system. A lot of businesses want to reopen fully and get back to pre-pandemic revenue levels but supply is an issue. For example, our furniture store members have opened their showrooms but customers may have to wait upward of six months to receive an item that they ordered. Demand is there but supply is not able to match demand in too many cases. The result is not just that customers have to wait but also the fear of inflation associated with demand outpacing supply, and we’re already starting to see that. Although the Fed says the inflation we’re experiencing is transitory, it’s very difficult to tell how long this will last. Long wait times and high prices are going to have a huge ripple effect throughout the economy.
Another recent international relocation is that of Israeli 3D printing firm Nano Dimension. In June this year, French broadcast infrastructure company Thomson Broadcast announced the opening of a new facility in West Palm. And as Florida is the gateway to Latin America, Palm Beach County has strong connections to companies and entrepreneurs south of the border. In August, the Research Park at Florida Atlantic University (FAU) alongside the Hispanic Entrepreneur Initiative (HEI) and the Small Business Development Center (SBDC) at FAU announced a partnership designed specifically for Latin American entrepreneurs looking to locate in the area. This is part of the Global Ventures Program, which specializes in working with businesses in key fields, including healthcare, sensors and embedded networks, marine science, ocean engineering, environmental sciences, and computational science. Also in August, the Hispanic Entrepreneur Initiative hosted a third annual International Economic Development Roundtable featuring the Brazilian delegation to Miami.
What areas in Palm Beach County are experiencing the most economic development? The city of West Palm Beach seems to be the center of economic activity and development. In the past two months we’ve seen at least four different projects come to us for our endorsement. This is in addition to another project for residential purposes. There are a lot of projects outside of the city but much of the focus is here. How is Palm Beach County managing its growing transportation demands? As the city grows, our roadways need to be able to handle the transportation needs. What we need to do as a matter of urgency is see what can be done to make improvements before we get to a critical stage where gridlock takes place. One of the things that we are anxiously awaiting is the return of the Brightline. It’s a new railway system but once it came on board a few years ago it made a tremendous difference to the movement of business traffic between here, Fort Lauderdale and Miami. We keep asking them when they’ll start again and they keep saying in the third quarter of 2021. When they return, it’s going to make a huge difference. 30
| Invest: Palm Beach 2021 | ECONOMY
Over 66,000 local jobs rely on tourism-related businesses in Palm Beach County.
ECONOMY OVERVIEW
Raphael Clemente Executive Director – West Palm Beach Downtown Development Authority West Palm Beach, in my opinion, is the most well-positioned urban center in the region for transit and mobility. In our Downtown, we have two rail stations – Tri Rail and Brighline – and both drop or pick up passengers in immediate proximity to our main street, Clematis Street. It’s a walkable district, so if you arrive here by rail on either service, there is an easy connection to government centers, offices, retail and restaurants, and events. The combination of the rail services and the walkability and character of our district are complementary. We have a great offering of first- and last-mile services with our trolley system and the Circuit, which is an electric shuttle vehicle service. Having these options makes it easy for people to arrive Downtown without a vehicle and get around comfortably and efficiently. People choose non-automobile options as a matter of convenience both for cost and time.
The county’s diversity does not only serve companies that want to do business in the United States but also those that want to carry out trade and export activities. Enterprise Florida was set up to support more than 60,000 Florida exporting businesses, as well as supporting small and minority-owned businesses to raise capital. And it is not hard to see why the firms choose Florida, having been voted the No. 4 best state for business in 2019 by Chief Executive, No. 4 state for access to capital in the nation by CNBC and No. 4 in terms of business tax climate in 2021 by the Tax Foundation. Looking ahead By all accounts, Palm Beach County’s economy is poised to emerge from the COVID-19 pandemic relatively unscathed. Despite some challenges faced by consumer-facing industries, the county’s real estate market is on fire and the tax base continues to grow as more people move in. Despite some downgrading in the county’s airport bonds to A+, all of Palm Beach County’s other liabilities are categorized as AAA or AA+ investments by ratings agency Moody’s, displaying the strength and resilience of the local economy. A steady influx of companies and people of all ages and demographics only bode well for the county’s future. The region’s continued appeal, with its skilled workforce, temperate climate and taxfriendly environment, shows no sign of waning. www.capitalanalyticsassociates.com
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ECONOMY OVERVIEW
Palm Beach County Preliminary FY 2022 Budget: Expenditures by Function: Internal Services 158,977,118
Other 76,430,939
2.7%
1.3% Reserves 1,180,259,452
General Governement 631,837,250
19.9%
10.7%
Interfund Transfers 627,188,813
10.6% Total of All Funds Culture and Recreation 280,840,351
4.7% Human Services 131,394,761
$5,926,036,035
Public Safety 1,395,786,952
23.6%
Physical Environment 584,721,554
9.8%
2.2% Economic Environment 169,258,762
2.9%
Transportation 689,340,083
11.6% Source: Palm Beach County Board of County Commissioners
Driving prosperity: Population growth, onshoring demand a strong backbone Any region’s economy and competitiveness are directly linked to the state of its infrastructure. In Palm Beach County, distribution and logistics, international commerce and marine industries are all strategic and targeted industries, meaning the state of the county’s infrastructure is incredibly important. The growing population, combined with the huge boost in demand for logistics services during COVID, have been key drivers of Palm Beach County’s economic prosperity and the uptick shows no sign of calming. Ongoing global supply chain issues have propelled onshoring of manufacturing operations, meaning that strong infrastructure is more important than ever for Palm Beach. Key sectors Palm Beach County has a handful of key sectors, including aerospace, aviation and engineering; distribution and logistics; and marine industries. The county is a recognized leader in aviation and engineering, with more than 20,000 employees in over 1,400 companies paying an average salary of over $100,000. The aviation and aerospace cluster in Palm Beach County is estimated to contribute $9.7 billion to the economy and includes companies such
as Lockheed Martin, Gulfstream Aerospace, Pratt & Whitney and Aerojet Rocketdyne. Another key segment within the transportation sector is that of distribution and logistics. As more and more companies look to onshore their manufacturing facilities as a result of supply chain disruptions caused by COVID, these services are more in demand than ever. Palm Beach’s top-class road infrastructure and excellent connectivity position it at the forefront of the supply chain. The county has several strategic intermodal highways systems, including the I-95 and Florida’s Turnpike, and several strategic railroads, airports and ports. As a result of this, several major companies have distribution facilities in the area, including Aldi, Nestle, Publix and Sysco. In fact, about 15 distribution centers occupy over 5 million square feet in Palm Beach County. Finally, Palm Beach is able to take advantage of its 47 miles of Atlantic coastline through the marine industries. The Palm Beach International Boat Show is one of the Top 5 shows in the United States with over $1 billion worth of boats on show. Marine services employ almost 20,000 workers in the county, bringing in a direct economic impact of $2.1 billion to the county. This covers manufacturing, wholesale trade, retail trade, dockage and marine services. ( ) www.capitalanalyticsassociates.com
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INFRASTRUCTURE, TRANSPORTATION & AEROSPACE INTERVIEW
Future mobility 5-6-1 Plan foresees investment to connect corridors for enhanced transit and to rebuild street networks for pedestrians and bicyclists
Nick Uhren Executive Director – Palm Beach Transportation Planning Agency allow them to thrive. We need to do that in such a way that reduces housing costs, promotes equity and provides continued prosperity for all. We call it the 5-6-1 Plan: If we invest in connected corridors for enhanced transit services, if we rebuild our street networks to be safe for pedestrians and bicyclists, then we’ve actually provided a system that will allow people to move around Palm Beach County in a car-optional future.
How are you looking to grow going into 2022? We’re focusing our attention on a return to what we are describing as place-based economies. We have a lot of companies that want to be in our downtowns. They want to come to South Florida and have the year-round convenience and luxurious lifestyle that Palm Beach offers, and they want to be near one another in our urban cores. So, what we’re seeing is a resurgence of the challenges associated with bringing people to those places of employment at the beginning of the workday and then bringing them back home. These are not new questions but we’re wrestling with them in new ways. We’re developing a vision right now, and refining it through our governing board, that motivates us to invest in mobility for the future of Palm Beach County. We have an obligation to connect our communities to employment opportunities that will 34
What is the state of transportation infrastructure in Palm Beach right now? From a demand perspective, our traffic counts have recovered to pre-pandemic levels. More people than ever, given the influx to South Florida throughout the pandemic, are participating in outdoor activities and returning to restaurants and in-person events. We’ve seen a return of travel patterns and transit services to pre-pandemic levels. We’re looking into ways to invest in enhanced safety and reliability for these systems so that we can attract more people to potentially use our transit services in lieu of driving. What is your near-term outlook? In Palm Beach County, we have an infrastructure surtax, established in 2016, that was a 10-year program. Half of that money goes to the school district to expand their capacity, 30% goes to the county and is being used to address deferred maintenance capital projects and 20% goes to the cities. We have been talking about asking our communities, in November 2024, to support a one-cent transportation surtax that will become effective on the sunset of the existing surtax and allow us to invest in the transportation system of the future. We are hopeful that the people of Palm Beach County will be willing to pivot, face forward and invest in the collective good of our community.
| Invest: Palm Beach 2021 | ECONOMY: INFRASTRUCTURE, TRANSPORTATION & AEROSPACE
IINFRASTRUCTURE, TRANSPORTATION & AEROSPACE OVERVIEW
( ) Road investment There are several highway projects in progress, including on a state level. The Florida Department of Transportation (FDOT) is carrying out several improvements on the I-95, including milling and resurfacing works, ramp improvements and lighting and roadway improvements. The projects are slated to be completed by 2023 and will cost around $275 million. Other ongoing improvements in the south, center and west of the county come out at a price tag of about $166 million, the biggest of which is the $95 million State Road 80 bridge replacement being carried out by Johnson Bros Corp. and due to finish this fall. In Palm Beach County, the Transportation Planning Agency (TPA) is a body of elected officials that promotes collaboration between the federal, state, regional and local government agencies, as well as transportation providers, including transit, railways, seaports, and airports. Its mission is to plan, prioritize and fund the transportation system through public engagement and collaboration. The TPA adopted a 2045 Long Range Transportation Plan in 2019, which was amended in 2020. The plan maps out the next 25 years of investment in the county’s transportation
The 2045 Long Range Transportation Plan maps out investment in transportation infrastructure infrastructure on a federal, state and local level. The plan considers multimodal transportation options, including pedestrian, roadways and transit that need improvement in the county. The TPA also drafted a Transportation Improvement Program (TIP) for Fiscal Years 2022-2026 that will be considered for adoption by the board in a September meeting. Projected funding for state roads is about $20 million per year but FDOT has requested the TPA oversubscribe to meet the $116 million required to fund all the priority projects. The
INFRASTRUCTURE, TRANSPORTATION & AEROSPACE OVERVIEW
TPA was also requested to provide $21 million of the $190 million required for nonstate roads. Bus and rail The COVID-19 pandemic hit the country’s transit services hard, and Palm Beach County was no exception. Palm Tran, the county’s public transportation agency, reported a 28% drop in ridership in April 2020 compared to the same month in 2019. Revenue tumbled 79% in the April to September 2020 period compared to April to September of the prior year. As the agency tried to attract riders back, they did so with a variety of measures, including installation of a new audiovisual information system on buses and rolling out more flexible payment options, including contactless options. In September, the agency launched Accelerate 2031, a public consultation to shape its transit services for the next 10 years. The county also is on the Tri-Rail line, a train that travels from Miami in the south, through Fort Lauderdale and to Mangonia Park in the north. The service is also offering incentives to entice back riders, including a free Uber or metro taxi ride to West Palm Beach Station. The Tri-Rail is now operating at about 92% capacity and is bringing back online its full service after having reduced trains from 50 per day to just 18 during the pandemic. The eagerly anticipated Brightline train was idled during the pandemic, but authorities say the daily service between West Palm Beach and Downtown Miami will return in November. And the county will soon get another station after Boca Raton voted to approve the ordinance for the station and parking structure. Brightline is now looking to fill almost 200 positions ahead of its November restart.
The development of Palm Beach County started a century ago with consolidation of the Over-Sea Railroad in the region.
CONSTRUCTION ECONOMY OVERVIEW
James Maus Vice President of Space Business Unit Programs Aerojet Rocketdyne
How would you characterize the space launch market and what is your involvement? The space launch market is probably more dynamic than it has ever been and includes many more competitors than even five years ago. We provide engines directly to our customers, mainly United Launch Alliance, and they in turn provide launch services. We just had our first launch last week of an RL10 engine built here in West Palm Beach that included several components built with additive manufacturing, which is commonly referred to as 3D printing. We’re embracing new technologies, like 3D printing, that enable cost reductions in response to the changing marketplace. Our strength is our incredible reliability and the long track record of our RL10 engine.
Palm Beach International Airport Palm Beach County has its own airport in Palm Beach International (PBI), which was named the seventh-best airport in the world in Conde Nast’s Reader Choice Awards 2020. The airport sees 200 daily nonstop flights to 34 locations across the United States, Canada and the Caribbean. Like all airports, PBI was shocked at the beginning of COVID-19 as passenger numbers dropped 96.5% year over year in April 2020 to just under 25,000. The recovery was slow throughout the summer months but by June, the airport began to see an increase in demand for its cargo business. In June, the total cargo tons handled at the airport were up 9.9% year over year. In 2021, there has been a significant improvement in performance, with traffic up to 445,000 in July, a 287.9% year-over-year increase and almost on par with the 488,000 passengers seen in July 2019.
How are client needs changing? The space launch market does not change too much from one year to the next and the demand that we address is primarily related to national security. For instance, the U.S. Air Force launches and maintains Global Positioning System (GPS) satellites. They have been relatively steady over the years. What is changing is the projection of what kind of spacecraft they want to put up as you deal with the threats that are in space. There is a growing concern about the resilience of those systems, so the U.S. Space Force is investigating a change to smaller spacecraft and more responsive launch technologies. What is unique about doing business in Palm Beach? This is a great place for us to do business. We’ve been here for over 60 years and have the capability to go endto-end on our product development. We also have our supply chain in place, which is almost entirely domestic with rare international exceptions. With all the other aerospace companies around here, it’s a much stronger industry. Our engineers possess high-end capabilities. That creates a strong job market and network with these other companies. Also, the education system here in Palm Beach County and in Florida ensures you can get the talent needed. www.capitalanalyticsassociates.com
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Clinton Forbes Executive Director Palm Tran
How can South Florida spur a culture change toward public transportation? In Florida, we’re car-centric and we like our personal vehicles. Our transport systems aren’t as mature as those in Boston or New York. Therefore, we need to build a more attractive transit system. The gas prices are helping this effort as they continue to creep up. People are looking at better options in terms of cost but, more than anything with transportation, people want speed and to be able to protect their most expensive commodity: time. However, that requires money. We have to build a system that has more frequent service, is safe, clean and with courteous attendants. That will help us get to the next level. How are labor shortages impacting the industry? It’s affecting our operations in a major way since the market is extremely competitive. With the pandemic, the younger generation and those who have had the opportunity to spend those 15 months at home liked it. Now, people are looking for opportunities where they don’t have to go to an office. Obviously, our bus operators have to come and drive the bus. However, administrative staff are leaving us to get jobs that offer that benefit. Different transit agencies are offering major signing bonuses to bus operators just to sign on because Amazon and companies like that are attracting new workers. It has been a challenge to attract workers into our industry because the market is extremely competitive. What is your near-term outlook for the company? We want to add new customers and we’re going to work to get those riders into our system. We will enter a statewide campaign to promote the benefits of public transportation. Our priorities are implementing our smartcar and fair-payment technology. We also want users to wait for the bus in the most comfortable environment possible with street furniture, as we call it. We want to make sure that bus shelter, passenger amenities and realtime information is state-of-the-art to protect users from the inclement Florida weather. 38
| Invest: Palm Beach 2021 | ECONOMY: INFRASTRUCTURE…
Palm Beach International Airport covers 34 destinations in the US, Canada, and the Caribbean.
Besides PBI, the county has four commercial and executive airports: Glades Airport, Palm Beach County Park Airport, North County General Aviation Airport and Boca Raton Airport. Airports in South Florida have seen operations complicated by the delta variant, which continues to spread across the United States. Another variant, mu, has also emerged. Travel data company Cirium says scheduled domestic flights in the fourth quarter fell 6.4% between Aug. 3 and Aug. 30, a significant change on 2020 when flights were being ramped up. Nevertheless, airlines continue to offer new routes, including Allegiant Airlines, which announced in August that it would now offer nonstop flights from PBI to Austin in November. Port of Palm Beach The Port of Palm Beach is a key engine of the county’s economic performance. The full-service, diversified port offers cruise and cargo services to 30 on-site tenants,
CONSTRUCTION ECONOMY OVERVIEW
processing more than $14 billion in commodities, 2.5 million tons of cargo and 700,000 cruise passengers annually. Cruises all but stopped in the past year and a half, meaning the port saw no passengers from April 2020 until July 2021. Cargo also experienced a dip due to challenges with staffing and capacity while implementing social distancing measures. Finally, in March 2021, cargo returned to pre-COVID levels and has remained strong, sitting above 110,000 tons per month. In July, when cruises were able to resume, they came back slowly with 2,636 passengers passing through the port, compared with pre-COVID levels that peaked at 34,000 passengers in December 2019. Nevertheless, the port’s financial position remained strong, with ratings agency Moody’s affirming its Baa2 credit rating in January 2021. The agency said the outlook for the port was stable due to its multiyear contracts that guarantee revenues, strong liquidity, sound margins and an aggressive capital improvement program. That capital expansion project includes an on-port rail facility expansion, a multiship passenger loading bridge, a port command and control system and rehabilitation of Berth 1. In its latest financial statement dated July 31, the port allocated $33.9 million in total cash and investments. Telecommunications Palm Beach County has always been a pioneer in telecommunications, given it is home to IBM and the PC was created in Boca Raton. The county is home to 1,700 telecommunications and IT companies along with their support companies, employing a total of 20,000 people with an average salary of $78,928. It is home to companies such as SBA Communications, LexisNexis Risk Solutions and DSS. Water Palm Beach’s water services are administered by the county through the Seacoast Utility Authority. The two main sources of water for the county are Lake Okeechobee and Grassy Waters Everglades Preserve, prompting calls for conservation of the resources. There are several initiatives in place, including the Lake Worth Lagoon Estuary restoration, the Loxahatchee River restoration and various water quality and stormwater initiatives. The Comprehensive Everglades Restoration Plan, or CERP, signed 20 years ago, allocated hundreds of millions of dollars to store freshwater in wells and reservoirs. Electricity Electricity in Palm Beach is provided by Florida Power
Clara Bennett Executive Director Boca Raton Airport Authority
How might the federal infrastructure bill affect the airline sector? We rely heavily on federal and state grants for our infrastructure improvement. Right now, we have a $4.5 million project underway to enhance an important road for underground utilities, landscaping and utility infrastructure. It’s a big project for a little airport like ours that we would not be able to do without the grants program. Hopefully, with the passage of the infrastructure bill, we’ll receive good news on a new grant for our taxiway project, which is a $2.5 million project. For small airports, these grants are critical, allowing us to modernize our infrastructure and improve service. Our operating revenues are about $5.5 million a year, which is enough to sustain our operations, but these grants are essential for capital projects. Part of our mission is to be an economic engine for the local community with a strong history in Boca Raton and investment in our airport creates these opportunities. What accommodations are needed for aviation to responsibly grow in the city? People want to be here for a number of reasons. For us, our biggest challenge is the land constraints so being able to meet that demand is challenging. We are in the process of updating our master plan that will take a look at those facility requirements and help us identify potential and creative ways to redevelop our oldest facilities. This will allow us to maximize land development opportunities and continue to attract investment through long-term leases. Technology is also going to play a big role in aviation. Developments in the use of alternative fuels and electric are very exciting and customers are demanding the industry adapt to meet climate change needs. We’re also looking at the potential for electric aircraft and a new entrance into the market for urban air mobility to help address roadway congestion. www.capitalanalyticsassociates.com
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INFRASTRUCTURE, TRANSPORTATION & AEROSPACE OVERVIEW
Electricity rates in Palm Beach County are 9.73% lower than the Florida average & Light. Rates are relatively cheap in the county, at just 8.72 cents/kWh for commercial electricity, 9.73% lower than the Florida average and 13.58% less than the national average. Residential rates are also low at 10.4 cents/kWh, 8.93% and 12.46% lower than the state and nation, respectively. For industrial users, rates are as low as 6.86 cents/kWh, 14.68% less than the Florida average but 2.85% greater than the national average. As a community with about 240 days of sunshine per year, it is little wonder that in Palm Beach County, efforts
are being made to transition to solar energy sources. FPL recently announced its first price hike in five years to cover the costs of the transition to solar power. Through the agreement, FPL would collect $692 million in its first year of the rate hike, supporting its goal of installing 30 million solar panels by 2030. Looking ahead Palm Beach County’s infrastructure is strong in some areas but weak in others. For example, substantial investment in the roads and highways is not matched in public transit and pedestrian intermodal systems, meaning citizens frequently complain about the traffic issue. The population is growing and Palm Beach County promises an excellent quality of life but authorities must ensure they do not fall behind on infrastructure investment and compromise the county’s competitiveness. Likewise, Palm Beach County is becoming a logistics hub and a leader in green energies but the county needs the infrastructure to support this. Amid the prolonged financial impact of the pandemic, this is much harder to put in practice but an expanding population and the effects of climate change demand action is taken now to increase the resilience of Palm Beach County’s infrastructure.
INFRASTRUCTURE, TRANSPORTATION & AEROSPACE INTERVIEW
Economic engine PBI generates about $5.7 billion in local economic impact
Laura Beebe Airport Director – Palm Beach International Airport What infrastructure projects are key for the airport? We have a number of projects approaching as airports are constantly building and rebuilding. Repairing infrastructure is an ongoing process and renews every year. The biggest project coming up is our $40 million concourse expansion in Concourse B. That will result in 56,000 square feet of additional space on that concourse, adding concessions, bathrooms, operational space and access to two additional gates. We are also continuing to ensure the integrity of our facilities, addressing what needs repairing, from terminal roofs to escalators and other items as needs arise. Our airport system, based on the last economic study conducted by the Florida Department of Transportation, generates about $5.7 billion in the local economy annually. We employ about 49,000 employees within the county. Commercial service and general aviation airports are important economic engines that support the local economy. How has the aviation sector been impacted by labor shortages and how are you mitigating that challenge? It affects every aspect of travel. After many of our tenants and concessionaires reopened as business picked up, they have had to provide large bonuses and increases in salaries to get workers. Airlines are continuing to struggle with pilots and crew. Trying to rebuild the workforce has been a struggle for everyone as the pool of experienced and qualified applicants has shrunk. What accommodations are needed to support growing demographics? We need to ensure that we have the capacity to serve our customers along with the service to the locations they want to travel to. We want to avoid the situation where we would be unable to handle the demand and volume of customers. That’s why we’re taking steps through
our master plan, including our concourse expansion project, to ensure that we continue to grow to support the local demand. How is technology changing the aviation industry? We’re moving into a place where you don’t necessarily need people. You’re able to execute various tasks without having to interact with another person. There are countless applications airlines are utilizing to modernize the industry. One airline is considering forgoing the check-in counter. Instead, customers would be able to complete what is necessary from their smartphones. The technology at security checkpoints is rapidly changing, too. New technologies are continuing to surface to avoid contact with people and make gates and facilities more flexible. www.capitalanalyticsassociates.com
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Professional Services: Professional services firms have been key contributors to Palm Beach County’s continued growth. From accountants to legal professionals and wealth advisers, these businesses have prospered in the past year as they helped their clients navigate the impact of COVID-19 and to capitalize on the opportunities arising from technological development and financial aid.
www.capitalanalyticsassociates.com
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A changing landscape: The pandemic gave professional services firms not only an opportunity to grow but to change the way they work The professional services sector is rarely described as sexy. From accountants to lawyers to wealth managers, these are the people who often work behind the scenes to ensure business and professional success. As a result of a pandemic that not only dramatically changed the way everyone works but also fired up unparalleled business uncertainty, there is a renewed vigor in an industry that has been pivotal to navigating the stormy waters of COVID-19. According to the Florida Department of Economic Opportunity, Professional and Business Services employed 117,900 people in the West Palm Beach-Boca Raton-Delray Beach region, adding 5,100 professionals between June 2020 and June 2021. Illustrating the industry’s position as a pillar of regional growth, the sector represents 19% of the area’s overall employment. This positive performance highlights the surge in demand from both residents and companies for such services to provide a clear perspective of the complex landscape that has emerged from the pandemic’s wake. Small-business owners are leaning heavier than ever toward succession planning, while the mere possibility of a reduction in the 1031 Exchange tax benefit is already keeping accounting and wealth 44
| Invest: Palm Beach 2021 | PROFESSIONAL SERVICES
management firms busy due to its influence on real estate investments. There are many other examples where these services have been asked to step up, and that alone has created new opportunities. Landscape Among the first transitions professional services firms had to make as the pandemic spread was dealing with the sudden boost in the role advisory played in their business. Overnight, for example, remote work became the prevalent modality for companies and employees, raising issues around both individual and corporate taxes. On the one hand, employees relocating could find themselves subject to different tax structures according to each state tax system. On the other hand, companies with relocated employees could open themselves to tax compliance issues via differing payroll, sales and income taxes across locations. As the landscape for businesses changed, so did the services offered by professional services. Many industry insiders have told Invest: that advisory had become a much bigger part of their business growth because of such complications. Moreover, some companies still reeling from the ( )
PROFESSIONAL SERVICES INTERVIEW
Tax wise Those moving to South Florida need to understand the tax implications
Timothy Devlin Co-Managing Partner – Daszkal Bolton LLP With so many people relocating to Florida, what should people know from a tax perspective? We have a state and local tax group at Daszkal Bolton. Having that function has really allowed us to consult for individuals and companies seeking relocation. Certainly, there are significant considerations people must understand related to a move. Each company’s situation is different. For instance, we have a company that is New York-based, is thinking of going public in New York and its executives are living here in South Florida and will continue doing so. How, then, will they structure this move? There are a number of other situations like these that we’ve had. The other aspect of this that we’ve seen is hedge funds from New York, New Jersey and Chicago moving to our area, a trend that we don’t see stopping in the near term. One of the things that I say is that, with the increase in tax rates — when you start coupling state and federal income taxes and the aggregate amount exceeds 50% — people start getting very interested in thinking of ways they can restructure their business. How would you characterize the tax and accounting effects of PPP stimulus loans? I will say that we’ve seen most companies take advantage of the available stimulus. Our client base is made up of quality companies. We generally have not seen or been involved in any companies that have used the funds inappropriately. What we have seen is the stimulus working the way that it was intended. For example, I’m a trustee of the South Palm Beach County YMCA. They were able to avail themselves of the PPP loans. The first thing that they did when they received the money was bring back the employees that they had furloughed and those individuals started receiving a paycheck again. They could have put it in their bank account and saved it for a rainy day but they actually sent that money out to
their employees. This was the intention of the program. Rather than take the government money and not use it the way it was intended, most companies used it as a way to maintain their workforce even if they did not have the billings or revenues under normal circumstances to keep them going. What are your near-term expectations? We’re very bullish on the recovery of the local economy. We’re continuing to double down on operating our business, taking care of our employees and ensuring that they are happy with the firm. We pride ourselves on providing a work-life balance and have allowed our team members to have a life both at home and at work. We want to continue emphasizing that they can have a life at our firm and build a career here. www.capitalanalyticsassociates.com
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Connor Lynch CEO Plastridge Insurance Agency
How is the booming housing market impacting home insurance decisions? The housing market has been interesting for all Floridians. We’re seeing a large influx of new clients from outside the area who are purchasing homes and moving businesses here. There is a lot of education involved in trying to ensure that people buying insurance understand the difference between construction replacement cost and market value. Market value doesn’t have a heavy impact on insurance because we don’t insure based on what the sales price of a home or property is. We insure based on what it would cost to reconstruct the home, which is the cost of the structure without the land or market pricing. Still, construction costs have increased in the last few years and this has increased the replacement value of homes and properties across the United States. There are other factors that are hitting other areas. Many insurance companies have lost a lot of money in the last few years and some of them have pulled back or stopped writing as much coverage. That means people usually end up trying to go to other companies but due to this limited supply of capacity in the market it has contributed to pricing increases. In the last few years, the insurance industry has taken losses of billions of dollars due to the many catastrophes including storms and wild fires. It can take from two to three years for all those claims to be realized or settled and then to ultimately impact pricing. Has demand shifted on the commercial end? There are a lot of trending coverages. There are new products in the market and there’s even a defense-only product offered for organizations or associations against things that are typically not covered by insurance. In this case, you could be providing an attorney for things like COVID or mold liability. Other products were also trending before COVID but the need for them has only increased, like cyber liability. At this point, we’re all in technology businesses. To me, there isn’t a company out there that shouldn’t have some level of cyber insurance. 46
| Invest: Palm Beach 2021 | PROFESSIONAL SERVICES
Office space in Palm Beach County continues to receive investment as more traditional business districts in the country struggle.
( ) ripple effects of the pandemic are having to file for bankruptcy. In South Florida, bankruptcy courts registered as many as 15 business filings in January 2021 alone, for either Chapter 7 or Chapter 11 bankruptcy. Navigating the most suitable strategy to restructure capital and assets for these companies to prepare their comeback also requires the expert advice that the region offers. The good news is that the aggregate number of filed bankruptcies in the region are showing a downward trend. Between January and July 2021, Chapter 7 bankruptcies totaled 910; Chapter 11 bankruptcies files were 41 and Chapter 13 bankruptcies counted 665. That compares to 1,245, 53 and 831, respectively, for the same period in 2020. Also bolstering the professional services, particularly in Palm Beach County, has been the influx of high-networth individuals. The latest figures show Palm Beach County hosts a record 48 billionaires. Pre-pandemic demographic trends were already favorable in that sense, and COVID-19 only accelerated that. Forbes calls Palm Beach County the Sunshine State’s billionaire hub. Added to that, it is home to 71,000 millionaires. Given those numbers, Palm Beach County is a boon for wealth management firms. In parallel, almost 2,500 financial services firms have a local presence in the county, employing an aggregate 37,000 people.
PROFESSIONAL CONSTRUCTION SERVICES OVERVIEW
Kurt Sylvia Managing Director The Sylvia Wealth Management Group at J.P. Morgan Wealth Management
What differentiates the Sylvia Wealth Management Group from its competitors? What differentiates our division, more than perhaps our group, is that we are a boutique division within J.P. Morgan Wealth Management that can deliver the full breadth of the platform of J.P. Morgan in a boutique setting. We’re one of a number of teams that work for J.P. Morgan Wealth Management in South Florida. We’ve had a lot of success over the last year.
Like most industries, Palm Beach County’s professional services firms answered to the COVID-19 pandemic by implementing significant modifications to their operational models, including more efficient use of office and administrative space, often resulting in a hybrid workspace; redesigning staffing and work patterns; injecting efficiency into digital connections and reducing business travel. These firms also saw their investments in technology, digitalization and innovation soar to new levels. In a survey that looked into changes to work practices that are expected to prevail post-COVID, the Association of Legal Administrators, together with Integreon and BigHand, found that the utilization of IT services reigned supreme with 42% of respondents. A diminished use of legal assistance came in second at 28%. Professional services firms have also proved fundamental in guiding their clients toward recovery from the pandemic. Business and Professional Services (BPS), and particularly in the accounting segment, have helped their clients pinpoint the business impact of COVID-19, elaborating projections, drafting cash flow strategies; finding tax refund opportunities; and capitalizing on the federal, state and local credits available. Among the initial and prominent legislative actions ( )
How are low interest rates affecting the dynamics of portfolios? One of the most challenging situations that we face has been trying to provide returns in fixed income, an asset class with very low return expectations due to the fact that interest rates are very low. We’re advising our clients that it can be OK not to have the returns they’ve seen over the last three to five years, while making sure they are not exposed to potential losses looking for additional yield. J.P. Morgan provides us with portfolio construction advice on how we may take advantage of sectors within the fixed-income markets that can still offer value and how to diversify within the fixed-income asset class. This is not as needed when interest rates are higher because core fixed-income can provide a stable rate of return and inherent low risk. What is the outlook for the wealth management industry in Palm Beach County? I was sitting with one of the top tax attorneys in South Florida and we were in agreement that we’ve never seen such a sudden influx of wealth within a small geographic area. The velocity of wealth that is moving to South Florida is astounding. I think for experienced advisers who are recognized in the local marketplace, this brings tremendo us opportunity to grow their practices. This applies to top wealth management teams, top tax attorneys, top accountants, everyone who provides services and intellectual capital to ultrahigh-net-worth individuals. www.capitalanalyticsassociates.com
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Market voices: Legal trends
Mark Bideau
Co-Managing Shareholder Greenberg Traurig – West Palm Beach
There is a tremendous backlog in the court system. The courts are restarting trials and they’re working hard to adjust as health conditions shift. I don’t know how long it will take before the backlog is whittled down. The judges are working hard to deal with it. In Florida, we started trials a little faster than in some other states but it will take several years to work through the backlog of cases. This has required us to be more creative in terms of mediation and trying to find settlements for disputes. Arbitrations are going to take off and they’re easier to do virtually. It’s the jury trials that are going to take the longest to catch up.
I think that the Biden administration has made it very clear that their primary objective is getting control of COVID-19 and, following that, this infrastructure bill that’s now in Congress. So, it’s not really clear where in the lineup estate tax reform might be. However, now we are all watching what will happen with the capital gains tax and the step-up in basis, both of which are central points in the proposed legislation now in Congress.
Tasha Dickinson Partner Day Pitney
Robert Sacco
Office Managing Partner Fox Rothschild
Attorneys dealing with courtroom work have had to become their own videographers and producers to ensure everything looks right at their trials and hearings. There are challenges to doing this and it has been interesting to see the sorts of solutions they’ve developed for dealing with these situations: how exhibits are presented, sidebar conversations, that sort of thing. On the flip side, there are considerable time savings. For some of these hearings and in-person events, there is a real advantage to continuing to do things virtually. I, for one, hope the courts will find ways to make use of the new technology now that we’ve had our trial by fire, and we’ve seen that it works.
We are bullish on Palm Beach County and its legal sector. We knew baby boomers were going to retire and we knew that was going to be good for the economy, for the real estate market and for the legal market but COVID has really sped that up. The success of our national economy has afforded people the opportunity to buy second homes and it has also accelerated the move of people from out of state to our state. The more people and businesses move to Palm Beach County, the more need there will be for legal services. We were bullish about that trend even before the pandemic.
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| Invest: Palm Beach 2021 | PROFESSIONAL SERVICES
Spencer Sax
Founding Partner Sachs Sax Caplan PL
PROFESSIONAL SERVICES OVERVIEW
( ) that required such services was the CARES Act. Rolled out hastily, the CARES Act, and its successors, have been touted for saving the economy, and small businesses in particular, from worse damage as a result of the pandemic. But it was, and is, a complicated package to decipher. And changes continue. For example, at least five beneficial tax modifications have been announced. First, it is now possible to carry back net operating losses from the 2018, 2019 and 2020 tax years. Second, the adjusted taxable income limit set at 30% on business interest was increased to 50% for 2019 and 2020. Third, qualified improvement property is now eligible for a 100% bonus depreciation, additionally made retroactive to property acquired and placed in service after 2017. Fourth, while the employer portion of social security tax is deferred, the employee retention credit made available by the CARES Act enables eligible employers access to a refundable payroll tax credit amounting to 50% of qualified wages paid. Finally, the CARES Act removes the 10% penalty on an early retirement accounts withdrawal if it is related to COVID-19. Navigating all these tax advantages requires an expert eye to help businesses capitalize on them, adding the growth opportunities for professional services.
South Florida had 1,782 CPAs and 484 CPA partners as of July 2021 On the legal side of things, legal firms have been working with their clients to ensure ironclad compliance throughout the PPP loan process to avoid audits under the suspicion of possible loan fraud. Before March 2020, none of these services were necessary. Accounting South Florida’s total number of Certified Public Accountants (CPAs) from the area’s Top 24 firms and the number of CPA partners totaled 1,584 and 435, respectively in July 2020. Fast forward to July 2021 ( )
PROFESSIONAL SERVICES INTERVIEW
Busy time Pandemic uncertainty has led individuals to reassess wills and create trusts, particularly in the face of potential tax changes
David Bowers Shareholder and Member, Board of Directors – Jones Foster trend continuing for the foreseeable future. Additionally, proposals have come out of Washington that could dramatically change estate and gift tax liability on inherited wealth and most are looking to be effective in January 2022. Many of our clients are working with us to review their estate plans and tax strategies now to mitigate tax consequences prior to the enactment of new laws, so I expect that we’ll remain busy in this area at least through the end of the year. How has the firm tackled legislation related to the pandemic? During the pandemic, we needed to address all new legislation and regulations in real-time, whether it involved health or economic issues. We formed a COVID-19 task force composed of attorneys from each practice area, and they were responsible for tracking changes on a federal, state and local level and following trends so that we could review, determine their impact and then provide recommendations and guidance to our clients. How has demand for legal services changed over the past 16 months? Our practice areas have been notably busier over the past 16 months, particularly our Real Estate, Private Wealth, Trusts & Estates and Corporate & Tax groups. The uncertainty everyone faced during the pandemic caused many of our clients to feel it was prudent to update wills and create trusts. Many others who run businesses needed guidance in the areas of employment law and PPP loans. The influx of companies and individuals relocating to South Florida due to quality of life and our beneficial tax system is increasing the demand for our services. Assisting clients in their planning and transition to Florida can be a complex process involving corporate filings, taxation, estate planning, homestead, and establishing domicile. I anticipate this upward 50
| Invest: Palm Beach 2021 | PROFESSIONAL SERVICES
What is your outlook for the legal sector and for Jones Foster? I’m an optimist. I believe that Palm Beach County is going to continue to attract top-tier companies from other markets and increase the pool of talented professionals in the workforce. I think the legal sector will thrive and mirror the strong economic growth in this area. The legal community is an essential component of change and a partner to businesses and municipalities in shaping the future of Florida. This firm, in my opinion, is uniquely positioned because of the emphasis we put on comprehensive client care, our history and depth of knowledge about South Florida and our ongoing commitment to excellence in the legal profession.
PROFESSIONAL SERVICES OVERVIEW
Kerensa Butler Office Leader, West Palm Beach and Fort Lauderdale – RSM US LLP Aside from the influx of demand in our technology solutions, we’ve seen an increase in demand for our tax expertise, especially around the management of the federal PPP programs and credits and incentives. Additionally, we’ve expanded our service offering to help client’s with their analysis around liquidity and cash management, and more recently, our expertise in the ability of companies to go public through transactions with SPACs. In South Florida, we have also seen an uptick within several industries, such as real estate, hedge funds and private equity, which aligns with what we see in the news about the increase of people relocating to Florida.
( ) and those numbers increased to 1,782 CPAs and 484 partners. That increase in just one year is a testament to the almost sudden need for such specialized services surrounding PPP loans, cash flow concerns and restructurings to inject resilience into company operations. On the billings front, South Florida’s Top 25 accounting firms totaled nearly $750 million in 2020, a nearly $60 million differential from the year before. On average, 2020 versus 2019 billings increased 8.5%, with the largest growth going to H&CO LLP at nearly 32%. The essential role of accounting firms helping their clients to make the most of the Biden administration’s American Rescue Plan Act tax environment is expected to continue, especially considering the Employee Retention Tax Credit (ERTC) was extended through December 2021. The ERTC has become a critical tool for businesses looking to recover and rebound from the ripple effects of the pandemic, especially considering it can return up to $28,000 per employee for those employers that qualify for the key resource for wages paid in 2021. The ERTC was not only extended in time but also in recipients, now allowing new businesses launched post-Feb. 15, 2020 that can show annual receipts of under $1 million to access a capped $50,000 credit per quarter. What is more, the Consolidated Appropriations Act (CAA) jolted the value of the ERTC for wages paid from Jan. 1, 2021, through June 30, 2021, from 50% to 70% of qualified wages. Employers that received the PPP loans also qualified for the ERTC, a measure retroactive to March 2020. The pandemic has shown the importance for accounting firms to remain engaged with their clients and to provide quick responses to complex issues. This
Billing by South Florida’s Top 25 accounting firms was up 8.5% on average Y/Y in 2020 experience highlights the critical aspect of consolidating the capacity to absorb quick changes in tax systems and developing a practice around turning big data into datadriven insights and assertive decision-making, another new avenue in the industry’s landscape. Striking the balance between in-person and service-as-a-product, will be key, many insiders say. Going forward, the accounting firms that stand out will be those that are able to adopt the mantle of trusted adviser, well beyond a simple service provider. Resilience, adaptability and flexibility will be three words that will continue to resonate in the accounting sphere well after the pandemic is dealt with. Accounting firms that remained close to their clients, helping them navigate the downturn and managing the federal, state and local business relief made available, will be expected by their clients to then assist on the forthcoming recovery and rebound efforts, which will entail different levels of business model adjustments. www.capitalanalyticsassociates.com
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Christine Gagnon Partner & Co-Leader, Florida Life Science and Technology Group EisnerAmper
What changes and strategies are going to become permanent post- pandemic? We are slowly and safely returning to the office but it’s going to look different than it did pre-pandemic. We’ve realized that it’s not a one-size-fits-all situation and we’re working with our employees to understand what the best solution is to coming back to the office. There are so many benefits to working in the office and visiting our clients in person, from on-the-job training with our new staff members to working with our clients on a face-to-face basis. The virtual meetings have been wonderful because people don’t have to deal with commuting but there’s something to be said for meeting people in person. What is the focus of businesses regarding possible tax changes? I think a lot of it is still up in the air. There are potential increases in ordinary income tax rates and capital gains taxes and those increases could be retroactive. There is the possible repeal of excess business losses as well as possibly the repeal of the like-kind exchange benefit. There are multiple other proposals being presented that target high-net-worth individuals. If tax rates increase and the tax proposals pass, investors are going to continue to find other ways to defer or eliminate capital gains taxes, such as investment in Opportunity Zones. Palm Beach County happens to have five Opportunity Zones. What are the advantages of doing business in Palm Beach County? Palm Beach County is an amazing place to do business. It’s also an amazing place to live and to raise a family. We have everything: arts, entertainment, great weather and Florida is a business-friendly state. It just gives you so much of an advantage over other areas of the country. With real estate booming, more and more people are waking up to the fact that it’s a desirable place to live and do business. 52
| Invest: Palm Beach 2021 | PROFESSIONAL SERVICES
Wealth management A recent Unacast report placed Palm Beach County as the top county for migration in Southeast Florida in 2020. Throughout the year, it welcomed 11,000 people and gained $3.4 billion in new income over 2019, or an average $2,165 per capita. The trend is expected to continue post-pandemic. Added to the ripple effects of the pandemic and finding ways to ensure value gains for their clients’ assets and investments amid the uncertainty, wealth management firms are also dealing with the entry of millennials into the investment fray, with different sets of priorities and mindsets when it comes to investing, such as an avid interest in cryptocurrencies or investing through stock or trading apps. Women are also taking a more active role in terms of key family financial decisions, driven by new investment models. AI, blockchain, big data, IoT and open banking are among a few of the technological disruptions that are making their way into the wealth management landscape. Throwing remote work into the mix, with the ability to work from anywhere and access a skilled, borderless talent pool, wealth management firms are provided a myriad of technological tools that will provide an added edge for their future business, so much so that those that fail to get on the tech innovation train risk falling into business irrelevance. Palm Beach County offers wealth managers looking to lean heavily into tech an ideal local tech hub that is home to one of the world’s largest modeling, simulation and training clusters, totaling 400-plus companies: more than 15,400 firms in software development, over 7,400 telecom companies, more than 4,500 digital media companies, 800-plus microelectronics and precision devices players and 340 photonics/optics companies. Palm Beach County’s IT and telecom talent pool counts 20,342 professionals, while the Sunshine State as a whole produces close to $8 billion worth of R&D activities in IT. Horizontal integrations are also on the cards for wealth management firms. Case in point: specialty insurance wholesaler K2 Placements and Wealth Advisor Growth Network (WAGN) wealth firm consultancy joined forces in May 2021 to create Advisor Insurance, a new platform meant to streamline the business insurance process of wealth managers, as well as provide resources to mitigate potential liabilities. Palm Beach County is home to 2,485 financial service firms, employing 37,255 professionals. The region’s Top 6 financial advisory firms alone had an aggregate $1.83 billion in assets under management
PROFESSIONAL SERVICES OVERVIEW
Tyler Vernon CEO – Biltmore Capital Advisors In 2017, when the Trump administration changed the tax laws, specifically reducing the deductibility of state taxes, whether that is property taxes or income taxes, it created a tax environment that was much less friendly to states such as New York, New Jersey and Connecticut. While the transition down to Florida was already starting, the tax changes accelerated it. The pandemic further accelerated this migration. We’re also seeing more competition in the financial services business as firms relocate to the area. More competition lowers costs and ultimately provides consumers with better choices.
(AuM) as of June 2021. It comes as no surprise then that the region has been dubbed the “Wall Street of the South.” Added to that, in 2021 alone, $34 billion left the country’s financial capital, New York City, for Palm Beach County: 70,000 high-net-worth individuals left the Big Apple and took their billion-dollar income with them. Gathering strength for its claim to the “Wall Street of the South” moniker, financial heavyweight Goldman Sachs opened several South Florida-based locations, relocating hundreds of employees to West Palm Beach in 2021. The move joins relocation and expansion announcements in the area made by Point72 Asset Management, Wealthspire Advisors, NewDay USA, Virtu Financial, Elliot Management and Colony Capital. Insurance Insurance carriers were also up to meeting the complex challenges, with the combination of the COVID-19 pandemic and hurricane season. The combined events make it imperative to review insurance policies. The American Property Casualty Insurance Association (APCIA) determined that ongoing labor shortages in the construction industry and the spike in construction materials pricing resulting from a stressed supply chain could translate into insufficient insurance coverage to rebuild damaged properties after a particularly aggressive storm, for example. In parallel, businesses across the Sunshine State are engaged in a legal battle with insurers over their unwillingness to consider COVID-19 related shutdowns as part of the offered business interruption coverage policies. More than 100 Florida businesses have claims pending in both state circuit courts and federal courts;
primarily bars and restaurants. Yet, one exception made in Missouri by a federal judge by the rejection of Cincinnati Insurance Co.’s motion to dismiss a hair salon’s claim may present a way forward for other businesses looking for insurers to make good on their business interruption coverages. Another significant disruption for insurance companies that might translate into a significant opportunity revolves around the virtual space. With the prevalence of remote work on a global scale, small and large corporations alike have expressed concerns over cybersecurity issues, made valid by the projections of cybercrime damages hitting $6 trillion in 2021 alone, doubling on 2015’s $3 trillion. Global ransomware attacks totaled 188.9 million in 2Q21, a 206% increase from 2Q20’s 61.7 million, according to a SonicWall report detailed by independent cybersecurity news platform Threatpost . For the United States specifically, it ranked first among the Top 10 countries in terms of total ransomware attacks, and by a large margin. It is not a surprise, then, that Cowbell Cyber found 65% of SMEs surveyed were planning to spend more on cyber insurance to consolidate their cyber resilience plan by 2023. Undoubtedly, insurance firms will work toward a tailored solution to this issue, to protect companies’ most valued assets, including intellectual property. Among Palm Beach County insurance companies, the Top 12 saw their premium volume increase from $5.1 billion to $5.42 billion between 2019 and 2020. Representing an aggregate workforce of 1,676 agents, these top insurance firms’ premiums were comprised primarily by commercial business at 62% while the remaining 26% represented individual business. www.capitalanalyticsassociates.com
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David Norris Co-Founder Cohen, Norris, Wolmer, Ray, Telepman, Berkowitz & Cohen
What impact have remote hearings had and will the trend last? During the pandemic, I was involved in some hearings that I had to attend because it involved my client. They were all done by Zoom and in a conference room; all of the other parties were up on the screen. It’s a little strange at first but it allowed the litigation process to continue. It was a little slower, a bit tougher to keep the cases moving as swiftly as before but it did enable them to continue to move, which I think is extremely important. Going forward, I think litigation, although it can be done by Zoom, really needs to be live and face to face, so I’m not sure how much of that will continue. Even before the pandemic you could do depositions by Zoom and you could attend some hearings by Zoom so that will continue but my guess is that it won’t be a huge shift to where everything, or the majority, is done by Zoom. I just think that personal, face-to-face contact is important when you’re a litigator and you’re questioning the witness. I think litigators like to be right there in front of witnesses, judges, and juries. How has demand for your services changed over the last 18 months? In South Florida, the real estate industry has been booming. It changed dramatically in that regard, especially in our residential closing practice. We were going crazy in a very good way with so much business and so many closings happening and, fortunately, they’re still continuing. We can see it kind of slowing up a bit because the volume is not there in terms of the inventory but the big impact was on real estate. The other areas of our practice, such as litigation and estate planning, continued without really dropping off. The impact of the pandemic was limited somewhat, reducing the number of trials and hearings, for example, but the work continued. We have a strong employment lawyer and, obviously, he was busy during this whole process because there were lots of questions in terms of what employers could and couldn’t do. 54
| Invest: Palm Beach 2021 | PROFESSIONAL SERVICES
As online hearings became more common, courts in Palm Beach County were well prepared for the digital transformation.
Legal South Florida’s pool of legal professionals remained relatively stable among the region’s Top 100 law firms between 2019 and 2020. Adding in lawyers, partners and staff, South Florida’s legal talent pool increased year-on-year from 15,037 to 15,066. Interestingly, despite the remote-by-force push across industries, the number of legal offices actually increased in that same period, going from 194 offices in 2019 to 224 offices in 2020. Among the changes imposed by the COVID-19 pandemic was a push away from hour-based billing to a value-based model. As their clients were going through the legal uncertainties of switching to a remote workforce and dealing with PPP loan compliance, resources were stretched thin for legal services, mandating a shift in how clients were charged. Value-based billing rests on the principle that law firms shift from viewing legal work from an attorney lens to a client lens. Legal work thus adjusts to the client’s goals and the value inherent to them. The work is then translated into a fixed-fee based arrangement, regardless of the hours dedicated to it. Moreover, Palm Beach County’s law firms expect the bulk of their transactional practice work to contract, while litigation work is expected to increase. This is
PROFESSIONAL SERVICES OVERVIEW
not to say that transactional practices inherent to a downturn — restructuring, government lending programs, debt capital markets, bankruptcy, alliances and joint ventures, M&A and distressed M&A — will slow down. Labor law conflicts between employee and employer, disagreements between landlords and renters, tax compliance relating to remote work and PPP loan compliance to prevent audits are but a few of the overarching tasks legal firms are expected to focus on as the region builds up its recovery and rebound. Not traditionally known for its intensive techpenetration, legal services have also been cornered into quickly adopting technology to work not only remotely but more efficiently. Videoconferencing technology has been introduced to conduct litigation in the virtual landscape, prompting law firms to upskill attorneys and train them in conducting depositions, mediations and witness preparation through a computer screen. On a more technologically sophisticated note, legal firms have seen the value in transferring their operations to the cloud. Maintaining a competitive edge in today’s legal landscape requires leveraging cloud computing. That confirms that legal firms now need a degree of flexibility and responsiveness toward either regulatory changes or client needs in a way that on-site systems are simply unable to provide. HBR Consulting anticipated that in its 2019 law firm cloud forecast report where it said that on average, 75% of a law firm’s workload — discovery, productivity and e-mails, document management — would be readily transferable to the cloud. The future of in-office work is another area law firms are tackling. Traditionally an in-person practice that values client relationships and mentorship, it is likely that most law firms will look to have some form of office
space available, whether through a hybrid operational model, a reduced office space or a co-working solution with the right safety and hygiene protocols in place. Throughout 2020, the Sunshine State registered healthy M&A activity, ranking fifth nationwide at 18 transactions, only behind Texas (50), New York (30), California (28), and Illinois (23). Purchasing companies included Kisinger Campo & Associates Corp, Madrid CPWG, BDG Architects, Ardurra Group, BES Inc., Swedroe Architecture, Answer Advisory, Universal Engineering Sciences, NV5 Holdings, Inc., WGI, Inc., BCC Engineering, TLC Engineering Solutions, Inc and GFA International. It is safe to say that law firms remained quite busy within that practice, especially considering investor appetite for tech-intensive, pandemic-resilient businesses, such as e-commerce and life sciences. In parallel, investors looked to capitalize on the investment and re-purposing of distressed assets to the benefit of overperforming industries. Looking ahead Palm Beach’s professional services industry will continue to play a pivotal role in the area’s swift recovery and strong rebound as it increasingly takes an advisory role with clients. By focusing on practices that foster compliance and business resilience, accounting, legal, financial and wealth management firms are in the best position to foster long-term, thriving relationships with their clients. Through technological developments and developing a nimble capacity for monitoring of regulatory changes and interiorization, Palm Beach County’s professional services industry is laying the foundation for a sustainable path toward future growth.
Residential Real Estate & Construction: Residential real estate is booming like never before in the county as supply struggles to keep up with demand. That is playing into the construction segment where supply chain and price concerns are hampering the market. Overall, few insiders see a bubble building but the skyrocketing prices are putting a burden on affordable housing.
www.capitalanalyticsassociates.com
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Residential Real Estate & Construction in Numbers:
Closed Sales
The number of sales transactions that closed during the month Economists’ note: Closed Sales are one of the simplest—yet most important—indicators for the residential real estate market. When comparing Closed Sales across markets of different sizes, we recommend comparing the percent changes in sales rather than the number of sales. Closed Sales (and many other market metrics) are affected by seasonal cycles, so actual trends are more accurately represented by year-overyear changes (i.e. comparing a month’s sales to the amount of sales in the same month in the previous year), rather than changes from one month to the next.
Month
Closed Sales
Percent Change Year-over-Year
Year-to Date
11,858
25.1%
July 2021
1,774
-8.6%
June 2021
2,117
43.2%
May 2021
1,890
90.7%
April 2021
1,989
67.0%
March 2021
1,723
10.9%
February 2021
1,211
-1.8%
January 2021
1,154
5.5%
December 2020
1,784
25.6%
November 2020
1,533
28.4%
October 2020
1,818
32.8%
September 2020
1,744
28.6%
August 2020
1,814
15.8%
July 2020
1,940
9.3%
Closed Sales: 2,500
2017
2018
2019
2020
J F M A M J J A S O N D
J F M A M J J A S O N D
2021
2,000
1,500
1,000
500
0
J F M A M J J A S O N D
J F M A M J J A S O N D
J F M A M J J
Source: Broward, Palm Beaches & St. Lucie Realtors®
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| Invest: Palm Beach 2021 | RESIDENTIAL REAL ESTATE & CONSTRUCTION
Median Sale Price (i.e. 50% of sales were above and 50% of sales were below)
Economists’ note: Median Sale Price is our preferred summary statistic for price activity because, unlike Average Sale Price, Median Sale Price is not sensitive to high sale prices for small numbers of homes that may not be characteristic of the market area. Keep in mind that median price trends over time are not always solely caused by changes in the general value of local real estate. Median sale price only reflects the values of the homes that sold each month, and the mix of the types of homes that sell can change over time.
Month
Median Sale Price
Percent Change Year-over-Year
Year-to Date
$462,000
23.9%
July 2021
$500,000
25.3%
June 2021
$500,000
33.0%
May 2021
$475,000
30.1%
April 2021
$466,000
27.7%
March 2021
$440,000
18.9%
February 2021
$450,000
24.0%
January 2021
$422,000
16.3%
December 2020
$425,000
16.8%
November 2020
$418,000
19.4%
October 2020
$420,000
17.0%
September 2020
$400,000
12.7%
August 2020
$399,000
12.4%
July 2020
$399,000
12.4%
Median Sale Price: $600K
2017
2018
2019
2020
J F M A M J J A S O N D
J F M A M J J A S O N D
J F M A M J J A S O N D
2021
$500K
$400K
$300K
$200K
$100K
$0K
J F M A M J J A S O N D
J F M A M J J
Source: Broward, Palm Beaches & St. Lucie Realtors®
www.capitalanalyticsassociates.com
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Hot, hot, hot: A perfect storm of factors is driving residential real estate but affordable housing remains the county’s Achilles’ heel Palm Beach County’s residential real estate market is thriving. So much so that it has been likened in some cases to the hottest market in the country. With its limited land mass, the county’s oceanfront strip has always had an air of exclusivity, with just 2,500 homes up for grabs. Among the county’s residents are 48 billionaires and luxury houses abound. With the pandemic sending people away from denser areas, the Palm Beach County market has continued to pick up steam along with others across the favorable southcentral United States. Landscape Palm Beach is attracting so much attention not only for its exclusive neighborhoods and famous residents but also for the quality of life and perks the county offers. There is a continued influx of incoming residents looking to benefit from favorable rates given the state’s low property taxes and absence of income tax. And although the COVID-related surge in purchases of properties that provide a quality living experience has waned, momentum still exists from those who are now being allowed to work remotely on a permanent basis, or for employees of offices relocating to the region. Still, amid 60
| Invest: Palm Beach 2021 | RESIDENTIAL REAL ESTATE & CONSTRUCTION
all the new demographics, retirees remain a key pillar of the Palm Beach County community. As far as buyer profiles go, Palm Beach is certainly attracting more qualified buyers. In West Palm Beach, 52.6% of home purchases in 2021 were all cash – the highest proportion in Redfin’s countrywide analysis. This shows that many of the new residents are either retirees or are buying a primary residence after cashing out equity from existing mortgages. Many of the new residents have continued to come from the Northeast markets of New York, New Jersey and Chicago, and even from California. There is also an influx of new Canadian residents, realtors say. But it is not just primary residents entering the market; some see an opportunity for investment. In one such case, Jeff Marcus, vice chairman of New York private equity firm Crestview Partners, flipped a 5,788-square-foot Palm Beach home in the space of a year, netting a cool $4.4 million in profit on the $10.34 million sale. The 150 Bears Club Trust also flipped a Palm Beach Gardens mansion for $10.97 million after buying it for $8.86 million just six months earlier. And despite the lack of space, developers don’t want to miss out on the action. One developer – The Related Cos. of New York – paid $20 million for a plot ( )
RESIDENTIAL REAL ESTATE & CONSTRUCTION INTERVIEW
Perfect storm Supply issues, the emergence of millenial buyers and relocations are among the factors impacting housing
Robert Rademacher President – Kolter Homes What are the main factors impacting the housing market in Palm Beach County? There are a number of factors. There has been an ongoing shortage of homes built across the country to the tune of 3.8 million to 4 million homes. When that is done over a 10-year period, this creates a supply issue. There is also the delay in the millennial first-time homebuyers who decided not to purchase a home as early as other generations. The delay in homeownership creates a greater pipeline of demand. Another demand driver is COVID and the influx of people from large cities in the Northeast. People want to upsize and leave the cities. This has created a perfect storm at this point in time for Southeast Florida because it is such an attractive place to relocate to. People now realize they will be able to work from home more often and they want to live in a location that offers a great lifestyle. We’re seeing a lot of demand now for dens and especially dual dens for working spouses who want separate workspaces. We have created more versatility in our structural options. What is the focus of demand in the Palm Beach market? In Palm Beach, we have three large communities: Cresswind in West Lake, and Alton and Artistry in Palm Beach Gardens. There are 1,400 units between Alton and Artistry and another 800 in West Lake. The demand has been outstanding and we’re controlling our releases to maintain delivery schedules and quality. This is an unprecedented level of demand. At the same time, our industry has seen costs go through the roof due to supply chain challenges and commodity prices, which have led builders across the region to increase prices dramatically. Has supply chain disruption improved in the last year? In my estimation, it has not really improved. We’re still seeing a shortage of lumber, metal, concrete, windows,
appliances, PVC and anything resin-based. We’re managing this process by altering how we order, placing orders about two months ahead of need. Lumber prices rose 300% in the last year and the average home in the United States increased $36,000 due to lumber costs alone. What is your outlook for the next 18 months? For all markets, we need to get some consistency in the supply chain, and we need more consistency in materials. I don’t know where the lumber situation will end up and that needs to be resolved everywhere. The supply was shut down because of COVID and the inventory was eaten up in the meantime. This year, we have record-setting sales. The biggest question mark for the whole industry is whether the shortages will be alleviated so we can offer our best price to customers. www.capitalanalyticsassociates.com
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Mike Pappas President & CEO Illustrated Properties
What is motivating the massive influx of capital into the real estate market? The real estate market is on fire nationally. I think in South Florida we have some advantages in that we have no income tax plus no inheritance tax. There are also 80 million millennials and 75 million baby boomers nationally, and the age of an average homebuyer is 34. In the next three years, there are 15 million millennials turning 34. This is creating demand for homes. We have also had unprecedented low interest rates below 3%, which is almost free money. How would you respond to those who say that this is a real estate bubble? There is no question that there is an excess of money in the market and in our bank accounts, and this is driving asset purchases. The government printed trillions of dollars to address the pandemic and people are not necessarily spending it. The typical income producer has more ability to pay for more than the average median home right now. So even though prices have escalated 20% in the last year or two, they are still in line with the affordability factor given interest rates. There is also huge scrutiny in the loan approval process, unlike before the 2008 crash when people were securing loans for homes they should not have been approved for. I think we will find out what will happen when the supply opens a little, but it does not look like this is happening anytime soon. Which asset classes are seeing the most success? The industrial market has been on fire due to the growth of e-commerce. Apartment sales have been amazing. And everyone thought retail, hotel and office would become distressed and that did not happen. On the contrary, cap rates have been lowering in line with interest rates. Some retailers did get hurt but in South Florida, we find there are many more to take their place. We are seeing that the commercial market is as strong as it was before the pandemic, although the office subleasing space has probably suffered. 62
| Invest: Palm Beach 2021 | RESIDENTIAL REAL ESTATE…
Palm Beach County’s coastline has earned the nickname the “Gold Coast” because of the wealth and tropical lifestyle found in the region.
( ) of land on the West Palm waterfront. The company reportedly aims to build a 25-story luxury tower. All this demand is leading to several new trends in the Palm Beach County residential real estate market. One is the prevalence of sight-unseen sales as buyers need to move quicker than ever to stake a claim. After a virtual tour or open house live stream, realtors are reporting an unprecedented number of offers being made. According to some reports, some houses attract as much as 50 offers after showings, and buyers are increasingly resorting to all-cash offers and waiving inspections to get a foot in the door. Market performance In the 16 months to July 2021, there have been 22 sales of $40 million or more in Palm Beach County and 35 over $30 million, which marks a 178% increase year over year. Home value is also shooting up. The median sales price in Palm Beach County has gone berserk since March 2020, reaching $2.65 million in August last year. This year, average prices have settled to about $960,000 in July but still remain significantly up on average August 2019 prices of $500,000. Median days
RESIDENTIAL REAL ESTATE & CONSTRUCTION CONSTRUCTION OVERVIEW OVERVIEW
Michael Ging Managing Director Florida Alliance Residential Realty
on the market have also tightened by about 50% to just 74. In the West Palm market, fundamentals are looking just as strong. The median sales price for July is up 6.3% on the year to $269,000 and houses remain on the market for a median 44 days, down over 45% year over year. The Boca Raton and Delray Beach markets are also charging ahead, spending 48 days and 50 days on the market, respectively. Median sales prices in Delray Beach rose over 10% year over year to $265,000 and those in Boca Raton are up over 23% to $470,000. In total, across the county, median home prices for single-family homes are up 33% year over year, with 2,117 sales over the year and just 1.8 months of inventory available. There are just 11 days to contract in 2021 compared with 56 in 2020 and, in many cases, 100% of the list price is received. Sales of townhouses and condos are also up over 10% year over year to 1,913 in 2021, with just 2.1 months of inventory available. The supply shortage is throwing up fresh challenges for realtors. While there are plenty of willing, qualified buyers, there is a lack of properties up for grabs. As a result, many realtors have had to resort to making
What have been the biggest takeaways from the last year? Capital availability — whether equity investment capital or construction financing debt — was very difficult for a period of time but, toward the latter half of the year, we started seeing that improve. Cap rates for commercial real estate really started getting stronger. This year, they continue to grow stronger — go lower — and we’re seeing record home prices around the country. In real estate in general, I’d say industrial and multifamily are clearly leading the way. A lot of the capital that would be going to the other asset classes is being overweighted toward industrial and multifamily. The other recent phenomenon in the last several months is what is happening in the for-sale housing industry, with home prices rising so significantly. Demand is outstripping supply. There are bidding wars with all-cash buyers and houses are going in a couple of days. What are the biggest challenges for the industry right now? Our biggest challenge right now is cost escalation. Not just land prices but all construction material costs have gone up dramatically. Lumber, of course, is the headline that has gone up about 400%. It has had a huge impact, not so much in South Florida, where we build everything in concrete, but pretty much everywhere else in the nation. What is your approach to workforce housing? It’s a challenge for us to deliver workforce housing here in South Florida with land prices being where they are and with impact fees and construction cost increases. The rents you need to achieve to generate an acceptable return are hard to get with the cost of developing even a more stripped-down version of workforce housing product. We do this without any tax credits or bond financing. It’s purpose-built workforce housing where we very carefully try to design a very cost-efficient product and building that is really suited for that part of the workforce who can’t afford that class-A product. www.capitalanalyticsassociates.com
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RESIDENTIAL REAL ESTATE & CONSTRUCTION OVERVIEW
John Hackett Senior Managing Director – Corcoran Group
The market is strong on both the selling and the renting side. Our rental numbers were up significantly this past year. We did a tremendous number of rentals, primarily because many of those people who would have been buyers simply could not find anything to purchase. There was a sense of urgency this year, more so than we have seen in most years. Typically, people will come down and if they do not see anything they would like to buy, they simply go back up North, or wherever their home may be. They then try to do it remotely or come back the next year and try again. This year, it seemed going back was not an option. They were compelled to make a choice between either buying or renting.
In July 2021, the number of loans in forbearance dropped to 3.87% calls and pounding the pavement to drum up fresh inventory. The continued low interest rates and the influx of money from the federal stimulus means more people are able to buy bigger or even second homes, compounding the availability crunch. Although the market may be throwing up some red flags, experts say there is no need to be concerned about a housing bubble like during the Great Recession. For one thing, inventory is typically high entering a recession but in 2020, the market was characterized by low inventory and high liquidity. Additionally, banks have substantially tightened lending criteria since 2008, so none of the affordability issues that existed in 2008 exist today. This is particularly visible in the low forbearance rates on national mortgage loans. In July, the total number of U.S. loans in forbearance dropped by 4 basis points to 3.87%. The rate of forbearance exits is also expected to increase when updated figures are released. 64
| Invest: Palm Beach 2021 | RESIDENTIAL REAL ESTATE & CONSTRUCTION
Affordable Housing Any tightening in supply weighs heavily on affordable housing, especially for Palm Beach. As the area attracts high earners, low- and middle-income buyers are being edged out of being able to afford to buy a home. Research from Pew Institute showed that the impact of the pandemic has weighed heavier on lower-income adults than upper-income adults, even despite federal stimulus measures. For those who did not lose their job, hours were reduced and some experienced extra burdens of childcare or family costs. To deal with the dilemma, Palm Beach County set up the Housing Leadership Council to address issues of affordable housing and residents being priced out of their own neighborhoods. But the agency is working against a trend that means it loses more affordable units per year than are built, and additional funding is hard to come by. The agency estimates that about $150 million is needed to build 20,000 affordable units. A government report released in January estimated the affordable housing deficit was more like 78,000 units. Also working to increase access to affordable housing in Palm Beach County is The Sadowski Fund, which is funded by documentary stamp taxes from real estate transactions in Florida. The money is used for those who pay more than 50% of their income on housing and are one paycheck from homelessness. Often though, the fund has not been used for its designated purpose and there is now a proposal to use the money for climate resilience measures. As anyone knows, economic growth is impossible without workforce growth. But with 57% of workers in the county employed in low-wage, service-sector jobs ( )
RESIDENTIAL REAL ESTATE & CONSTRUCTION INTERVIEW
Tight supply It’s not just out-of-state buyers driving the regional housing market higher. Locals are moving as well
Dionna Hall CEO – Broward, Palm Beaches & St. Lucie Realtors® and BeachesMLS What trends are emerging in the commercial and residential markets in Palm Beach County? From a residential standpoint, inventory is tight right now and that’s driving up the prices of homes. Many people from other states are coming to our marketplace with a lot of cash. Also, a lot of local people in the region during the pandemic decided that they wanted to move as well. It’s not just the influx of people moving here from outside the state that has been driving the market; rather, local resident movement has also been a significant factor. Unfortunately, our ability to provide new construction housing was slowed because builders were not building during the pandemic, largely due to supply chain issues, such as the Suez Canal blockage and the overall availability of materials. We’re lucky to still have buildable land in Palm Beach County but that land is expensive because there is little of it left. How do you see the future of commercial real estate in Palm Beach County? One of the great things about commercial real estate is that it has started to make a strong comeback. There was a lot of talk that people were not going to return to offices because employees wanted to work from home but companies have realized that a lot of collaboration is missing when meetings are limited to only a virtual environment. Regarding retail, we’ve seen interest in converting retail into other uses, for instance changing commercial retail centers into residential complexes because housing inventory is so tight. We’re coming up with different solutions to address the housing shortage and create additional inventory. What has been the impact of the Realtors for Equality campaign? In South Florida, we’re blessed to already have a diverse
marketplace. Other places in the United States are a lot more homogeneous. We developed a campaign to reinforce to our 39,000 members and the public that housing is for everyone. For every house that is sold, $92,000 is reallocated into the local economy and two jobs are created. This demonstrates that real estate activity is the backbone of our communities and that is why at the onset of the pandemic we worked so hard to ensure that real estate was deemed an essential service. What is your outlook for the industry? The real estate industry is thriving. We’re seeing record numbers of people enter the industry. As a local Realtor® association and MLS, we are scaling those numbers and ensuring that we are educating these professionals and helping them to be as successful as possible. www.capitalanalyticsassociates.com
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RESIDENTIAL REAL ESTATE & CONSTRUCTION OVERVIEW
( )with hourly wages equivalent to 46% to 60% of the county’s 2018 median household income, many are being forced to move further out or become severely cost-burdened. The situation is worse for women, according to research. The median income for a woman in Palm Beach County is $26,739, according to 2019 U.S. Census Bureau data and adequate housing in this price range simply does not exist. Single mothers outnumber men two to one in the county and the unemployment rate among women is 25% higher than that for men. And even though there are more women buying homes than men in Florida, single women tended to buy smaller homes in poorer conditions, buying for about 2% more and selling for about 2% less. Some progress is being made, however. In December, West Palm Beach revealed a new $20 million affordable housing complex designed for those living with behavioral health challenges. The development has four stories and 36 units. The county has also decided to allocate $60 million of the $290 million in federal government funds to a supply of affordable and workforce housing units. And in late August, plans were submitted to the county planning board by affordable housing developer Wendover and Pinnacle for Berkeley Landing. The development would have 110 affordable units, two livework units, 191 parking spaces and amenities, such as a swimming pool and playground. Ninety-four affordable apartments are also going up at Flagler Station. Rental trends As potential homebuyers are priced out of the market, many are turning to the rental market until they can afford to buy. This in turn is pushing up rental prices in
Local real estate organizations are supporting a constitutional amendment to tackle housing affordability in Florida.
RESIDENTIAL REAL ESTATE & CONSTRUCTION OVERVIEW
Perspectives: Shifting demands Stephann Cotton Founder & CEO – Cotton & Company We work with Boca West on both marketing and sales management. They have 3,500 homes in Boca West and right now there are only 70 listings. A normal, healthy real estate market is typically around 10% of your homes, which means 350 homes should be available for sale. I think prices will remain strong, but there was an average of 14% appreciation from last year. We’re in new territory but it’s for all the right reasons. Demand is being driven by users not investors. We have a good level of confidence that we will continue to see record growth.
Jon Isherwood Division President – K. Hovnanian Homes Most easily identifiable is a desire for a dedicated office space. When you find yourself working from home, the dining room table is not the best place to be successful. You need a proper working environment. We’ve also seen demand for flat space that can be adapted into a workspace for kids or adults. Maybe it’s not a dedicated office but a room with a desk in it where you can take video calls if necessary. Those flexible spaces are areas that we really saw develop over the last 16 months. In addition to this, demand for outdoor space has gone up significantly.
Joe Morello Business Development & Operations Manager – Somerset Financial Group
Palm Beach County. Insurance agency Insurify found in a study that rents in Palm Beach Gardens spiked by 10.55% year on year in 2021, compared to the national average of just a 0.42% rise. Palm Beach Gardens was not the only city to see an increase in prices; those in Boca Raton increased 8.85%, Wellington was up 6.85% and Delray Beach jumped 5.63%. According to Rentdata, current rents in the West Palm-Boca Raton area are very high compared to the national average, at $1,180 per month for a one bedroom, $1,468 for a two-bedroom and $2,387 for a four bedroom. As prices increase, rental units are trading at eyewatering prices. An apartment complex in the Uptown Boca mixed-use center traded for $230 million, marking a record price of $504,000 per unit. The 456-unit development is part of the 38-acre mixed-use center and was sold to Atlanta-based Courtland. And RREEF ( )
The most demand is definitely for residential real estate, whether it be for single-family homes, multifamily properties or condominiums, such as those that we own. We’ve had a lot of interest from investors, whether it’s a small investor group or an individual. We’ve gotten a great deal of interest from Latin America, New York and California, and even local investors. These units are being sold occupied with tenants.
Kevin Neal Managing Director – Trinsic Residential Group Demand for apartments in South Florida has been very strong. Our Aura Boca project leased up much faster than anticipated because the demand has been so strong due to the continued migration to Florida. There is a need for high-quality multifamily housing in Palm Beach County as demand has outpaced supply over the last year and a half especially. That was advantageous for us and we were able to meet that demand at Aura Boca as we completed the project without any delays caused by the pandemic.
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RESIDENTIAL REAL ESTATE & CONSTRUCTION INTERVIEW
In a bubble? Landscape comparison between 2008 and today suggests that claims of a real estate bubble are unfounded
Michael Belmont President– Minto Communities USA If the sales pace were to slow down a bit, it would not be the end of the world and maybe the price of lumber will stabilize and material shortages will be less common.
Would you say the housing market is in a bubble? When people talk about bubbles, they think back to the way it was in 2006-2008. That truly was a bubble because there were so many investors in the market buying three, four, five homes to flip as prices increased. A lot of homes were being built with no occupants and this created an oversupply. We do not have an oversupply of homes right now, quite the contrary. There are very few investors in the market today and we are selling to people who want into a new home. There are very few investor resale homes in the market. The general economic conditions of supply and demand will avoid a bubble like we had experienced in the past. A slowdown in the overall sales pace is more likely to happen. Minto has plenty of land in our portfolio and we are not overbuilding, just meeting consumer demand. 68
| Invest: Palm Beach 2021 | RESIDENTIAL REAL ESTATE & CONSTRUCTION
Which asset classes have outperformed in the past year? All of our residential has done well, whether it is the Latitude Margaritaville brand, the 55-plus active adult communities or a community like Westlake that is family-oriented and offers something for everyone. The demand for Westlake, for example, is amazing. Unfortunately, due to the number of sales we had last year and the environment right now with out-ofcontrol increases in construction costs, we have actually slowed down our sales pace at Westlake and some other communities because our backlog is getting too far out. We are now delivering homes in 14 to 15 months, which is a little more than we like, especially given the volatility in prices of materials and the labor market itself. There are only so many homes we can produce as a result. We’ve put in place some restrictors on our sales. So far this year at Westlake, we’ve sold 113 houses compared to 130 last year. With these rising costs, the price of our houses has had to go up as well. We’ve seen steady increases in our home price. Thankfully, due to the favorable interest-rate environment, mortgages are still relatively affordable and people are still able to get into a house even though the initial price is more expensive than it was a year ago. What is your overall near-term outlook? We’ve had record-setting home sales in the last eight to 10 months. We have a very robust and growing backlog of sold homes that will close in 2022. We’ve sold all of our homes that we are going to close in 2021 and we probably have 40% of our closings in 2022 already sold and in backlog. Our sales and closing goals for 2021-22 will be accomplished and maybe exceeded.
RESIDENTIAL REAL ESTATE & CONSTRUCTION OVERVIEW
( ) Management paid $157.5 million for two multifamily complexes in West Palm and Wellington this August. The 316-unit Vista Lago went for $274,525 per unit and the 222-unit Waterstone at Wellington at $318,694 per unit. On the other side of the coin, the eviction and foreclosure moratoriums were hailed as a necessary measure to prevent widespread homelessness but many have criticized the program for kicking the can down the road. In Palm Beach County, hand in hand with the moratorium is the rental assistance program, which helps those in financial hardship pay back-dated rent. After having been due to expire at the end of July, a new eviction moratorium was instituted at the beginning of August for counties impacted by the delta variant, which applies to all counties across Florida. Householders and renters are finding access to these funds to be extremely difficult, however, and the Opportunities for Utilities and Rental Assistance Program was found in August to have distributed just 2% of the $870 million in federal rental assistance it has available. Outlook The question on everyone’s mind is whether or not the market’s momentum will last. According to one of Florida’s biggest real estate investors, Jeff Greene, the answer is no. The property mogul, who owns a portfolio worth about $2 billion, says prices are inflated and should see a flattening when New York and Los Angeles residents return to their primary homes come autumn. Other real estate investors say that the inflation in prices is buoyed in part by the Top 1% seeking beneficial tax arrangements, a trend that was accelerated by – but notably not started by – the pandemic. But for Greene,
Rents in the West Palm-Boca Raton area average $1,180 for a one-bedroom, above the U.S. average Palm Beach County is still a pillar for investment. The entrepreneur is building two 30-story mixed-use towers at a cost of $250 million. Despite the concerns of some, Palm Beach County’s residential real estate market shows no sign of slowing, especially as demand heightens and supply continues to tighten. For sellers, this is excellent news but for buyers, it means all-cash offers, waiving of inspections and entering bidding wars.And the supply bottleneck does not look like it will abate in the next few years as construction costs go up and the influx of people into Florida continues. Construction landscape The high demand for residential real estate witnessed in 2020 and 2021 had a knock-on effect on the construction sector, while the raw materials shortages and higher prices in turn played their part in pushing up real estate prices. Although bid prices for construction projects have
Jay Parker CEO – Douglas Elliman Florida Region President – Douglas Elliman Development Marketing, Florida I think we’re in the early innings of a doubleheader that we’re winning. As it relates to the real estate market, I think we’ve got a long, strong ride ahead of us. As it relates to the Florida economy, if you’ve got more wealthy people moving here,what are they going to do when they get here? They’re going to spend money. They’re going to spend money on everything you can think of, from cars to food to school and anything and everything in between. Employment will go up all around. Every part of our society should swell as the wealthy demand more and better services. It is a discerning clientele that is making this place their home and from my seat that is good for Florida.
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Thomas Frankel Founder Frankel-Ball Realty Group
What changes in demand have you experienced and what are the emerging trends in the market? I’ve been doing this for 36 years and what happened in the pandemic is unheard of. I don’t think this pentup demand for real estate will ever happen again in my lifetime. I don’t know what kind of correction we’re going to have but the run-up in place is unheard of. Properties have doubled in value in many of our markets during the last 24 months, and that has created a whole new set of problems. First of all, many buyers are hesitant to pay these prices. Secondly, it’s hard to get sellers to sell their homes because they don’t know where they’re going to move to. The next 12 months will be dramatically lower in sales volume due to inventory shortages. We are trying to deal with this issue but it’s not solvable right now. Are you tracking any economic indicators that might affect your services? Inflation has been as advertised. Workers are able to demand a much higher value for their services. Materials, light steel and concrete, air conditioning equipment and appliances are in demand and more expensive than they were six months ago. Therefore, we track inflation and interest rates. The big correction in real estate will occur if there is a correction in the equity markets and with interest rates. This market cycle is so much different than what I’ve experienced in the past because there’s no inventory. A correction usually happens when there’s abundant supply and lack of demand but we have a lack of supply and still have demand. The wealthy have benefited dramatically from the pandemic. The amount of wealth created through the equity markets in the last 18 months is incredible. What is your near-term outlook? We can’t replicate what has happened in the past 18 months but North Palm Beach County is a jewel, it’s where people want to be. The next 24 months should continue to be good for our industry. 70
| Invest: Palm Beach 2021 | RESIDENTIAL REAL ESTATE…
2,427 permits for dwelling units were issued in 2Q21, up 68% versus 2Q20 risen marginally by about 3.4% since mid-2020, the cost of construction inputs has surged by about 26.3% in the same period, complicating the situation for contractors, according to The Associated General Contractors of America. As prices continue to rise, compounded by supply chain issues, it is becoming almost impossible for contractors to provide accurate estimates for projects that will be completed over the course of several years. Residential trends Employment in the West Palm-Boca Raton-Delray Beach area’s construction sector continues to recover from the impacts of COVID-19. As of July, employment was estimated at 38,400 jobs, the highest level seen since the end of 2019. At its peaks in August 2019 and December 2018, the sector employed 39,000 people. However, the sector has said that employment remains muted given that June is typically the beginning of peak construction season and skilled labor is particularly hard to find, according to a poll carried out by the US Chamber of Commerce. About 43% of contractors surveyed said they experienced moderate difficulty finding skilled workers and about 45% said they experienced high difficulty. About 35% said they had to turn down work as a result. It is not just labor shortages that are complicating the situation for the construction sector but also material shortages caused by the COVID-19 pandemic’s impact on the global supply chain and exacerbated by continued restrictions on movement. A report by JPMorgan found that current supply chain issues represent an “unprecedented” non-recessionary collapse. As well as restrictions on staffing globally, container shortages have also been reported and delays in transport times have all weighed on the situation. Amid all of this, demand increased in the second quarter of 2021. For many developers, new guidelines are another issue, one that could slow the pace of new development. One such regulation is a new proposal to inspect certain
RESIDENTIAL REAL ESTATE & CONSTRUCTION OVERVIEW
buildings within the county if they are older than 25 years due to the effect of salt water on buildings. This is in the wake of an apartment collapse in Miami that killed 98 people. City officials want the inspections to apply to buildings with at least two stories, not just high-rise “threshold buildings,” they said. Another new issue that the construction industry is keeping its eye on is the proposal by the Palm Beach Town Council to modify working hours. The new rules would require quiet work from 8 a.m. to 9 a.m. on a year-round basis, not just during the peak season and workers would be prohibited from arriving at construction sites before 7.30 a.m. Saturday working hours would be eliminated during winter months. Market performance Developers are working hard to keep up with demand. As of April, there were about 111 projects in Palm Beach County that were either unbuilt or under development and within these projects, there were around 22,000 units remaining. The total area under development spanned about 127,300 acres. According to county records, permits were issued for 2,427 total dwelling units in the second quarter of 2021 – 1,152 of which were single family and 1,275 of which were multifamily. This is up 68% on the second quarter of 2020 in terms of number of units and up almost 75% in terms of value. The vast majority of the single-family units were located in Palm Beach County’s unincorporated area, followed by Westlake with 232 single-family permits and Palm Beach Gardens with 79. In terms of multifamily units, the largest development is in West Palm Beach
According to a study by Unacast, Palm Beach County received approximately 11,000 new residents in 2020.
Lesley Deutch Managing Principal – John Burns Real Estate Consulting Palm Beach County is a large and growing housing market. I believe the real estate sector will be difficult to predict moving forward. Palm Beach County, like the rest of the US, has experienced a massive increase in demand and home price appreciation, and supply has struggled to keep pace. Over the next few years, the real estate market will be dynamic; Palm Beach County is a popular destination and net-migration has accelerated by the pandemic. Palm Beach County is still attracting retirees but also becoming a place where young professionals want to move and reside. We have an opportunity to change and diversify our economy. It’s time to take advantage of this opportunity.
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RESIDENTIAL REAL ESTATE & CONSTRUCTION OVERVIEW
opened in 2019. And in Palm Beach Gardens, Kolter Homes is constructing a mixed-use development that combines residential buildings with commercial and retail spaces. The site will be made into a community with clubhouses, recreational areas, lakes and parks, all just off the I-95.
In the 16 months to July 2021, there have been 22 sales of $40 million or more in Palm Beach County.
with 503 units, followed by Boynton Beach at 326 and Lake Worth Beach with 232 permits. But the figures show that the year started out a little rockier. In the first quarter, only 1,672 total building permits were issued in the county, down 32% on the first quarter of 2020. Single-family permits increased by 24% year over year to 1,172 but multifamily permits contracted by 67% in the period to 500. The majority of both single-family and multifamily home permits in the first quarter were granted in the Palm Beach County unincorporated area. There are also several upscale new developments underway. The 41-unit Forte building is going up on Flagler and offers four- and five-bedroom apartments starting at $4.9 million. La Clara, which is due to be completed in 2023, is already 60% sold on its residences, which range from $2 million to $9 million. Both buildings followed in the footsteps of super-high-end The Bristol, which
Looking ahead Despite a positive upward trend in activity and unprecedented demand, Palm Beach’s construction sector is feeling the burden of increasing materials costs, a scarcity of labor, tightening building regulations and the uncertainty that comes with a global pandemic. According to a survey by the National Association of Home Builders carried out in August, the monthly confidence index fell 5 points to 75, representing its lowest level in 13 months. But there is room for positivity too. Only 86% of builders surveyed in August said they had increased base prices in July, down from 94% the previous month. And raw materials prices are expected to come down in the second half of 2021, according to Anirban Basu, chief economist for Associated Builders and Contractors. Palm Beach County’s home prices are unlikely to drop anytime soon, as demand outstrips supply. But it is important that the authorities ensure growth is equitable. Economic growth not only requires billionaires but also service workers and those earning minimum wage. If they are priced out of the housing market in Palm Beach County, the county could come up against a roadblock in its economic growth. A delicate balance between workforce and affordable housing and the ultra-luxury high-end apartment buildings must be struck.
Commercial Real Estate & Construction: If 2020 was a year of uncertainty for commercial real estate, 2021 has been one of recovery, with the industrial and multifamily segments leading the way. While the fate of the office space remains an open question, the signs signal a rebound. But construction in the commercial segment faces the same daunting challenges as in residential: higher costs and a workforce shortage.
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As strong as ever: Commercial real estate has momentum on its side with little to hinder its progress After a brief, uncertain pause during the first months of 2020’s COVID-19 lockdowns, Palm Beach County’s commercial real estate market has been as strong as ever. The momentum has continued through the first half of 2021. Industrial space remains robust, spurred by the e-commerce boom, with an average transaction size of 5,700 square feet in the first quarter at a value of $13.10 per square foot. The big question mark, of course, is office space. Although there is widespread disagreement over the future of the office, developers are pushing forward with their plans for the segment. Palm Beach County had 125,000 square feet of active office requirements as of the first quarter and new proposals for office blocks are being submitted. Landscape Commercial real estate used to be seen as a relatively safe investment. Demand for office space and industrial units continued to grow steadily and, although there was a lack of new malls being built, large mixed-use projects drew considerable interest. Some experts thought the pandemic spelled the end for commercial, social spaces and office buildings, especially after the 74
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country proved it was able to work remotely during the lockdown months of 2020. But as the pandemic wore on, it became clear that this could provide an opportunity for counties in South Florida and across the Sun Belt. As people began to evaluate their living standards, many in the Northeast and in Canada began moving to Florida, making it their main primary residence. It was no surprise then when the jobs began to follow. In Palm Beach County, in particular, several companies such as Elliott Management and Citadel Securities have relocated to the area. According to the mayors of Boca Raton and West Palm Beach, there are increasing levels of interest in relocation from venture capital, private equity, hedge funds and other financial services companies. One of the biggest relocations of the year was at the end of 2020 when banking giant Goldman Sachs announced it would move its asset management firm to West Palm Beach. The appeal of Palm Beach County never faded, and this is reflected in its property values. This July, it was reported that overall property values had reached $28 billion, up from $24.7 billion in January. The value of total residential and commercial construction was $328.65 million, according to the County Property ( )
COMMERCIAL REAL ESTATE & CONSTRUCTION INTERVIEW
Mixed use These developments aren’t for every community but in the right circumstances they can be dynamic
David Warne COO – Penn-Florida Companies
What strategies did Penn-Florida Companies employ to overcome the challenges related to the pandemic? Penn-Florida Companies has been headquartered in Boca Raton since 1987. The fact that we are located in South Palm Beach County allows us to be nimble and flexible in our business. We benefit from close relationships with our vendors and our tenants. Our best pandemic strategy was listening to people’s concerns and responding as best we could. How is demand for your properties holding up? We’re focused on completing Via Mizner, a $1 billion mixed-use project in Downtown Boca Raton. Some of our resources are allocated to finishing the final two phases of this luxury three-phase project. In the next 15 months, we’ll be completing the Mandarin Oriental Hotel & Residences as well as launching our Via Mizner Golf & City Club membership program. The invitationonly membership to Via Mizner Golf & City Club allows members to play the newly completed Jack Nicklaus Signature golf course. Mixed-use projects require certain key elements to be successful; they are not necessarily a solution for every community. However, in unique locations, delivering a mixed-use project can be dynamic. Location and demographics are key as well as understanding the local market and properly programming the lifestyle offering for that specific community is very important. How is the influx of new residents changing the market and how is Penn-Florida capitalizing on that trend? We’re headquartered in Boca Raton and the recent migration to our community is unprecedented. Palm Beach County’s population has grown almost 10% during the past 10 years. I think we’re well-positioned with our existing portfolio and those properties we’re
planning to develop in various locations across South Palm Beach County. What is your near-term outlook? We’re cautiously optimistic. The migration to Palm Beach County benefits not only real estate but business owners, restaurants, retailers and the whole community; everyone feels fortunate to be living and working here. The migration and demographics will continue to improve for the foreseeable future and create many opportunities for people living and working in Palm Beach County. We’re focused on continuing to execute and operate our businesses well. Our business plan looks quite compelling and our challenges appear more tactical. Our portfolio strategy, with today’s migration, is timely but we have to execute and deliver the services, lifestyle, products and the quality that people expect. www.capitalanalyticsassociates.com
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Bradley Scherer Founder & President Atlantic Western Realty Companies
In which neighborhoods is growth concentrated? From a pure price appreciation standpoint, I think the appreciation of residential values on the island of Palm Beach standout. There was a recent story in the paper about the Tarpon Island property that reportedly is under contract to sell for more than $80 million. My firm had the listing for Tarpon Island in 1993-4 at the time for less than $6 million, which translates into close to 40% year-over-year appreciation for 30 consecutive years in a row. That being said, no region in Palm Beach County has underperformed in this cycle. Every area is doing great. The rising tide has lifted all boats What factors could hamper or slow growth? What we’ve seen in certain asset classes is the aggressive influx of new capital looking for deals. The office sector is one of those areas that has received a disproportionate amount of new investment. But the office fundamentals have somewhat lagged investment activity. We believe buyers of office buildings may have gotten ahead of the underlying occupancy and lease markets in their rush for an investment opportunity. I think the fundamentals need to catch up to investment values. When you say the fundamentals need to catch up does that mean the market is in a bubble? In Downtown West Palm Beach, the class-A office vacancy rate is 36% but at the same time, asking rents have never been higher. So with the highest prices ever paid for buildings, something has to give. Either many more tenants are going to have to pay a lot more in rent or investments that have overpaid are going to underperform. Is it a bubble? I don’t know but something has to give. I’ve been doing this for a long time. Good times don’t last and neither do bad times. What could spoil the party? Much higher inflation in construction, labor and material costs, as well as perhaps new federal taxation policy (if some of the proposals that are being considered at the federal level get enacted), including elimination of the 1031 exchange rules. 76
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Constructing vertical structures is one of the strategies used by developers in Palm Beach County to mitigate land scarcity.
( ) Appraiser’s Office. This has led to a significant $1.5 billion hike in total taxable values to $21.56 billion. About 8% of the taxable value is made up by commercial properties and 5% vacant land. Multifamily properties contribute about 22% but single-family homes pay the lion’s share at 64%. According to the Realtors Commercial Alliance of Broward, Palm Beaches and St. Lucie, if people continue to move to Palm Beach, demand for amenities, including office spaces, retail and industrial, will also strengthen. Supply is so low for commercial properties in Palm Beach County that several small businesses face the prospect of significant rent hikes of up to 50%. Neighboring St. Lucie County has about 5 million square feet of commercial property that is due to break ground by the end of 2021 although problems in the construction sector, which include shortages of labor and supplies, could complicate the situation. The picture is not all rosy, according to Colliers. The retail sector in Palm Beach County is “strained,” according to the agency, with a 50-basis point quarter-
COMMERCIAL REAL ESTATE & CONSTRUCTION OVERVIEW
over-quarter increase in vacancy rates to 4.9% in the second quarter. Negative net absorption during the quarter was 289,840 square feet. But for some, mixed-use projects provide just the right amount of risk and reward to incorporate retail space into new developments. Lineaire Group, Capstone Equities and Max Ducharme are proposing a massive mixeduse project next to the Brightline station in Downtown West Palm, which will feature 2,457 square feet of retail alongside 180 apartments and 130 hotel rooms. Office market According to Quantum Realty Investors, Palm Beach County was one of the few markets that experienced positive net absorption in the first quarter, to the tune of 27,851 square feet. It was also the 17th-most active market in terms of office acquisitions year to date as of June. In CBRE’s second-quarter market view, the firm says that demand for office space continues to soar in Palm Beach County. Related Group’s 360 Rosemary development is a key example of this, having filled up leasing during the period after minimal pre-leasing just a year ago. And the fundamentals look good for office spaces. Palm Beach County’s total unemployment rate came in at 4.8% in July, still above its pre-pandemic 3.3% in February 2020 but well on its way to recovery from the double-digit peaks seen during the height of the pandemic. As part of that rebound, office-using professions have added 9,500 jobs in the last 12 months, according to Cushman & Wakefield. New leasing activity through the second quarter reached 928,000 square feet, which is up 39.8% on the first half of 2020. The most in-demand asset class is class-A office space, having leased about 457,000 square feet, likely due to the new “COVID-19 technology” incorporated, including touchless entry points, state-of-the-art air filtration systems and open floor plans. The average asking office lease rate in Palm Beach County is $27.51, although this varies greatly among submarkets. For example, in West Palm Beach’s CBD, this number increases to $42.15, while in Delray Beach and Boynton Beach, it falls to $19.23. The total vacancy rate is 16.2% of the total 19.75 million square feet of inventory. Meanwhile, 184,400 square feet are under development. Many of the biggest transactions have been new-to-market clients, including Goldman Sachs, Elliott Management and Sanders Capital, which has rented out 16,800 square feet in Philips Point East. NewDay USA also rented 53,324 square feet of space at 360 Rosemary. Many are so convinced that the office market is not ( )
Perspectives: Monitoring market trends
Dilip Barot President & CEO – Creative Choice Group The housing market’s behavior will depend on various factors, the most significant being interest rates. If inflation picks up, interest rates will go up. If the overall economy remains strong, people will be interested in investing money, in buying houses and improving their quality of life. Development costs will also play a major role down the line.
Robert Hamman Managing Partner, Palm Beach – SVN Florida Commercial Trying to find a restaurant or office space in the Jupiter market and in northern Palm Beach County is extremely difficult. Often, real estate does not even go to the market anymore. Properties go that fast, especially the high-end properties like industrial, restaurants and office space.
Randy Lebolo Owner – Lebolo Construction Management
The old way of doing business with a piece of paper is gone. Now, you’re wasting time and money if your systems are not completely digitized where you can review everything on a screen and can email that or take a picture and send it to the architect so they can resolve an issue within seconds.
Robert Primeau President – Florida General Contracting Corporation The idea of modifying and revitalizing existing housing stock is always good but it has not been undertaken at a level to meet future demand. Existing markets show high demand for the housing that is out here today, except much older segments — assets built in the 1960s and before — that have gone beyond an expected useful life and become obsolete.
Brian Sudduth President – Miller Construction Company We’re building facilities right now that have miles of conveyors that run hundreds of feet per minute. We see distribution companies not relying on manned forklifts but unmanned forklifts, robots. When you start having all those components, many of the buildings that we’ve traditionally built can facilitate this, but it can be better facilitated if it’s planned upfront.
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®
oundtable:
Commercial landscape Leaders in commercial construction and development discuss tackling the industry’s most daunting challenges and what this could mean for their business moving foward.
Dale Hedrick
CEO Hedrick Brothers Construction
How did Hedrick Brothers Construction fare throughout the pandemic? We had to reinvent our operations and lead by example. Senior management showed up every day as we helped ease employee’s pandemic fears. One of the biggest challenges was spreading people out in the tight construction environments. We had to be strategic with getting workers to the project sites. When other companies in different markets saw major delays in construction deliveries, we were able to finish our projects on time. The supply chain has been disrupted throughout this time. The Colonial Pipeline and the Suez Canal incidents are examples of how quickly the supply chain can be disrupted. Given the unemployment benefits from the stimulus packages, many factories do not have the workers needed to open up, which in turn adds to the increase in material costs. For Hedrick Brothers Construction, not a single job was late or over budget. We were challenged but we overcame every challenge. How is technology helping reduce project costs? Owners want a seamless transition from design to construction without surprises and with accurate market information and cost proposals to save time and money. Preconstruction services provide the ability to only go through the design process once. Virtual design and construction is the technological tool and process utilizing Building Information Modeling, which allows the team to envision every element of the structure and to predict and resolve potential issues by making smart decisions early during design and construction. We’re doing many projects with this type of technology. It’s a flawless system. 78
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Rex Kirby
President Verdex Construction
What successful strategies did your company implement to manage COVID-19? As an essential business, we were able to keep working. We put in a great deal of effort to make sure we were doing business the right way so we could stay open and operational. We learned how to distance people and keep them safe on job sites. Coming out of this pandemic, we’ve seen that there is plenty of money out there and people are looking to invest in real estate, both on the capital and the equity sides with banks offering low-interest loans. The challenge is getting supplies and materials in all areas. There is only so much people will spend on rents so the project has to be financially feasible for developers. We’ve had to work around getting material and figure out ways to work with the client and do our best to reduce pricing so that projects can move forward. How is commercial real estate faring? I’ve started to see more retail come back. We have a special projects group that does a lot of interior build-outs, renovation and additions. We’re doing a lot of work for the landlord Related Group at Rosemary Square. Related is almost switching out its entire tenant base with all new restaurants and shops, so they are refreshing the whole complex to update it to today’s conditions. The office market in West Palm Beach and all the way through Miami has been on fire, post-pandemic. Primarily from hedge funds and financial groups that decided they could leave New York so the floodgates opened. There are at least three more buildings planned to go up as office space. This is after people thought nobody would come back to work but there is a lot of demand in this area.
COMMERCIAL REAL ESTATE & CONSTRUCTION ROUNDTABLE
Alex Rosemurgy
CEO Rosemurgy Properties
What strategies are you seeing in the market to mitigate the consequences of land scarcity? Given the natural barriers to entry in South Florida from the ocean to the Everglades, the need for urban infill will continue. If you can’t go out, you have to go up. Creating better connectivity and walkability will be more and more important. Also, ensuring communities continue to maintain adequate and well-programmed outdoor recreation spaces will become more critical as land becomes scarcer and land values continue to increase. What is the outlook for your company and the development sector in Palm Beach County? The skies have never been bluer than they are today. We are always looking for new opportunities in our market. But, we must carefully navigate this new world we are living in. I have come to learn that the next economic downturn could be around the corner and to never get lulled into thinking otherwise. We face challenges of land scarcity, so finding opportunities to develop can be difficult, and once we find them, they take significant time to entitle and develop. Our business is cyclical, time isn’t always our friend. The real estate market is hot right now, which leaves us wondering how long will this last? How will that impact our company? Where are we in terms of development deals? We’ve been very lucky during the past year coming out of the pandemic. We were in the right market and our developments were well received in the marketplace. We are very fortunate that South Florida has done so well and we’ve been a huge beneficiary. We hope it continues and that the migration into South Florida continues to change the dynamic of the area for the better.
Zach Young
President Kast Construction
What supply chain difficulties have you encountered? Right now, the supply chain is the No. 1 challenge being faced not only by Kast but by our industry. This includes everything from extended lead times, allocations and availability of material, and cost escalation. With the exception of lumber, we believe the current escalation trends will subside as we head into the second half of 2021. We believe the lumber market has a long way to go, more than a year, until pricing comes back to historical norms. For KAST, this is an opportunity to capitalize on the strong relationships we have with our trade partners and supply chain partners. Pre-planning the work has never been as important as it is in today’s market. We have several strategic supply chain partnerships which help us mitigate the effects of material cost escalation or any allocations that occur. How has the landscape for mixed-use demand shaped up over the past year? We watched the rent collection and occupancy numbers very closely once the pandemic hit, and those numbers held strong month after month. At that point, it was clear that the multifamily sector was going to be the bestperforming asset class, along with industrial. Multifamily has always been one of our core sectors, comprising about 65% of our projected revenue for 2021 and 80% of our sales in 2021. Currently, we have a very healthy pipeline 85% of which is comprised of multifamily or mixed use projects. We believe that we are heading into the golden age of multifamily, as there will be a tremendous amount of capital invested in the sector. www.capitalanalyticsassociates.com
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COMMERCIAL REAL ESTATE & CONSTRUCTION INTERVIEW
Pressing needs Utility infrastructure — potable water, sewage collection, roadways — plays a big role in investment return
Rick Reikenis President – Reikenis & Associates over the course of my career. Understanding the economic situation of these different places is key to understanding what is possible in terms of development. As well, you need to understand what the client needs and wants. I like working in developing economies. While there is a certain amount of chaos, you can still get things done. What factors are you keeping an eye on going forward? I happen to be the chair of the Chamber of Commerce of the Palm Beaches. We’re very in tune with what’s coming down the pike here in terms of investment. I’m also the chair of the West Palm Downtown Development Authority. We’re tracking a lot of things coming through here. On the transportation side, something like Brightline getting back on track is absolutely huge. Once that is properly up and running, it will be a huge added value to the Palm Beach economy.
What are the most pressing utility infrastructure needs in Palm Beach County? What we find is that the basic utility infrastructure for potable water distribution, sewer collection, roadways and parking, and working all of that into a piece of property so that it works and you get money out of your investment — remember, land is at a real premium right now — is a big deal. If there’s a piece of property in Palm Beach County that hasn’t been developed yet, it’s because it has big problems. But the economic equation has changed and it is now worth tackling these problems to develop a piece of property. How does your international work compare to the work you do locally? From Eastern Europe to the Middle East to the Caribbean, I’ve consulted on utility infrastructure in many places 80
| Invest: Palm Beach 2021 | COMMERCIAL REAL ESTATE & CONSTRUCTION
How are labor shortages affecting your industry? While labor shortages are affecting the economy, we haven’t run into that as much in our sector. In my industry, we were always fairly up on computer communication. As a result, labor shortages weren’t an issue. With Zoom, we were able to have our people work from home without a problem. In the hospitality business in West Palm Beach, though, the staffing level is simply not there. What is your near-term outlook? The rest of 2021 is going to be a very good year. I keep waiting for things to slow down a bit but we keep getting new work. I’m thinking 2022 is going to be a good year. I’m a little hesitant to forecast beyond that. It’s nice to remember that, in this country, there is a lot of money being put into infrastructure. It’s hard to ignore that and it’s something that can be a harbinger for good things in the economy.
COMMERCIAL REAL ESTATE & CONSTRUCTION OVERVIEW
( ) redundant that they are making substantial bets. Grover Corlew, a South Florida-based real estate investment management group, recently spent $45 million on the Bank of America tower in Downtown Boca Raton. Clematis Banyan Investors has expressed interest in building a 12-story office block with 100,000 square feet of office space in West Palm Beach. And Boca Raton-based Morning Calm Management recently acquired three office buildings in Downtown West Palm Beach for a total of $54.17 million. In other relocation news, Steven Cohen’s Point72 Asset Management will open a 45-person office at 360 Rosemary and investment management firm Wealthspire Advisors will set up shop in Boca Raton. And more companies are coming in from the Northeast. Another financial services firm, Virtua Financial, is relocating to Palm Beach Gardens from New York City, bringing with it 50 jobs paying about $165,000. Colony Capital also announced it will relocate its global headquarters from California to Boca Raton. Coming in from New Jersey is national consultancy The Boyd Company, which opened a new office in Boca Raton this year. Industrial Industrial real estate in Palm Beach County has been gaining momentum for several years but the pandemic propelled the sector’s activity and value to new heights. And Palm Beach County’s already established logistics and e-commerce sector helped it mitigate the spike in unemployment seen at the beginning of 2020. Not only this but the Port of Palm Beach is the fourth-busiest container port in the state and the 18th-busiest in the country. Strong e-commerce trends and dwindling
Total industrial inventory in Palm Beach County is 48.8 million square feet availability of space continue to support strong market fundamentals. The total industrial inventory in Palm Beach County sits at 48.8 million square feet, with a vacancy rate of 4%, according to CBRE. What’s more, the average price paid for industrial land was $975,000 per acre and the firm says this is fast approaching the $1 million mark. The greatest amount of industrial space is located in West Palm Beach, followed closely by Riviera Beach. Wholesale and distribution space has seen the highest vacancy rate year to date at just under 5%, with R&D and flexible space sitting at 2.4% and manufacturing at just under 1.7%. This means manufacturing space can command a premium over other industrial subsectors. Average asking rents for manufacturing facilities is $6.45, compared with $13.12 for flex and R&D space and $9.72 for warehousing. Property developer Minto Communities is mulling a 50-acre mixed-use business park in Westlake containing retail, restaurants, offices and industrial space. A local
Angelo Bianco Managing Partner – CP Group
West Palm Beach is seeing more demand due its proximity to Palm Beach, which is home to some of the world’s most affluent people. Boca has a more varied workforce, with larger employers and more technology and life-science-based businesses. It is more entrepreneurial. Palm Beach is mostly finance, law, accounting, wealth management and private equity. Those two markets are in essence Palm Beach County but Boca Raton’s 11 million square feet of office space is more than all the office space in Palm Beach and Palm Beach Gardens combined and doubled.
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Morley Greene Chairman & CEO Trez Capital
What was Trez Capital’s approach to lending activity during the last year? I started Trez Capital in 1997. I raised $3 million from investors and since that time we have funded over $12.5 billion in loans. We have seven offices, 150 employees and nearly $4 billion in assets under management. We have over 24,000 investors. One advantage of having been in this business for as long as I have, is that you have a lot of experience. While we have not had a pandemic before, we have experienced other challenges. At the onset of the pandemic, when we realized that things were going to be unpredictable, we decided to stop lending. Something was going on out there and we did not know the severity of it. I’ve learned over the years that whatever I plan for is never the problem, it’s the things I can’t control or can’t foresee that become problems. Last year, I thought we might have a lot of defaults but we had no defaults. I thought we would not have loan payoffs, but we had a record number of loan payoffs. So, all the trouble we thought we might have, did not happen. As a result, we came through the pandemic in good shape. Now, we are back lending in full force and once again raising investor capital. How would you compare the COVID crisis with the recession in 2008? When it comes to the pandemic and the financial crisis, you can’t compare them. 2008 was a disaster. Property values dropped dramatically, especially residential. The aftermath of the pandemic may not be written just yet. We need to wait three or four years as interest rates start going up. That is when we’ll likely see what happens with those who took on too much debt. What is your near-term outlook? We see more of the same. With a focus on multifamily residential, single-family housing, industrial and limitedservice hotels. If rates stay low, people will continue to buy real estate and Florida is well-positioned to take advantage of that coming growth. 82
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developer is already under contract to purchase 5.8 acres for a self-storage facility and an additional 17.5 acres is intended to house a flex office-warehouse space. Amazon also announced new investments in Coral Springs and Riviera Beach with new delivery stations, as well as a new fulfilment center in Jupiter. And selfstorage company Value Store acquired two self-storage facilities totaling over 252,000 square feet for $35.3 million. During the year, there were also some notable rezoning developments in Palm Beach County’s industrial sector as existing land availability tightened. A proposal was submitted to rezone a 7-acre plant nursery west of Boynton Beach for industrial use. The rezoning will allow around 136,000 square feet of light industrial space. An agricultural reserve located in Delray Beach has attracted the attention of New York-based Kushner Companies to be potentially re-zoned for distribution. And in February, Vecellio Group submitted a proposal to rezone a 32.8-acre site west of the Florida Turnpike from commercial to industrial space. Multifamily Apart from single-family homes, multifamily in Palm Beach is perhaps the county’s most dynamic asset class. After a few months of uncertainty following the onset of the pandemic, at the end of 2020 the market began to achieve near-record levels of sales once again. The county recorded the second-highest ever per unit sales at $170,000 after a year during which sales totaled $650 million. Deal volume slowed because of lower availability and the majority of sales are shifting to new buildings constructed in 1980 or after. As of the end of 2020, the occupancy rate in Palm Beach County’s multifamily market was 92.2% and there was an inventory of 61,480 rentable units. Across South Florida, Cushman & Wakefield said in their 2021 forecast that they expect delivery of 14.8 million new units, which will then slow to just 8.3 million in 2022 and 1.6 million in 2023. As of the end of 2020, there were 19 apartment buildings under construction in Palm Beach containing 4,984 units, the largest of which is Boca Dues with 354 units, followed by Town Lantana II with 340 units. Although the firm expects urban units to underperform in 2021 and 2021, it says over the five- to seven-year term, they will overperform. The picture looks much the same in 2021, except supply is tightening. Higher completions and a lower vacancy rate than 2020 have left sales prices relatively flat but it is pushing rental prices up to average effective rates of just under $1,900. This marks a significant increase year over year and about a $2,000 bump on 2020 average rates,
COMMERCIAL REAL ESTATE & CONSTRUCTION OVERVIEW
David Blatt CEO – CapStack Partners At the beginning of the lockdown, everybody had a panic attack because they thought we were going to see a meltdown in capital markets like what we saw in the last recession. This time around, the government was better prepared, institutions were better prepared. From the standpoint of the capital markets, we bounced back strongly and so much faster than a lot of people expected. What we’re seeing now is that better projects and better investments have no shortage of capital. It’s just the function of who the right capital partners could be for a given project or platform. Our understanding of the players in the capital markets gives us a good vantage point to be able to direct people who are looking for money in the right direction.
according to Marcus & Millichap. On a country-wide basis, Quantum Realty Investors says that acquisitions of garden or low-rise buildings with less than four stories rose 68%, accounting for 79% of total acquisitions as of June. Delinquency rates also continue to fall, with multifamily properties recording a rate of about 2%. In West Palm Beach alone, around 6,500 units are either under construction or in the lease-up phase, all of which are expected to be completed by the end of 2022. Several transactions have taken place in 2021 that show the strength of the multifamily market this year. In March, real estate firm Colliers began to market a multifamily portfolio of 11 one- and two-story buildings containing two to 14 units on behalf of owner Reijo Lahteenmaki. The asking price of $12 million is equivalent to $147,840 per unit. And in August, Avanti Residential announced its acquisition of a 341-unit class-A apartment community known as 500 Ocean for $105 million. The Boynton Beach property is 98% leased and marks the firm’s first multifamily investment in the region. In South Florida’s priciest sale of 2021, Cortland acquired Residences Uptown Boca for $230 million this August. The development contains seven buildings with 456 apartments and spans 38 acres on the outskirts of the Everglades. Real estate investment Developers are not the only ones eager to get multifamily projects into Palm Beach; authorities are also keen to increase density. In Lake Worth, the Beach City Commission recently approved a 27-unit multifamily project that forms part of a larger mixed-use project with retail, office and green space. Developer Deco Green
is proposing to build four buildings across 2.3 acres alongside a 20,000-square-foot landscaped courtyard. The same municipality approved a 230-unit multifamily development in May that includes four residential buildings with a height of between three and five stories. The Advantis project is already under contract for sale with Prospect Real Estate and is set to bring in rents of between $1,275 and $1,850. And another multifamily mixed-use development is going up on Lake Avenue in Lake Worth, which is set to provide 200 units, 44 of which will be workforce housing. The development will feature a pool, lounge and co-working space and is expected to complete in summer 2022. But some local authorities are less keen to approve multifamily properties. In May, the Boca Raton City Council turned down a proposal for Liv on 5th, a student housing complex connected to Florida Atlantic University. The four story, 546-bed development was intended to provide students easy access to the university while also accommodating the growing student population. It was rejected by authorities who said the building did not fit into the area. Concerns included increased traffic and the size of the development. Another project in danger is the proposed conversion of the Forest Oaks golf course in Lake Worth into a 450-unit residential complex. There is opposition from the Lake Worth Drainage District (LWDD), which contests the filling in of a LWDD canal. Financing trends There is an abundance of liquidity and “cheap money” in the market as a result of the federal government’s $6 trillion in stimulus and support packages, meaning ( ) www.capitalanalyticsassociates.com
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Market voices: Architectural minds
Rick Gonzalez
President & Principal Architect REG Architects, Inc.
We’ve upgraded all of our computers and use them to draw buildings three dimensionally (Revit). Out of 22 people, maybe one or two worked remotely once in a while. We’ve expanded that to senior management but we did keep the junior people in the office to receive guidance. Architecture is a field of heavy interaction between principal senior project managers and junior people and they really need to have that “one on one”. Our office environment is incredibly clean now, it has larger work stations and conference rooms. We have access to remote computers. The whole way of how we do business has forever changed.
The demand for design services ebb and flow over time attributable to ever-changing market influences. In addition to our national expertise, our Palm Beach County studio specializes in numerous markets including hospitality, public/institutional, higher education, residential, senior living, corporate/commercial, and food/distribution/manufacturing. During the pandemic, higher education and hospitality markets were hit exceptionally hard. Ironically, hospitality has rebounded as new hotel and resort projects are flourishing as are residential and corporate commercial projects.
Mark Smith
Senior Vice President, Architecture, Director of Florida Operations GHP, Inc.
Vice President & Managing Principal LEO A DALY
In retail, you see a lot of old and tired strip malls being repurposed. One of the better examples of this was actually not in our market but in Nashville when Vanderbilt University took over a mall that had been constructed in the early 1970s. It was one of the first malls in the market, and it succumbed to the economic downturns that have threatened retail. Vanderbilt came in and made it a large medical office building with outpatient services. I attended a conference with the American Society of Healthcare Engineers in Nashville recently, and one of the topics was the repurposing of retail for healthcare services.
It ties to the retail trends that are unfolding in the market. An example is a traditional retail center that historically would have a bunch of parking supporting the retail. Now, the demand in retail has changed somewhat. We’ve seen this trend where residential developers are looking at retail sites to create a mixed-use environment where you can take advantage of big empty parking lots, build residential assets and it all works really well together. The residential supports the retail and vice versa. Parking lots are now becoming fully-fledged mixed use sites from this adaptive reuse trend.
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| Invest: Palm Beach 2021 | COMMERCIAL REAL ESTATE & CONSTRUCTION
Keith Spina CEO SpinaOrourke
COMMERCIAL REAL ESTATE & CONSTRUCTION OVERVIEW
( ) that developers do not have to look far to find investment. As the value of commercial assets appreciates and banks become more comfortable with lending, there is plenty of loan activity. Commercial mortgage lender Trez Capital expects to originate over $2 billion in construction loans in 2021, with almost $800 million of that coming from the Palm Beach County and Atlanta markets. With an abundance of lenders in the market, developers are seeing favorable terms, flexible financing options and speedy execution. One of the loans originated by Trez Capital was $75.2 million in construction financing for Unicorp National Developments’ luxury 354-unit SOTA 75 apartment complex in Sarasota. Monroe Capital also allocated a $50 million construction loan to Tricera Capital this April to build mixed-use The Press in West Palm Beach. The loan was provided through the Opportunistic Private Credit group focusing on special situations. And South Florida firm Saul Ewing Arnstein & Lehr said in August that it has $250 million in financing deals in the pipeline as inward migration drives growth. Construction As the commercial real estate sector steams ahead, the situation for the construction sector has been a little different. Although it would be logical to assume construction is buoyed by the momentum of real estate and higher public spending in the first year of a new federal administration, the reality is characterized by supply chain issues, material and labor shortages and COVID-related capacity restrictions. Market performance In West Palm Beach, there is plenty of demand for
Prices of steel at U.S. mills were up 60-100% as of August commercial construction services but contractors are struggling to balance mounting costs with competitive bids to maintain margins. According to an investigation into construction costs and inflation, the United States has suffered its largest manufacturing drop since 1946 during the pandemic, which affects a slew of construction inputs, including cement, steel, doors, frames, windows, roofing, siding, wallboard, lighting, heating systems, wire, plumbing fixtures, pipe, valves, cabinets and appliances. In the case of steel, prices at U.S. mills are up 60% to 100% in the last six months, and if contractors need to rely on imported steel, they face significant wait times. On Aug. 24, S&P Global Platts assessed the price of the global benchmark Turkish rebar at $675/ton, excluding transport costs. In comparison, the same price was just $390/ton at the end of March 2020. According to the analysis, the cost of an industrial building in 2020 and 2021 rose 2% and 4%, respectively, when benchmarked against 2019 costs. For an ( )
COMMERCIAL REAL ESTATE & CONSTRUCTION INTERVIEW
Comeback After being on hold during the pandemic, the hospitality market is looking to the outdoors
Charlie Sisca Managing Member – Sisca Construction Services children — anything that they can do to bring the whole family together and preferably in an outside safe environment. With the growth of online shopping, what is the future of commercial real estate? We are seeing major changes in commercial real estate here, as online shopping and delivery services are having a tremendous effect on big box retail users. I don’t think there’s any way that the online retail trend is going to change. Also, a lot of companies that have been renting large facilities for their employees now have people that are adapting and learning how to work remotely from home and prefer such. The overall demand for office space is inevitably going to shrink and we must find alternative uses for those spaces. These spaces are going to have to be repurposed and used for services & businesses that you can’t do remotely, which may vary, from manufacturing, technical retraining, to restaurants and other personal services. How has demand for your services changed over the last 16 months and what trends are you preparing for? The hospitality industry was basically on hold for quite a while and we’re seeing now that they’re coming back to the forefront and we’re seeing a lot of activity with restaurants, a lot of activity with country clubs, and it’s all related to the exteriors. Everybody is trying to take advantage of incorporating the outdoors into their business. We’ve been seeing interesting concepts with the work of architects, designers and owners to try to bring about the utilization of their outside areas. A lot of the country clubs in South Florida have traditionally been very focused on their golf operations. What we’re seeing now, is that the entire concept and makeup of country clubs is changing. They’re looking at food trucks, outdoor movie nights, game rooms for younger 86
| Invest: Palm Beach 2021 | COMMERCIAL REAL ESTATE & CONSTRUCTION
What is your near-term outlook? I think the pure numbers in terms of new residents are telling the story, are driving our sector and will continue to drive our sector. This increase in our county’s population is going to continue to provide the fuel for expansion and creating new businesses. The challenge for us will be in finding the available property that’s properly zoned, reasonably priced and shovel-ready. Additionally, the ability to obtain site plan approvals and permitting in South Florida over the last 10 years has become increasingly and exceedingly more difficult and as a result, it takes three to four years to find a piece of property and get it to the point where we can start building on it. I think the availability of buildable property is going to become extremely slim but we are not going to feel the effect of that anytime soon.
COMMERCIAL REAL ESTATE & CONSTRUCTION CONSTRUCTION OVERVIEW OVERVIEW
( ) office building, 2020 and 2021 increases were 3.7% and 6.3%, respectively. For both offices and industrial buildings, costs are expected to reach about 109% of the 2019 benchmark. And the cost of employees plays a significant role. The cost of a concrete contractor is expected to grow 8.2% on 2019 levels by 2023, while a roofing contractor will cost 111% of 2019 rates. For electrical contractors and plumbers/HVAC technicians, the rise is 110% and 106%, respectively, between 2019 and 2023. And employment in the sector is rising. There are about 38,400 people employed in the construction sector in the West Palm Beach-Boca Raton-Delray Beach statistical area, the highest level since December 2019 and almost as high as the October 2019 peak of 39,000 workers. Despite challenges, South Florida’s construction starts more than tripled in June, with nonresidential construction up 245% year over year to $795 million. It should be noted that the comparative figures reflect the beginning of the pandemic. That being said, yearto-date nonresidential construction starts through June were up 33% year over year to $2.4 billion. Still, general contractors remain pessimistic about the outlook. According to a survey by Associated General Contractors of America and Sage Construction, 75% of contractors say projects are taking longer to complete due to the pandemic and 58% say costs have been higher than anticipated, with 46% increasing bids or contracts as a result. Around 58% had projects delayed due to the pandemic and 50% had projects canceled altogether. Seventy-nine percent of those surveyed said they are having trouble filling some or all positions. Trends The main trends for commercial construction have been driven by the COVID-19 pandemic. For one thing, industrial space is growing to make room for the rising popularity of e-commerce that does not show signs of subsiding anytime soon. According to CBRE, the average new transaction in the second quarter measured 8,600 square feet, up from 5,300 square feet a year earlier. Deliveries were limited during the quarter after over 1.2 million square feet were brought online in 2020 but with a further 1.2 million square feet in the development pipeline, CBRE expects deliveries to pick up in the second half of 2021. Not only is industrial space getting bigger but commercial spaces are also changing. Although the public started shunning the traditional mall long before COVID, now there is far more demand for open, outdoor spaces within well-ventilated shopping centers. Likewise, offices need to provide minimal contact,
Jeff Hardin Founder & CEO Straticon
How has technology transformed the industry? Over the past decade, the construction industry has seen immense growth related to how technology is used on projects. Historically, technology had limited use by field staff on projects; however, the ability to have real-time data at your fingertips has left them with no choice. Technology has provided our employees with safer sites and efficient means of communication. It now takes less time to complete their paperwork. Mobile applications have been the most beneficial product that our teams are now utilizing, along with having document storage in the cloud,allowing access from any place as long as there is an internet connection. This has been of particular importance to our clients, who can now track their project from virtually anywhere. What are the most in-demand areas? Traditionally, we’ve been busy on Palm Beach Island with new residential construction and renovations. However, over the past 12 months, Downtown West Palm Beach has seen an explosion in project starts and proposed development. This is an area that we are investing heavily in and I believe it will continue to thrive over the coming years. I believe this is important for Palm Beach County as it helps attract new populations to the area as well as encouraging people to remain here. We also recently completed a major project for the city of Boynton Beach, which has the potential to really grow and develop. What legislation do you see on the horizon that might affect your operations? Over the past 18 months there has been many interesting legislative bills passed that affected our operations. As recently as July this year, there was legislation passed governing payments due to contractors and the interest due for untimely payment. The reason I highlight this is due to the relationship between timely payments and maintaining project schedules. It is beneficial to owners and contractors. www.capitalanalyticsassociates.com
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COMMERCIAL REAL ESTATE & CONSTRUCTION OVERVIEW
In 2021, Amazon chose Palm Beach Gardens as its 22nd U.S. brick-and-mortar location smart technologies and world-class ventilation systems. In neighboring Miami, Royal Palm Companies just opened the world’s first “COVID-conscious, pandemic ready” skyscraper at Miami Worldcenter. The 55-story building comprises residential, hotel and medical space and is sure to set the tone for the rest of South Florida’s commercial construction. When designing the building, the architect included hospital-grade ventilation systems, UV robots, touchless technology, voice-activated technology, water filtration system and even antimicrobial material on all the furniture. The fact that shopping malls are no longer the social meeting point they once were is no reflection on retail space as a whole. In fact, grocery stores around the world have reported record earnings in 2020. Developers have also found that those traditional shopping centers anchored by a grocery store make malls much more successful. In July, Minto Communities sold 20 acres in Westlake for a new Publix-anchored retail and grocery center. And convenience stores are also getting a slice of
the action, with 7-Eleven converting a historic art deco West Palm Bank into its “coolest” location. Looking ahead If 2020 was a year of uncertainty for commercial real estate, 2021 has been one of recovery. Longstanding trends such as e-commerce accelerated and created an even greater need for industrial space. New trends were born that prioritized space and minimal contact, catapulting class-A office space to the top of the wish list. And people really examined their lifestyles, leading to a population influx into South Florida and Palm Beach County, bringing with them huge pent-up demand for multifamily homes. Another surprising new development came from Amazon this year when it chose Palm Beach Gardens as a location for its 22nd brick-and-mortar location in the United States, turning its entire business model on its head. It remains to be seen whether this will become a widespread trend for other companies. Rezoning has become more common in the last year as land use becomes more fluid. Old shopping centers are frequently converted into warehouse space or industrial land can be rezoned for multifamily. But all bets were off after JFK Medical Center moved to rezone its vacant property in West Palm to multifamily. Redevelopment is also the name of the game as old becomes new again. Some notable projects in Palm Beach County include Styx Promenade in the historic northwest, which involves the overhaul of shotgun-style homes into mixed-use concepts. The West Palm Beach CRA is also working to renovate music and entertainment venue the Sunset Lounge into the epicenter for a new African American cultural tourism destination.
Banking & Finance: Palm Beach County continues to act as a catalyst for banking and finance players looking to capitalize on the market opportunities and advantages the area provides, including enviable demographics, infrastructure, salaries and a growing high-net-worth population.
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Banking on growth: The banking and finance sector is consolidating a foundation that will see it go from strength to strength Not even the devastating economic effects of COVID-19 were able to slow the ascent of Florida’s banking and finance sector, which has grown unabated since 2008. In 1Q21, the Sunshine State’s finance and insurance sector GDP, which includes banking, totaled $76.31 billion, a 10.3% increase compared to 1Q20’s $69.14 billion and a nearly threefold increase to 2008’s $29.6 billion. The U.S. Bureau of Labor Statistics reported a preliminary 44,400 total professionals employed in the Financial Activities sector in June 2021, a 2.5% increase to June 2020’s 43,300. Overall, the financial sector employs 7.4% of the county’s 613,400 nonagricultural labor force. While many sectors suffered under the weight of the pandemic, the financial stimulus provided by the federal government helped bolster bottom lines in the banking sector as lenders proved pivotal in rolling out the PPP loans. For South Florida, and Palm Beach County, in particular, it also accelerated moves by top players to establish or broaden their footprint. By the end of 2020, about 30 major financial firms were going through the motions of setting up a local presence. But there were also challenges, mainly derived from the historically low interest rate environment that, while 90
| Invest: Palm Beach 2021 | BANKING & FINANCE
benefiting mortgage holders, undercut lending margins at banks and other lending institutions. Landscape South Florida’s 25 largest banks by deposits showcased a dynamic performance in 2020 with an overall $253.53 billion in deposits, a nearly 11% increase compared to 2019’s $212.49 billion. Zooming into Palm Beach County, the area’s Top 13 banks totaled $15.1 billion in assets. Among those 13, four were located in West Palm Beach: Grand Bank & Trust of Florida, Palm Beach Community Bank, Flagler Bank and First Bank of the Palm Beaches, with an aggregate $700 million in assets. Among the best performers during the PPP loan rollouts were community banks, although the numbers demonstrate the difference between these banks and their bigger counterparts. In South Florida, the Top 25 largest banks held $82.29 billion in assets, $64.13 billion in deposits and $57.8 billion in loans. In contrast, all community banks saw an aggregate $74.79 billion in assets, $57.59 billion in deposits and $52.47 billion in loans. From a workforce standpoint, the professional, technical and financial services sectors had the ( )
BANKING & FINANCE INTERVIEW
Streamlined tech Technology investment can provide an edge among customers for whom speed matters
Richard Gieseler Florida Regional President – M&T Bank What technological aspects of the bank are you most focused on? Our investment today in technology has been focused more on creating efficiencies for our customers, such as streamlining the onboarding process. Speed matters in today’s digital world. Customers demand quick responses and service levels – their time is important to them. We are wholly focused on the customer experience, looking at the way we do business from the customer’s perspective. We’re gearing our technology improvements in a very agile manner. It doesn’t take long to identify opportunities where we can improve processes and create wins for our customers. Streamlining our business with our customers, which is both an external and internal process, is key to our technology focus. Are you concerned about inflation? After over a decade of very low inflation, we’re seeing early signs of inflation within our construction real estate business. Land has become increasingly expensive, specifically driven by demand and the shortage of supply. We’re seeing spikes in the costs and delivery delays in building materials after projects are underway. These cost increases are making what would have been a sound investment more challenging. This is something that our customers are always evaluating and may delay future projects due to the market turbulence. These increased costs are being felt across many, many industries – raw materials are now more expensive, transportation costs are increasing and labor resources are scarce. All of this seems to point to inflationary pressures. It is unclear if rising prices are temporary in nature or will persist for a longer duration. How is M&T capitalizing on the influx of businesses to South Florida? These businesses are coming from the Northeast
and M&T has a strong Northeast presence. When we arrived in Florida two years ago, many native Floridians often told us that they had never heard of us. That was understandable. However, with the persistent influx of residents and businesses moving from the Northeast, we believe there is a fantastic opportunity to cultivate relationships with these new businesses in Florida with a reputable commercial banking partner they know and trust, M&T Bank. What is your outlook for the South Florida economy? I am very, very bullish on the Florida economy. With a pro-business climate, abundant access to capital and high quality of living for business owners and their employees, I see strong growth potential for the Florida market. www.capitalanalyticsassociates.com
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Daniel Sheehan Chairman & CEO Professional Bank
What was behind the decision to take Professional Bank public? There were three primary reasons driving the decision, the first of which was to create liquidity for our shareholders. Our first generation investors have been with us since 2008 and we thought it was important for our shareholders to have liquid stock. The second reason was to create further value for our current and future employeepartners. We feel the opportunity for ownership at the bank will continue to serve as a compelling attribute to attract and retain great talent. When hiring, there’s not a better alignment tool than offering the opportunity for ownership and having it listed on a major exchange. The last reason relates to potential M&A. When looking to partner with a bank through a merger, listed stock is a much more valuable currency and is a helpful form of consideration for the deal as it provides liquidity that a seller or partner might be expecting. How would you describe the state of the Palm Beach County banking and finance sector? Palm Beach County has been a popular destination for financial firms relocating from out-of-state markets. In addition to the several out-of-state banks seeking exposure to Florida, there are nonbank financial firms, asset managers, hedge funds, private equity funds or other financial vehicles that are not depository institutions. The number of depository institutions in Palm Beach County has actually shrunk over the years, while the market opportunity has expanded, which makes Palm Beach County an attractive market from a banking perspective. Palm Beach County continues to get younger and the economy is becoming more diverse. If you looked at the economy 30 years ago, it was largely geared toward real estate, tourism and local service businesses (legal, accounting and medical), without many large employers. That’s different now. Firms are relocating here bringing institutional capital formation, deal origination and the related back-office jobs. 92
| Invest: Palm Beach 2021 | BANKING & FINANCE
With 488,000 acres, Lake Okeechobee is the largest lake in Palm Beach County.
( ) strongest job gains month-to-month during the rapid recovery from double-digit unemployment, as demonstrated in Palm Beach County. As of March 2021, 86% of the 78,366 jobs lost in the county throughout 2020 had been recovered. Palm Beach County’s competitive advantages — a diversified economy, 6.5 million potential customers, a 3.1 million-strong labor force, 375,000 higher ed students in the South Florida region to which Palm Beach County belongs — were key in the decision of 10 financial household names to relocate here: Goldman Sachs, NewDay USA, Virtu Financial, Elliott Management, Colony Capital, Point72 Asset Management and Wealthspire Advisors now call Palm Beach home, added to the more than 2,500 financial service firms already operating in the area. Palm Beach County offers an added advantage to banking and finance firms in that in 2020 alone, 70,000 high-net-worth individuals, primarily from the Northeast, relocated in Palm Beach County bringing with them $36 billion to spend. The brick-and-mortar presence of South Florida’s Top 25 banking institutions experienced a dip as of June 30, 2020 compared to the year-before period, with bank branch numbers slightly decreasing from 1,306 to 1,297.
BANKING & FINANCE OVERVIEW
comers with $247.5 million on 13 loans. First Republic registered $244.2 million from 49 loans, while Wells Fargo did $152.7 million on 20 loans. The total amount of loans for the 12 months fell 9%, however.
Performance As is expected in a period of prolonged economic contraction such as that triggered by the pandemic, South Florida’s residents and businesses held on to their capital in the past year. In aggregate, Federal Deposit Insurance Corp found that as of June 2020, bank deposits in the region, bolstered by PPP funds, grew 15% year-over-year to $276.6 billion in deposits held by all 83 banks with a presence in the region. On the mortgage side of banking, business has been booming in both the high-end $1 million-plus residential housing market and the commercial segment in Palm Beach County. According to an August 2021 Palm Beach County mortgage report from law firm Rabideau Klein, the number of residential mortgage loans in July compared to 12 months prior was up 75%. The value of those loans surged 91%. The county’s Top 3 residential lenders over the 12 months to July 2021 were JPMorgan Chase with 209 loans valued at $756.4 million, First Republic Bank (150, $439.7 million) and Bank of America NA (144, $367.6 million ). In the commercial segment over the same period, Citibank, First Republic and Wells Fargo Bank National Association provided the highest loan amounts, if not the highest total number of loans. Citibank led all
Top banks Among South Florida’s leading banks, Bank of America not only sits at the top of the list of best performing banks in terms of deposits ($47.97 billion) and market share (17.33%), it is also going out of its way in terms of community outreach to help with Palm Beach County’s economic rebound. Nonprofit organizations Education Foundation of Palm Beach County and Adopt-A-Family of the Palm Beaches each were awarded a $200,000 grant from the financial juggernaut, added to leadership training for its senior staff. Not only that, the Palm Beach County Black Business Investment Corp. (BBIC) announced a partnership with Bank of America in August 2021 to deploy a certified CDFI — Pathway Capital Funding — to the tune of $375,000 to secure financing to Black and minority-owned and controlled businesses. In that same vein, PNC Bank was able to secure $30 million in COVID relief programs for its applicant clients, added to $1 billion to fight systemic racism and support the economic empowerment of African Americans. Truist Bank set a precedent by creating Truist Cares back in March 2020. Since then, the organization has moved to support nonprofit organizations, donating $50 million to support the local communities it serves, including Palm Beach County. These actions all took place in the shadow of the the social strife that marked the summer of 2020 across the United States in the wake of numerous race-fueled tragedies and police brutality, including the murder in Minneapolis of George Floyd at the hands of police, whose impact continues to move the nation. Second only to Bank of America in terms of deposits in South Florida at $41.47 billion, Wells Fargo is implementing a multiyear operational restructuring in the region that included changes in its branch banking leadership. It also closed 329 of its 5,200 branches in 2020. In part, the closure answers to the bank’s clients increasingly moving toward digital banking. In the community banking sphere, mergers and acquisitions were the name of the game. Case in point: Palm Beach Gardens-based Anchor Bank announced a merger with Hallandale Beach-based Home Federal Bank of Hollywood. Combined, the assets of both institutions will reach close to $217 million. Seacoast National Bank also concluded the acquisition of Legacy Bank of Florida. The latter ranked fourth among Palm www.capitalanalyticsassociates.com
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BANKING & FINANCE OVERVIEW
As of June 2021, Palm Beach County had an aggregate 89,712 approved PPP loans totaling $4.8 billion Beach County community lenders in terms of total assets at $292.4 million. CARES Act By far, the greatest impact on businesses, particularly smaller businesses, was from the Coronavirus Aid, Relief, and Economic Security (CARES) Act of June 2020. South Florida’s Top 25 SBA lenders distributed 579 7(a) loans, an average 31% increase to 2019’s figures. The 7(a) loan total dollar volume added up to $21.66 billion, an average increase of 51.32% compared to one year prior. The average 7(a) loan amount was 676,259. The 7(a) SBA loan crown went to TD Bank, with a total 225 loans and a 7(a) loan dollar volume of $22.85 million, with average loans placed at $101,577. Thanks to the PPP rollout and the work of the region’s lenders, South Florida’s Top 30 PPP recipients were granted a total $253.46 million, rendering them able to preserve 13,543 jobs. As of June 2021, Palm Beach County had an aggregate 89,712 approved PPP loans totaling $4.8 billion. In parallel, Palm Beach County had a total undisbursed amount of $89 million. The industries that most benefited from PPP loans in the region were professional, scientific, and technical services at $721 million; healthcare and social assistance at $673 million; accommodation and food services at $522 million: construction at $498 million and retail trade at $326 million. Out of the 89,712 loans awarded, 24,451 had been forgiven by 3Q21 for a total $2 billion. While the SBA officially closed PPP loans to new applicants in May 2021, as well as its Restaurant Revitalization Fund grant program in July 2021, small businesses still have a couple of financing options available. The SBA’s Targeted EIDL Advance, Shuttered Venue Operators grant programs and the Community Navigator Pilot Program remain open. In parallel, the 94
| Invest: Palm Beach 2021 | BANKING & FINANCE
Department of Agriculture has made available grants of up to $2 million to assist in the buildup of new businesses and create high-paying jobs in rural areas through its Rural Innovation Stronger Economy grant program. The National Science Foundation is also offering America’s Seed Fund grant program, aimed at earlystage tech companies. Federal agencies with extramural R&D budgets that exceed $100 million are providing Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs to encourage businesses to contribute to federal research with the aim of commercializing their products. Regulations The pandemic accelerated the prevalence of digitalized banking services on a global scale. It was necessary to cater to the demand spike from users requiring a mix of in-person branch services and an increasingly fullservice virtual space. The momentum for technological innovation, combined with remote work, raised concerns over fraud hikes and cyberattacks, prompting financial regulators to enact regulations around transparency and data protection. In a 2021 regulatory banking outlook report, Deloitte said decision-makers should be leaning toward reinforced oversight of the digital transformation and technological innovation, governance, anti-money laundering compliance, consumer protection and controlling dynamic data environments. Moreover, a new federal administration invariably translates into new legislation, and the banking and finance sector will be no exception. The devastating and unequal effects of the pandemic against minorities has stressed the importance of enforcing fair lending to address the vulnerabilities of minority-owned businesses. It will also come with an increased celerity surrounding Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) legislation. Also, the Financial Crimes Enforcement Network has a bevy of new ascriptions to crack down on banks providing services to money-laundering customers. The silver lining from the pandemic is that the Federal Deposit Insurance Corporation (FDIC) found in early 2021 that 99% of the banks under its supervision rated satisfactorily or better in terms of consumer compliance and Community Reinvestment Act compliance. This means banks are taking steps to help customers and the communities they operate in to navigate the ripple effects of the pandemic. Mortgages After reaching an all-time average low of 2.65% (
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BANKING & FINANCE INTERVIEW
Stable base Community banker offsets margin compression with ‘great deposit franchise’
Charles Cross Market President South Florida – Seacoast Bank How are you adjusting to the margin compression? The entire industry is seeing margin compression. At Seacoast, we’ve built a great deposit franchise over many years with a low cost and stable deposit base, so margin compression didn’t affect us as much as other banks. We prioritize our customers’ needs over pushing products or services that may benefit the bank – that’s one of the benefits of community banking. What are you expecting in terms of inflation? For financial services as a whole, it makes it harder to make money from a spread of loans and deposits, so fee income is necessary. It’s just going to be a challenge as far as how interest rates are going to go. The 10-year Treasury has come up dramatically over the last 12 months. Everybody is starting to see inflation creep, and we will see how long it takes to enter into the mainstream economy and impact us over the next two years. What strategies are you using to hire and retain talent? Labor is a significant issue in many industries. Like any other financial institution, we are constantly looking for talented bankers. We operate in several different metropolitan markets across Florida. Someone who lives in Orlando may not want to move to South Florida or Tampa, so we have to recruit locally. What makes Palm Beach special and what separates it from other markets you do business in? Palm Beach has a port, an airport, a strong education system, great hospitality and industries that have been the county’s backbone for a long time. Lately, we’ve had many private equity and private capital investors move here. Residential and commercial construction are critical drivers of business growth in Palm Beach County, so all of the people and companies moving here represent opportunities.
What is your near-term outlook? Now that Florida is reopening its hospitality venues, we expect them to return to their pre-COVID levels as a result of the vaccination campaign. Our borrowers across industries are reporting robust demand but they are also discussing key issues like labor in construction and other areas and disruption in the supply chain. In general, the unemployment rate is improving and it will continue to improve until next year. Given the rising demand and the increasing population, we expect to see economic conditions continue to improve, particularly in metro markets like Palm Beach County. We expect this significant recovery to help many businesses, including our own. www.capitalanalyticsassociates.com
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( ) nationwide in January 2021, the average 30-year fixed mortgage rate is on an upward trajectory, breaking the 3% ceiling as early as March 2021, standing at 3.02%. In parallel, the National Association of Realtors signaled that the skyrocketing rise in U.S. home prices outweighed the gains from historically low interest rates. The median price for a single-family home sold in Palm Beach County in February 2021 hit a historic high of $450,000, a 25% increase from February 2020. The supply of homes fell 52% throughout the year, from 6,282 in pre-pandemic February 2020 to 2,987 in June 2021. That inventory is poised to quickly exit the market as the length of time they remain available is shrinking from 61 days in early 2020 to just 30 days in 2021. In this context, the U.S. Commercial Mortgage-Backed Securities (CMBS) delinquency rate posted in June 2021 the largest single month-over-month increase since the inception of Fitch Ratings’ loan delinquency index in 2005. The surge touches across all property types — hotels, retail, mixed use, office, industrial and multifamily. To avoid uncontrollable defaults in mortgage payments, Palm Beach County launched a second round of assistance in August 2021 to allow homeowners some leeway between economic recovery and costlier mortgages. The Community Development Block Grant Coronavirus Mortgage will provide up to six months of assistance, capped at $10,000. Competition As the digital push heats up among lenders, commercial and community banks alike are going to have to plan
Perspective: Inflation Ward Kellogg Chairman & CEO – Paradise Bank We’re seeing inflation in everything. There’s a shortage of material supplies and a terrible labor shortage. Businesses cannot find enough workers. Some industries are worse than others. Contractors, for example, could triple their volume if they could find enough workers. They just simply do not have the people to get the work done. Interest rates are not going to go down. They are going to go up. It’s just a question of when. We have two choices regarding inflation: We can either start raising rates to get ahead of it or we can wait to see it increase further and then chase it. The second is more likely, for political reasons. It’s less effective, however. In the early 1980s, the prime interest rate was 21.5%. Inflation was completely out of control. We don’t want to see that happen ever again.
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for the increased relevance and footprint of fintech companies across the United States, including in Palm Beach County. As of July 2021, 22 fintech startups called West Palm Beach their home. The latest fintech player to enter the fray is Virtu Financial Inc. The New Yorkbased financial services firm opened a 10,000-squarefoot office located in DiVosta Towers, Palm Beach Gardens. Going forward, Palm Beach’s banking players are expected to either develop in-house responses to the fintech frenzy, work on partnerships with established fintech players or strike acquisition transactions to incorporate them into their service portfolio. Community bankers also remain firmly in the fray, despite a dwindling overall number of institutions as a result of M&A, a result primarily of the need for a greater capital base to implement necessary technology changes and adaptations. While they may be smaller in number, they are not going away. Their contribution, resilience and need cannot be understated, particularly when looking at the role they played and the results obtained throughout the pandemic. The performance of South Florida’s community banks assets, deposits and loans suggests they are in it for the long haul. Typically, a community bank holds less than $10 billion in assets and focuses heavily on the local communities they serve. Close to nine out of 10 farmrelated real estate loans under $500,000 are given by community banks. Community banks also make up the majority of commercial real estate loans under $1 million. They are also responsible for more than 75% of CRE loans under $100,000. Considering the higher fixed costs inherent to originating small business loans, several large banks stay away from them, leaving community banks to fill the gap. In addition, community financial institutions are more likely to leverage relationship lending to help smaller businesses get loans that they otherwise would not be able to obtain with larger institutions based solely on their financial information. Growth drivers As of August 2021, the robustness of the U.S. economy allowed it to regain 9 million jobs lost to COVID-19. In parallel, inflation remained well above the Federal Reserve’s 2% as it oscillated between 5 and 5.4 % between April and July 2021. Supply chain shortages, particularly raw construction materials, semiconductor and microchip shortages, have resulted in higher average prices, causing a prolonged dip in consumer spending. The ripple effect may be temporary as supply chains recover and resupply inventories. As such inflation in the United States is expected to plateau going forward,
BANKING CONSTRUCTION & FINANCE OVERVIEW
The average 30-year fixed mortgage is moving upward, breaking the 3% ceiling in March albeit without a clear timetable as to when it will return to the targeted 2%. Palm Beach County Commissioners approved an expenditure blueprint for its $290 million share of the American Rescue Plan Act to be fully spent by 2026. The primary expenditures include $60 million directed at developing affordable and workforce housing; $43 million to expand broadband and cybersecurity; $10 million for infrastructure improvements and another $10 million to the county’s behavioral health and hunger relief operations. Special Purpose Acquisition Companies (SPACs) are also taking the financial world by storm. In the first five months of 2021 alone, more than 300 listed SPACs generated gross proceeds greater than $100 billion. For reference, that figure has already surpassed the total proceeds from SPACs in 2020, when 200 SPACs generated gross proceeds of $80 billion. Given the magnet Palm Beach County has become for financial players, it is likely just a matter of time before multiple SPACs start financing the IPOs of local companies. Looking ahead Banking and finance players will continue to play a pivotal role in Palm Beach County’s economic rebound. Through new products and services, innovation, mergers and acquisitions, strategic investments and combining the strengths of commercial and community banks in the area, the health of the region’s financial strength will continue to provide support to small and large businesses alike. While the brick-and-mortar aspect of banking will be analyzed on a case-by-case basis, it is likely that the overall footprint of bank branches will continue to evolve as digital services evolve to cater to client demand, paving the way for a hybrid offering that adapts more easily to shifting user preferences and investment needs.
Justin Cooper Founder & CEO Layla Capital
How can homeowners tap into the strength of the housing market? Real estate demand still seems to be at an all-time high and inventory is extremely low. Other factors, such as rising raw material costs, have also contributed to the explosion in housing prices over the past year. Many homeowners throughout South Florida would love to capitalize on the recent surge in home prices. However, unless they have plans to move out of state or downsize, it does not necessarily make sense to sell now, as they would then be forced to buy a new home at an equivalently high price. But with interest rates still at historically low levels, homeowners can access the equity in their homes by refinancing or obtaining a Home Equity Line of Credits (HELOCs). This way, they can tap into their equity and have access to liquidity for the next five to 10 years without having to sell their homes. On the private debt side, we have seen a significant increase in demand for bridge loans on single-family investment properties over the last year. To what extent do you think South Florida will become the Wall Street of the South? Historically, a great number of thriving cities have experienced mass exoduses over time. Detroit was one of the great manufacturing cities in the nation during the automotive boom but then things changed. With big money and lots of smart people relocating, others start to question why they should stay in a place with burdensome taxes, expensive real estate and high costs of living. A lot of major financial firms have either relocated to Florida or opened satellite offices and that trend will likely continue. For so long, people have been stuck in a bubble but through the pandemic, we learned that nobody really needs to work from a fixed location. From a political perspective, Florida is a very probusiness state and there are great benefits to working and living in Florida that are not available in other places. The influx of people is stimulating the local economy but is also inflating real estate prices. www.capitalanalyticsassociates.com
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Healthcare: The healthcare sector has suffered an extensive and long-lasting impact from COVID-19, both on its business model and the professionals working in the industry. Some changes have been accepted for the better while challenges remain, particularly as the pandemic continues despite a strong vaccination campaign.
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Long-lasting impact: The healthcare industry transformed with the pandemic and that transformation is expected to continue Serving a slightly older and wealthier population — as compared to the state of Florida and the United States as a whole — healthcare is a vital component of the overall economy of Palm Beach County. With a permanent population of 1.49 million people and attracting about 8.2 million visitors and tourists to the area per year, Palm Beach County boasts robust medical and biotech sectors, with 14 hospitals and over 200 biotech companies. However, the impact of the COVID-19 pandemic on the healthcare industry has been extensive and long-lasting. Even as many regions appeared to be emerging from the pandemic at the start of 2021, including Palm Beach, the county is now seeing the highest hospitalization rates of the pandemic, as well as reduced capacity for nonessential medical services, posing challenges for 2021. Landscape The third-most populous county in Florida, according to the latest Census figures, Palm Beach has an older and wealthier population on average, with a median age of 44.8, compared to 42 for Florida, and boasts a per capita income of $39,933, compared to $31,619 for the state. Rating agency Fitch, in fact, describes Palm Beach County as one of the wealthiest counties in Florida 100
| Invest: Palm Beach 2021 | HEALTHCARE
and notes healthcare and bioscience technology are two sectors vital to the area’s “well diversified” local economy, one of many factors securing the county consistent AAA bond ratings. The uninsured in Palm Beach County made up 17.9% of the population in 2019, compared to 16.4% uninsured in the state of Florida, and 11.5% of the population lives in poverty, compared to 12.7% for the state. Those aged 65 and older make up 23.6% of the population in the county, compared to 20.1% for the state of Florida, according to the Health Council of Southeast Florida’s annual county health profile. The disability rate for Palm Beach County stood at 6.7%, according to recent Census data. The healthcare industry is among the largest employers in the area, accounting for 13.4% of workers. Steward Health Care, Boca Raton Regional Hospital, Veterans Health Administration, HCA Healthcare, Bethesda Hospital, Jupiter Medical Center and Wellington Regional Medical Center dominate the list of top employers in Palm Beach County. As a whole, Palm Beach County had a real GDP of $75.6 billion, comprising 7.9% of the state of Florida’s total GDP. While narrowing the healthcare sector’s contribution to that figure is difficult, just five ( )
HEALTHCARE INTERVIEW
Child-centric Joe DiMaggio Children’s Hospital focused on technology to main patient-family-centered care
Caitlin Stella CEO – Joe DiMaggio Children’s Hospital How did the hospital work to overcome this unprecedented period of time? At Joe DiMaggio Children’s Hospital, we try to create an environment where the child is at the center of our care and the entire family is included, engaged and participating in their care because nobody knows that child better than their own family. This includes siblings and other extended family members, whatever the definition of family is for that family, we try to respect that and include them. One thing that has been challenging during the pandemic is maintaining our commitment to patient-family-centered care while minimizing physical contact. We utilize technology as much as possible, which is a great tool. FaceTime family and sibling visits and utilizing our NICVIEW cameras for our newborns are two ways we keep families tuned into patient care. Pediatrics has always embraced technology – for children it’s such a part of their world. How are the hospital’s infrastructure changes coming along? The main hospital is growing by four stories and construction is in full swing. We will likely complete the work in the fall of 2022. Right now, the expansion is topped off and we are in the middle of interior work. It’s exciting to see it come to life! How is Joe DiMaggio Children’s Hospital preparing for the eventual talent crunch? We continue to recruit specialized pediatric providers in order to grow the services that children in our community need. We hire people from all over the country to ensure that children receive exceptional care from pediatric-boarded and pediatric-specialized care teams. How you treat diseases in childhood is very different from how you treat diseases in adulthood and children deserve teams that are trained to take care
of their needs specifically. The American College of Surgeons surveys children’s hospitals to see whether or not they are implementing best practices for children across surgical specialties. During the pandemic, Joe DiMaggio Children’s Hospital was given a Level 1 designation, which is a huge accomplishment. It is basically a marker that indicates that we provide the best surgical practices for children. We were also awarded U.S. News & World Report’s No. 1 ranking in Florida for pediatric orthopedics. We are also ranked in cardiac surgery and cardiology care. Those awards tell you that we have a vast number of specialists and programs that meet national standards for excellence in the care of children. We’re fortunate that we’re able to attract talent from the top programs around the country. www.capitalanalyticsassociates.com
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Rachel Blumberg Executive Director Sinai Residences Boca Raton
What are some of the greatest takeaways for Sinai Residences from operating through the past year? The extraordinary events of the past year and a half really pushed our residents to learn technology on an unprecedented level, in a way they probably would have never learned otherwise. Before, we never would have imagined many of our residents chatting on Zoom every day - but that became the necessary reality and I think most of us are better for it. We’re extremely grateful that kind of technology was available to keep everyone in touch with loved ones and not feel quite so isolated. Technology really played a huge role in many different factors. We were able to rely more on voice command technologies as several of our residents have low vision due to macular degeneration, cataracts or glaucoma. We also had to get creative with new ways to socialize. Socialization is such a critical factor when it comes to successful aging and reaching a social, intellectual, spiritual and physical balance. Therefore, we implemented an in-house, tech-infused network. That allowed us to talk to the entire resident population to provide exercise classes so they could remain active in their apartments. These are tools we will also be able to use moving forward, post-pandemic. What are your near-term top priorities for Sinai Residences Boca Raton? Our focus is maintaining top-notch operations, as we always have. Continuing to provide great quality of care, exceptional dining and a variety of activities to our residents. We will also be closely monitoring the construction and development of an additional 111 apartment units, two new restaurants, new pool and firstclass spa. After completion of this “Phase II” project next year, we will have 1 million square feet on our campus as a $400 million property. We’re really looking forward to the next chapter, putting the pandemic behind us, welcoming our new residents to the community and taking all of the lessons we’ve learned along the way with us into the future. 102
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( ) hospitals in the county (Delray Medical Center, Good Samaritan Medical Center, West Boca Medical Center, Bethesda Hospital East, Jupiter Medical Center) posted $10.6 billion in total patient revenue in the most recent Medicare Cost Report. COVID-19 impact COVID-19 hospitalizations in Florida rose to an alltime high at the start of August 2021. By the end of August, only seven ICU beds were available in Palm Beach County, according to the Palm Beach County Hospital Report. The spike in numbers once again led hospitals — including Palms West, Lakeside Medical Center, Jupiter Medical Center and JFK Medical Center — to cancel elective surgeries to make room for the onslaught of COVID-19 patients. After elective procedures were canceled at the start of the pandemic in 2020, hospitals across the country
Repurposing retail buildings as healthcare or bioscience facilities became a trend during the pandemic.
HEALTHCARE OVERVIEW
Lenny Lomax, M.D. President & CEO – Ultimaxx Health As a company, we are fundamentally focused on taking a more natural approach to drug development, improving quality of life and health in general. We develop plant-based medicines and clinically validated natural products that will help mitigate serious public health problems and improve people’s overall well-being, mitigating issues related to chronic disease. In medicine, we get trained in a certain way that focuses on certain factors rather narrowly, relating to how we treat conditions or look at health in general. The outcomes regarding the prevalence of various conditions and the cost of healthcare are both unacceptable and unsustainable, particularly in this past year that’s become even more clear.
With elective surgeries canceled, hospitals across the country saw a 30-40% drop in revenue in 2020 experienced an average of 30-40% drop in revenue, according to a report from Moody’s Investors Service. Some estimates show that America’s hospitals and healthcare system lost about $57 billion each month at the start of the pandemic. By September 2021, and with cases again rising, national hospital chains like Tenet Healthcare Corp and HCA Healthcare — both of which are key players in the South Florida market — were waiting until the last minute to delay such procedures, pushing back against potential employee furloughs and clinic closures. As risk from the COVID-19 pandemic continued, some hospitals responded to the threat from the fastspreading delta variant by mandating vaccines for staff, including Boca Raton and Bethesda hospitals in Palm Beach County. Others were even mandating visitors at the hospital be fully vaccinated, such as Memorial Healthcare, South Broward’s public hospital system. As of Aug. 26, 51.9% of the county’s population was ( ) www.capitalanalyticsassociates.com
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HEALTHCARE INTERVIEW
Tech base Software development division to continue to operate from West Palm Beach
Seamus Lagan CEO – Rennova Health hospitals in a very close geographical location and make them successful in ways that they otherwise would not have been. To be blunt, we’ve had a difficult entry into this area — it has not all gone to plan. Some of that is a cause of matters specific to rural communities and particularly the effects from the pandemic everyone had to deal with last year. There was a long period of time where the investment community was looking at the sector before re-engaging just to see what the outcome of the pandemic would be. Things are starting to get back to normal but we do have a few scars from that.
Will Rennova be staying in West Palm Beach despite its hospital-based acquisitions in Tennessee? While it appears that our main operations have moved to rural hospital operations in Tennessee, underlying that, we have a software development technology division that continues to operate from West Palm Beach and we hope it remains there. We believe that acquisitions of rural hospitals may take us to other parts of the country but we intend that Rennova’s software division will remain based in West Palm Beach. The Florida area is much easier to attract people to due to the weather and standard of living. It’s a quality-of-life thing that people wish to pursue and have. What potential do you see in supplying rural healthcare? Our vision is to own and operate a number of rural 104
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What are the biggest challenges facing the healthcare industry? At the base of all healthcare, it’s a well-known national problem that it is very difficult to get paid. It’s a sector unlike any other. Usually, you go into a shop and you buy a product: you know what you’re paying for it, the supplier knows what they’re selling it for. But you go into healthcare, you provide a service and you believe you should get paid for it but somebody in an insurance company believes they should not have to pay for it. That’s one of the biggest problems across the sector that I believe has to change. How are you looking to grow in the next year or two? I think the software division will very soon be a separate entity. We believe that will permit that division to grow. We would like to avail of that growth opportunity. Second to that, we are in a restructuring mode in the rural healthcare division, and we have to get some stability. We must understand the difference on the ground after COVID and we have to work with that. So, the initial short-term plan is to stabilize our rural hospital operation, implement a management team capable of making additional acquisitions and grow further over the next few years.
HEALTHCARE OVERVIEW
Over 80,000 local jobs rely on healthcare-related businesses in Palm Beach County.
( ) fully vaccinated and 62.9% had received one dose of the vaccine. The push for vaccinations in the area have included free vaccine drives and mobile vaccine clinics taking vaccines straight into communities. Hurdles continued, however, with marginalized communities the least likely to get vaccinated both at the national level and in Palm Beach County. As of May, for example, 93% of the 9,000 residents of the wealthy, predominantly white town of Palm Beach were vaccinated. In the rural, and poorer, town of Belle Glade, only 6.2% of the population was vaccinated, in the same period, according to the Palm Beach Post. The pandemic also has had a wider impact on demand for health services, with up to 55% fewer people seeking hospital or preventive care from MarchApril 2020, according to a survey by Strata Decision Technology. One benefit from the pandemic, however, has been the shift to providing telehealth where available, often at much cheaper rates and with more convenient options for millions of Americans. A survey by Updox and conducted by Harris Poll showed that 42% of Americans used telehealth services during the height of the pandemic, and most Americans hope telehealth remains a viable option moving forward. Among the local organizations now offering regular telehealth visits is Palm Beach
By the end of August, nearly 52% of the county’s population had been fully vaccinated Atlantic University, which gives students 24/7 access to medical assistance and mental health counseling. As emergency orders related to COVID-19 wind down, representatives in Florida are calling on the governor to reauthorize telehealth for insurance coverage and funding for telehealth services. Telehealth is also becoming a cornerstone of new services from regional providers, including Baptist Health South Florida. Notable expansions Despite challenges, the pandemic has not dampened the long-term economic outlook for the healthcare sector, www.capitalanalyticsassociates.com
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Rafael Vasquez South Florida Market Leader Florida Blue
How has service demand changed during the pandemic and what trends have emerged? The biggest shift that we’ve seen in healthcare prepandemic and during the pandemic is the need for telehealth and virtual health services. That is a big shift in our industry. Many people prior to the pandemic were not open to seeing their doctor or getting care virtually or through telehealth. Now, they are. That is a tremendous shift. At one point, we were seeing nearly 70 to 80% of all care visits done virtually. That’s not a long-term sustainable model. The future of healthcare and a good comprehensive approach to virtual care is going to be a hybrid approach where some services will be in person and some services will be online and tailored around individual customers to meet them at the places where they need to be met, whether that’s at home, telehealth or in one of our partner centers. How are your services adapting to mental health needs? We’ve learned more than ever that it’s not just about the clinical setting. Mental health is a part of the holistic health of total well-being and that’s important to us. We had been tracking mental health issues prior to the pandemic and throughout this period and will continue to do so. Mental health is one of the barriers to achieving better health. Our parent company GuideWell also acquired a majority stake in New Directions Behavioral Health, which offers mental health services for our members. What are your priorities for Florida Blue? Our No. 1 priority is to lower the cost of care, lower healthcare costs for our members and increase access to affordable health insurance for individuals and employers. That’s why we launched a new health insurance product for midsize and small businesses — Truli for Health. Truli was built to address the issue of affordability and premium stability strategically and directly — a major hurdle that often prevents smaller companies from offering quality health coverage for their employees. 106
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Encompass Health will build a 50-bed in-patient rehab hospital in Palm Beach Gardens with new mergers and acquisitions, as well as relocations and expansions featuring in the news. In July 2021, Encompass Health Corp., the largest owner of inpatient rehabilitation hospitals in the United States, announced plans to build a 50-bed inpatient rehab hospital (up to 80 beds in later phases of construction) in Palm Beach Gardens. It is expected to begin operations in 2023. The project will create 227 direct jobs, with salaries starting at $71,000. Vibra Healthcare announced in July plans to invest $32 million in a new hospital in Palm Beach County, creating 160 jobs after the construction of the specialty hospital. Universal Health Services purchased land in February 2021 for $33 million to build a full-service hospital in Palm Beach Gardens. The hospital is planned to have 270 beds, as well as a four-story medical office building. Plans have also been floated within county documents for specialty hospitals in Jupiter, Delray Beach and Boynton Beach. National brands have also expanded into the area, such as the nation’s leading hospital for orthopedic surgery, the Hospital for Special Surgery, which opened a branch in West Palm Beach — its first clinic in Florida — in February 2020. Job growth The COVID-19 pandemic worsened an already-existing healthcare shortage, as demand for critical care staff skyrocketed while increased wages for nursing and critical care staff motivated thousands of healthcare workers to give up jobs in clinics and healthcare offices in favor of higher pay working emergency rooms in COVID-19 hotspots. The issue has been made worse by a decade-long nursing shortage, driven as baby boomers age and require more care, according to Healthline. Even before the pandemic, 1 million new nurses were needed to keep up with demand. And some regions feel the pain more acutely, including
HEALTHCARE OVERVIEW
Jay Mays CEO & Co-Founder – MPLT Healthcare Truly, every specialty is in demand. Of course, we are still seeing an increased need in critical care and pulmonology due to the rise in COVID numbers again. But another area of real demand is psychiatry as mental health issues became a real focus over the pandemic. We are now also seeing some of our subspecialties come back, like GI and orthopedics. These are big revenue generators for the hospitals that we had to pause earlier in the pandemic. But, overall, we’re seeing a pick-up across all specialties right now. The number of jobs that we’re working on today is already double what it was in March 2020, just before the pandemic hit.
Palm Beach County. With a slightly older than average population, as well as higher rates of COVID-19 spread and hospitalization, the nursing and healthcare shortage in Palm Beach has hit hard. In August 2021, Tenet Healthcare announced it was experiencing a nursing shortage in its Palm Beach County hospitals. Nursing homes in the area are facing federal fines for severe shortages in nursing staff, according to local news reports. Palm Beach County has asked for 76 nurses to be sent to the area from the Federal Emergency Management Agency (FEMA), as surges from COVID-19 strain current staff. Statewide, Gov. Ron DeSantis has applied for 1,500 nurses from the federal agency to address the current shortage coupled with the COVID-19 surge. To combat the shortages, area hospitals are offering incentives to attract new staff and training programs. Boca Raton Regional Hospital is offering signing bonuses and relocation assistance; Broward Health is offering up to $15,000 in signing bonuses; and Bethesda Hospital is also offering signing bonuses, onsite childcare programs and has created the Bethesda College of Health Sciences to train new nurses. Health insurance The uninsured in Palm Beach County made up 17.9% of the population in 2019, higher than the national average of 12.1% uninsured in the same year, according to a report by the Office of Health Policy, although more recent reports suggest that number is down to 14.5%. According to a study from the Commonwealth Fund, two out of five working Americans are underinsured. Eligible Palm Beach County residents have been encouraged to sign up for insurance through the
Palm Beach County is home to 14 hospitals and over 200 biotech companies.
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HEALTHCARE OVERVIEW
Affordable Care Act (ACA), which now provides additional financial assistance and new eligibility rules under the American Rescue Plan (ARP) Act of 2021, passed by Congress to mitigate COVID-19 challenges. Individuals could also sign up for 2021 insurance through Aug. 15, 2021 — a marked increase in the window to sign up for coverage. With the additional assistance provided through the ARP Act, four out of five ACA customers pay $10/month or less for health insurance premiums. Florida is also leading the nation in new enrollments in ACA plans, according to Medicare & Medicaid Services. Florida had more than 2.1 million people enroll for 2021, about 17% of the entire country’s enrollments, according to the Exchange. Cigna announced in August it is planning to expand its offerings on the ACA Exchange in 2022, taking advantage of a growing market there, and Aetna will also be offering plans on Florida’s Exchange in 2022. Florida, a largely conservative state, has resisted expansions to Medicaid, one of 12 states in the United States to refuse the expansion of benefits through a federal program. If the expansion passes the Florida legislature, an estimated 500,000 to 800,000 people in poverty would be eligible for coverage, according to The Sun Sentinel. In Florida, 40.3% of individuals are covered through employer health insurance plans, 9.5% are on nongroup plans, 17.4% are on Medicaid, 18% are on Medicare, 1.4% are on another public plan and 13.1% are uninsured. Florida residents pay an average of $467 per person monthly for medical insurance, according to eHealth, with major networks including BlueCross BlueShield, Cigna, Aetna, United Healthcare and Humana, according
Palm Beach County has around 333 ICU beds available.
Joseph Sardano Founder, Chairman & Chief Executive Officer – Sensus Healthcare We have a very positive outlook. We feel that the market is coming back slowly this year. We don’t have unreasonable expectations; we feel that we will see slow, conservative growth during the course of the year, that we will probably get back to normal levels in 2022 where we think we will see a hockey stick effect with our technology. We know that this year will be profitable if the market continues to grow at the levels that we are seeing. Because of what we have done during the COVID period and just prior to the COVID period and cutting our costs, we feel that we are a tightly organized and welldisciplined company to ensure we keep costs down and maximize our sales so we maximize our profits for shareholders.
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HEALTHCARE OVERVIEW
nursing, health coverage and school health. The 2021 adopted budget of the district has projected revenues of $245.4 million and projected expenditures of $249.8 million. There are also separate programs to assist those in poverty, such as Project Access, a 501c3 coordinating volunteer physical care, hospital care and diagnostic services for low-income, uninsured residents of Palm Beach County. The program has an average of $1.2 million in services donated per year and has served 11,000 people. There are concerns the pandemic has exacerbated existing health disparities and health crises, including mental health care and the opioid epidemic. The fallout from the COVID-19 is broadly impacting mental health, with four in 10 adults in the United States reporting experiences with anxiety or depressive disorders in 2020, compared to one in 10 in 2019, according to a survey from the Kaiser Family Foundation. In Florida specifically, 22.9% of adults reported symptoms of anxiety disorder and 19.1% reported symptoms of depressive disorder. Opioid deaths are also up nationwide after 2020, with nationwide overdoses at 90,000 for 2020 compared with 70,000 in 2019, with rises in unemployment and mental health concerns a factor In Palm Beach County, there was a 27% spike in opioid deaths in 2020 from 2019, with 565 overdoses recorded in 2020 compared to 446 in 2019.
to eHealth. The average cost per day for an inpatient stay in a Florida hospital is $2,087, before insurance. The U.S health insurance market has weathered the COVID-19 pandemic surprisingly well, according to a study from PwC, making quick shifts to transforming operations into a digital network and incorporating new technology like telehealth coverage. Of course, health insurance markets and healthcare funding are an evolving landscape, impacted by COVID-19 and other health concerns, like the opioid epidemic, as well as changes in political leadership and overall economic performance. Public health Palm Beach County voted in 1988 to create the Health Care District of Palm Beach County, a separate taxing entity to provide healthcare services to those in need, including trauma care, primary care clinics, skilled
BioTech and life sciences A decades-long scheme to make Palm Beach County a hub of biotech engineering has seen progress this year, with Marizyme, Inc. signing a lease with a Jupiter-based biotech incubator, Palm Beach Innovation Center. JZZ Technologies, a biotechnology firm focused on human life extension and longevity, has also relocated its headquarters from New York to West Palm Beach, citing the area’s already booming biotechnology sector, strong employee base and friendly tax regulations. Beacon Pharmaceutical Jupiter announced in March it is moving forward with a $150 million biotech incubator and manufacturing plant in Jupiter. Companies from big pharma to startups are in talks on the space, which will be able to host 50 to 70 companies. The anchor of the biotech sector in Palm Beach, Scripps Research Institute, was brought to Florida in 2003 and built its Jupiter facility in 2009. Though expansion of the biotech industry has been slower than expected since the deal in 2003, there are currently 205 biotech companies in Palm Beach County and over 7,380 people employed by the sector. www.capitalanalyticsassociates.com
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Health policy The last two years have seen increased federal attention to healthcare and vulnerable populations, as realities over the COVID-19 pandemic hit home. Congress has passed several acts mandating increased healthcare access and new rules surrounding the provision of care for health insurance providers. Such programs include the Families First Coronavirus Response Act (FFCRA), which requires all private insurance and Medicare and Medicaid programs to cover COVID-19 testing, as well as eliminate cost sharing for these tests. Congress also budgeted $1 billion to cover testing for uninsured people, and, under the ARP Act, increased financial assistance to those eligible for health insurance on the ACA Exchange. Even though Florida has resisted calls to expand access to Medicaid, with Republican leaders saying the cost is too great, a significant portion of the state’s fiscal year budget is already earmarked for healthcare. The state’s 2022 budget will see $44 billion out of $101.5 billion go to healthcare. The budget will supplement federal dollars heading to healthcare programs across the state, including Medicaid. At the local level, Palm Beach County officials are highly focused on COVID -19. The County Commissioners voted to declare a State of Emergency for the area on Aug. 17, 2021, citing hospital capacity, nursing shortages and positive testing rates for COVID-19. The county will continue to focus on masking efforts, vaccination drives and managing hospital capacity for the near term. Despite the state and federal assistance programs, however, many argue greater access to healthcare is needed during the pandemic and beyond.
Florida state’s FY 2022 budget will see $44 billion go to healthcare Looking ahead The outlook for the Palm Beach County healthcare industry remains strong, despite challenges presented by the COVID-19 pandemic. With key demographics to attract investments in quality healthcare and an alreadythriving biotech sector, Palm Beach County is positioned ahead of other areas in its healthcare outlook. Key challenges moving ahead will be reducing the area’s rate of the uninsured population and meeting short-term and medium-term shortages in healthcare staff. Despite the obstacles, COVID-19 has also presented positive changes for the area, including greater access to telehealth and greater outside interest in the area’s biotech potential. With local vaccine mandates rolling out at area hospitals for staff and visitors, and vaccination drives going into local communities, the area’s vaccination rate is expected to continue to climb. As the county’s tourism and hospitality sectors continue to recover and Palm Beach County’s economic vitality is restored, the healthcare and biotech sectors have the potential to boom.
Education: Education in Palm Beach County faces many challenges as educational institutions were hit hard by the pandemic and may continue to be hit if the virus isn’t brought under control. Budget issues and enrollment remain hurdles but action is being taken to adapt and refocus in a changed landscape.
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Up to the challenge: Palm Beach County schools are working to leap over present and future hurdles Palm Beach County is wealthy, it’s diverse and it’s an economic juggernaut. To keep all of these forces working in salubrious equilibrium, its educational offerings also need to be top notch, up to the task of providing a workforce and an incubator of ideas that can ensure continued success. Between its disproportionately large K-12 population, its numerous colleges and its vast array of technical schools, the region is handily keeping up with demand. This hasn’t been easy over the last 18 months. Schools are not businesses, not in the traditional sense of the word, but they are expensive to run. The COVID-19 pandemic presented a host of challenges that made educating students far more difficult, which is expected to be the case for a number of years. Students had to go remote as classrooms had to be deep cleaned and airfiltered; in many cases, enrolled students were simply unable to travel to their schools. Mass vaccination, the way out of the conundrum, has still yet to be sold to many of Florida’s student population. The hope is that in triumphing over these challenges, Palm Beach County will be in a better position to meet the challenges of tomorrow. 112
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Landscape In terms of education, Palm Beach County clearly punches above its weight in the areas of K-12, higher education and technical training. Even though the county is the 25th-most populous in the United States, its school district is the 10th-largest in the nation, a fact that speaks to the growth potential of the economy as the county continues to grow and people get educated. In terms of higher education, the county counts no fewer than 16 institutions, including Florida Atlantic University, Palm Beach State College, Lynn University and Keiser University. Of the top community colleges, the county can boast Everglades University (2,104 students), Southeastern College (720 students), and Cambridge College of Healthcare and Technology (463 students). Besides these, there are dozens of vocational institutions to ensure the existence of a well-trained workforce. Thanks to this solid education infrastructure, students are able to get the training they need to succeed in Florida’s white-hot economic climate. The 2020 data certainly speaks to this: in Palm Beach County, 67.9% of people have a bachelor’s degree or higher, followed by ( )
EDUCATION INTERVIEW
Transformation Going virtual was a ‘transformative’ process and required changes to research formats
John Kelly President – Florida Atlantic University How was FAU and the education sector transformed by the pandemic experience? Probably the most transformative factor was us having to do things virtually that normally you would do in groups — if you are doing a research project together, working on building a racecar as an undergraduate student, for example. As an institution recognized as the best in the country at undergraduate research, our College of Business students, College of Engineering students and our Science Department students often all work together on the same project. To do so in a virtual setting is nearly impossible. We changed our research format to adapt everything we possibly could, limiting the in-person experiences. When students got the chance to be in person, all masked up and following strict safety protocols, they could at least then bond a bit differently than they do just by looking at a computer screen. What are the most in-demand professional skills and how is FAU responding? Our largest college is the College of Business. It provides a lot of students for the workforce. Some of the emerging disciplines include an acute interest among our students in artificial intelligence. AI is growing so fast taht it’s making it hard for us to keep up with the number of students interested in that subject. FAU decided in 2017 that it was going to develop a reputation for AI. It is now an area of distinction for our institution. Usually thought of as an engineering discipline, we’re carrying AI through the whole campus — art, performance, marketing, automobiles and engineered cars. It has become an integral part of our curriculum where 10 years ago, we might have talked about it but would not have been doing much of anything in that world. Now, it is constantly talked about in regard to everything we do. We purposely tried to integrate it into each of our 10 colleges.
What is your outlook for the university? It is extremely positive. Everybody is appreciating the importance of higher ed. You really need that extra set of degrees if you are going to be successful in the marketplace. There is an opportunity for a person to focus entirely on their academics. That is our goal: not just to prepare students for the shifting workforce but to prepare them for a career, something they are going to thoroughly enjoy the rest of their life. You do not even have to physically move to come back anymore. You can just sign up directly for one of our distance-delivered programs or our executive MBAs. Our priorities are to provide a safe environment and a sense of normalcy for our students to get back to what the true richness of a college experience is, which is developing these deep relationships and friendships. www.capitalanalyticsassociates.com
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Debra Schwinn President Palm Beach Atlantic University
How important is collaboration between education institutions and the private and public sectors? Palm Beach Atlantic (PBA) University is quite unique in having community service as a core foundation of our university. We have a program called “Workship,” in which every single student completes 45 hours of community service per year as a form of worship. PBA has provided 3.6 million hours of community service in this county and region. As an example, one of our strong partnerships is with Rosemary Village in one of the most difficult, poorest neighborhoods in our county. They offer an after-school program where our students serve by tutoring students and mentoring one-on-one. In terms of business partnerships, PBA’s Titus Center for Franchising is one of the only centers for franchising in the country. Not only do we teach franchising, students in the program and recent graduates have the opportunity to “pitch” why they want to buy a franchise, with the chance of one student being given funding by generous donors to make that dream a reality. How is PBA addressing gaps in higher education? PBA’s online platform is critical in terms of delivering programs globally that integrate faith and academics. This is unique and crucial in such a polarized world today. There are people around the world looking for Christian universities offering online programs that are robust in their academics without sacrificing the role that faith plays in so much of life. We are committed to meeting that need. We are also thoughtfully looking toward the future and asking what will be needed in 10 or 20 years. We are particularly focused on the types of new skills that students will need to lead in emerging markets and growth sectors. PBA has also launched a new global leadership program that is 100% in Spanish, allowing us to better serve the diverse cultures represented in South Florida as well as neighboring Central and South American countries. We are excited to be piloting this program in Columbia. PBA intends to continue expanding Spanish programs to meet the demand for Christ-centered academics. 114
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36.7% of Palm Beach County residents older than 25 hold a bachelor’s or graduate degree.
( ) 24.1% with an associate degree and 6.1% have at least a high-school qualification. Of those who have attained higher education, 45% have a bachelor’s degree, 23.5% have a master’s degree, 18% have a professional school degree, 9.2% have an associate degree and 4.3% have a doctorate. Of the degrees obtained in Palm Beach County, the top tier breaks down along certain fields: business ranks first at 21.8%, followed by the social sciences at 16.6% and then literature and language at 11.1%. Unfortunately for the county, not all areas are created equal. Wealthy communities, such as Palm Beach, Cloud Lake, and Glen Ridge, have their numbers heavily skewed toward higher education, high-school graduation rates and often a preference for private over public education. Impoverished areas such as Westgate and Pine Air score far lower on these metrics. Poverty is often aligned with the ethnic and racial make-up of the neighborhood in question. Palm Beach County is also diverse. Palm Beach State College, for example, has 31,289 students enrolled. Of these, 31.7% are Hispanic or Latino, 30.2% are white, 26.6% are African American, 2.8% are Asian, 2.46% are two or more races, .18% are Native Hawaiian or Pacific Islander and .16% are American Indian. Performance Holding in-person classes posed a number of challenges
CONSTRUCTION EDUCATION OVERVIEW
Ethan Shapiro Head of School Saint Andrew’s School
during the pandemic. Both K-12 schools and universities were forced to make the transition to a hybrid of remote and in-class learning and to integrate antiCOVID protocols to help keep students, teachers and staff safe. The whole process took an incredible toll on the county’s finances. Between masking, air filters deep cleaning the school facilities and ensuring that students had internet access and computers, the final bill for Palm Beach County’s public schools alone was around $80 million. And this number only takes in the most immediate costs. The longer-term effects of the pandemic are yet to be tabulated. With the 2021-2022 academic year, schools reconvened with a changed landscape for learning. Florida Gov. Ron DeSantis’ executive order, signed with the outbreak of the pandemic, that made distance learning legal, was allowed to sunset. This means that more than 167,000 students in Palm Beach County were expected to return for the first in-person year since the outbreak of the pandemic. This is a sharp change from last year when, at the beginning of the second semester, only 52% of the county’s students attended school in person. It comes at an inauspicious time, though. A pandemic that should be winding down in the United States is still raging, and Florida is among the regions feeling the brunt of it. While COVID vaccinations have been available to nearly all adults since spring 2021, the rate
What are your priorities and outlook for Saint Andrew’s School for the near future? We’ve been successful throughout the pandemic and want to carry that momentum as we move forward. We want to be innovative, adaptable and flexible. We’ve achieved 90%-95% of our objectives set in the Vision 2020 strategic plan, completing many of our goals before the pandemic began. We’re developing our next strategic plan, which should be completed by the end of 2021. Our upcoming strategic plan is where our mission meets the market. We have a multiconstituency steering committee that will examine community input for emerging priorities, using that to develop our main goals for this upcoming plan. We’re placing special consideration on how the educational landscape is changing. We want to figure out how to prepare the school for tomorrow. How have equality and justice initiatives impacted your students? Two key organizations that we are members of — the National Association of Episcopal Schools (NAES) and the National Association of Independent Schools (NAIS) — have principles of good practice for Episcopal schools as it relates to equality and justice. We’re always looking at ways to inform students on how to live a life of purpose. We’re called to be a diverse and inclusive community, learning from one another. With various educational opportunities,we want to tackle issues that can and have greatly impacted our students. How has tech transformed the education sector? Technology is a tool that students and faculty are becoming more comfortable with. While students generally are more tech-savvy than their teachers, faculty have become better versed in how to use technology for remote and hybrid learning purposes. We want to integrate technology in the most efficient ways because it’s a tool that can move us to where we want to go. www.capitalanalyticsassociates.com
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Ralph Maurer Head of School Oxbridge Academy
How is the education sector tackling the ongoing labor shortage? We are trying to make ourselves the most attractive school we can from both a teaching and learning standpoint. Teachers want to teach and they want to teach in places that are interesting, that have interesting students and a healthy environment that is kind, engaging and fun. This takes on an added level of significance in this COVID-19-riddled environment. We also take care of our own by providing a safe place that is intellectually stimulating and rigorous, where they can develop their careers and hone their craft. We try to go to the market as early as we possibly can and always pay attention to good people in the market even if we aren’t hiring. If there is somebody who interned with us or had a longterm sub-position with us and who we loved, we try to keep track of them and maintain a good relationship with them because in a tight hiring market, it is going to make a big difference if we can call them up and get them to our school. How does the school balance top-level education with affordability? We give out a lot of financial aid. Forty percent of our students are on financial aid, which is well above the region’s average. That does not just help us maintain affordability, it fosters diversity too, helping to craft a diverse student body in many ways along many different dimensions. It is critical for us to continue to do so because we want our students to be exposed to a lot of different kinds of people early in their educational careers. What is your near-term outlook for Oxbridge Academy? It is extremely positive. We just started middle school this year, in the middle of the pandemic. We started the seventh and eighth grade. We announced it in January 2021 and filled up all 56 spots extremely quickly. We’ve been growing and what we see in terms of economic development in the region is highly positive. 116
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of fully vaccinated Floridians only sits at slightly higher than 50%. Such an abysmal rate has allowed the delta variant to spread like wildfire, turning Florida into the epicenter of the pandemic just as the new school year was set begin. These fears were laid bare in August 2021 at Florida Atlantic University when 160 faculty members signed a petition directed at the school administration to take firmer action against COVID. For the coming year, there will be a mask mandate in Palm Beach County — a subject that has proved highly contentious not just in Florida but across the country — though it will not be completely foolproof: masks will be required wearing for all staff and students while indoors on school property and on buses and all visitors to school properties will be required to wear masks but the parents of students can opt out of the policy if they provide a note to their child’s teacher by first period. Even with these measures in place, the rise of the delta variant has increased the chance that some hybrid form of e-learning will remain in place. On college campuses, too, there are measures in place to prevent the spread of COVID, though for many these may not be as stringent as desired. At Florida Atlantic University, which is welcoming 1,500 freshmen in the 2021-2022 school year, residence halls will again be at 100% capacity. Masks will be encouraged though not required, as they were last year. This is troubling as COVID has been far more rampant in the region over summer 2021 than it had been the year before. There will be other anti-COVID measures: new students will be required to receive a COVID test upon arrival and moving in will be occurring at appointed times for students in an effort to minimize contact among outsiders. In another move aimed at controlling the pandemic and boosting vaccination rates. Palm Beach State College is partnering with the Health Care District of Palm Beach County and the Department of Health to ensure that vaccines are readily available to students. COVID-19 presents additional challenges for Palm Beach County’s higher education institutions. Many schools last year experienced reduced enrollment rates, which meant reduced revenue for schools. It couldn’t have come at a worse time since safety protocols surrounding the pandemic required schools to invest heavily in health infrastructure. Added to this budget crunch has been the absence of international students who haven’t been able to travel from their home countries. This is especially painful as enrollment by international students at U.S. colleges has grown 55% over the last decade, offsetting what would have been a 3% enrollment decline.
CONSTRUCTION EDUCATION OVERVIEW
FAU will welcome 1,500 freshman in 2021-22, with residence halls at full capacity The whole experience has been something of a debacle for higher education institutions, many of which having no choice but to cut costs, with non-essential areas such as benefits, athletics and clerical staff to be among the first axed. While the coming of the vaccination has made institutions optimistic that the end may be in sight, the spreading of the delta variant has called many things into question. Even if the pandemic is successfully managed in the coming year, the debt incurred by many universities will have a stimying effect for years. Diversity and inclusion Besides COVID-19, 2020 saw a huge reckoning over racial justice across the United States. The death of George Floyd and the resulting Black Lives Matter protests have provided the impetus for schools across the nation to revisit their policies concerning diversity, equality and inclusion. Schools redoubled the effort to create an open dialogue in which all sides of an issue can be heard. Across Palm Beach County, schools, the government and charities have stepped up to the cause in the hope of reducing instances of prejudice. State Representative Kelly Skidmore hosted an online forum in July 2021 to investigate the state of equity and inclusion in Palm Beach County’s education system. In a similar vein to other colleges in the region, Florida Atlantic University has begun a mandatory online program called Diversity, Equity, and Inclusion for Students Online Training through which they hope to address societal problems and create a safe space for cultural diversity on the campus. Lynn University took measures to hire a diversity, equity and inclusion officer. Some organizations are hoping to attack the problem of inequality head on. The charity Take Stock in Children Palm Beach County aids children fromunder-privileged backgrounds by awarding ( )
Daniel Gropper Dean Florida Atlantic University, College of Business
What successes stand out from the past year? There are two successes I think I would highlight. One is that our online enrollment grew substantially, both in terms of the number of students we saw and the number of classes that they took and passed. We already had a very robust undergrad component in the online program that was very highly ranked in the Top 30 by U.S. News & World Report this past year. The FAU College of Business was well-positioned before we hit the pandemic and we had a lot of classes that were prepared; we had classrooms that had cameras and we had faculty that were used to recording lectures and teaching online. The second thing that was quite interesting and that we hadn’t anticipated was how our students interacted with their academic advisers. Before, they would make an appointment to come in and spend time sitting in the adviser’s office, working through their schedule. That all switched and now they’re advising via Zoom, WebEx, or whichever media. This has proven to be more effective than coming in person in the sense that fewer students missed their appointments, the advisers were able to set up and talk with the students more effectively and advisers were happy to adjust their hours. How do you balance quality with affordability? We are one of the most affordable universities in the entire country. Full-time tuition on campus is less than $6,000 a year for the academic program and that stretches us a little bit because we don’t get a lot of money from the state government to help keep that tuition. We’re having to find ways to stretch and make that work, even on our premium-priced programs, such as the Executive MBA and our Executive Master in Health. During COVID, we looked at our executive programs and said OK, if you can’t come to campus, you’re not going to need to park, you’re not going to need to eat lunch with us, or have dinner. We cut our premium price to the online price, which is an example of the fact that we have our students’ interest in mind, so we explicitly try to keep it affordable. www.capitalanalyticsassociates.com
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EDUCATION INTERVIEW
Outside the box Institutions like Palm Beach State College had to be creative to engage students in the new landscape
Ava Parker President – Palm Beach State College options, because that is what the next generation of students need. How did your institution tackle student retention and new enrollments in this environment? We were in a very interesting position last summer; we actually had our highest summer enrollment in the history of the college. From there, however, enrollment started to decline. This summer, we’re not seeing any of the growth that we experienced this time last year. Students went to school in the summer, which they don’t traditionally do. They’ve probably reached a point where they want a break. Also, when everybody goes remote, your competition is completely different. We don’t have as many transient students as we would normally have because they have the option of taking courses from their home institution and just do so remotely. When so many things are remote, it is difficult to distinguish yourself. We’re training our faculty so that they can find ways to be just as effective, whether they are in person or remote. How would you characterize Palm Beach State College’s experience with online learning? We were pleased with having a significant portion of the infrastructure at the ready when we had to make the transition to remote instruction. We have small classrooms and they are designed that way so that faculty can develop a real relationship with students. It is critical for both social and academic issues. When you take that away via a transition to this remote environment, it’s very different. We found ways to engage with students. Our faculty was astoundingly creative in ensuring we could still engage in different ways, thinking outside the box. Some of our classes did not transition. There were certain courses that we just had to shut down and reopen, such as public safety, fire and welding courses that are hands-on. Moving forward, we are going to offer several 118
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What is Palm Beach State College’s contribution to equitable opportunities and social mobility? Colleges across the state mirror their communities. Our students are about a third Black, a third white and a third Hispanic. Our institutions are very diverse. Unfortunately, the data has shown that students tend to complete their education almost based upon their ethnicity. Our Hispanic students do better than our Black students and then our white students do better than our Hispanic students. We will not let your ethnicity determine your trajectory here. We created the Dr. Barbara Carey-Shuler Cross-Cultural Equity Institute, which is specifically designed to take a look at why it is that students are not graduating at the same rate and shed light on what it is we can do to assist students with that.
EDUCATION OVERVIEW
( ) college scholarships. The ultimate aim of this is to help these students break out of the poverty cycle. Aid will properly begin in high school and continue until the completion of a college education. In 2021, the charity will award 111 scholarships, which together total $1 million. Workforce preparation With the pandemic came a Northeast (among other areas) exodus of people and companies looking to make the state their home. The draws are obvious: excellent weather, a business-friendly government and no state income tax. Palm Beach County, especially, benefited as wealthy Northerners, who previously had only visited Palm Beach, began seeing the region as an ideal place to live and set up shop. But with this new-found popularity came a new-found need: vocational training and career preparedness to ensure a skilled labor force to meet the challenges of a vibrant sophisticated economy. The challenge is being met. Among the efforts, the Palm Beach County School District has an Adult and Community Education division that services 34,000 people annually. Its goal is to provide the training that will increase the employability of the state’s workforce.
To see this through, the county’s Career and Technical Education program offers help on a number of fronts. There are CTE courses and industry certifications that prepare the pupil for the profession ahead. Career planning, also on offer, allows the pupil to work with experts in mapping the best course through what can often be a tortuous and difficult process. Finally, there is a program of study, whereby the CTE program helps the pupil connect all aspects of their education — from grammar school, through high school, to college, and beyond — in a way that will maximize career success. Looking ahead There are many challenges on the horizon. Educational institutions were hit hard by the pandemic and may continue to be hit if the virus isn’t brought under control. Further, there are still a number of issues surrounding remote learning that the people of Palm Beach County may have to continue dealing with. Ultimately, the challenge is known: how will Palm Beach County develop a workforce that can meet the needs of a fast-changing, economically vibrant community. With each passing day, Palm Beach County grows. The education sector must grow alongside it.
Tourism, Arts & Culture: Palm Beach County has a lot going for it, with a prime location that offers beaches, restaurants, amenities, museums and outdoor activities galore. As thousands move to Florida and grow the economy in innovative ways, the attractiveness of Palm Beach County tourism will continue to rise. Only the pandemic stands in its way.
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Great appeal: Tourism, arts and culture continue to be focal points of the local economy despite a hard year Palm Beach County claims an outsized place in the imagination. Known for its fabulous beaches and worldclass cultural institutions, the region has been drawing well-heeled visitors since Gilded Age tycoon Henry Flagler first built the coastal railway here at the end of the 19th century. As befits a region of great wealth and beauty, there are numerous features attracting tourists from all over the country and the world. But this has been a hard year for tourism. The COVID-19 pandemic has upended economies across the world but few sectors were altered as definitively as tourism, arts and culture. While in other industries the transition could be made to remote work, tourism relies on people showing up. People weren’t leaving their home, restaurants were closed, they weren’t attending concerts or sporting events and they were avoiding airplanes and other crowded modes of transportation. It was a dark time. But Florida was more willing to open than many other places in the world, meaning its economy had a robust rebound from the initial fallout. Tourism, arts and culture in Palm Beach County rode the coattails of Florida’s success. Now the vaccination campaign is progressing. But will enough people become 122
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vaccinated to ensure the continued health of Palm Beach County’s tourism economy? The delta variant surge of summer 2021 has called into doubt the progress over the last year. The hope is that the region, with its plethora of offerings, will be able to weather this storm. Landscape The last decade has seen startling growth for tourism, arts, and culture in Palm Beach County, where the sector remains a vital pillar of the economy. In the county, before the pandemic, over 66,000 jobs depended on tourism-related business, including hotels, restaurants, retail outlets and transportation. The 7.3 million people who visit Palm Beach County annually spend about $4.6 billion, with $1.4 billion going to food and restaurants, $1.2 billion on lodging, $1.2 billion on retail, $600 million on recreational activities and $400 million on transportation. In the last 10 years, the number of visitors has increased from 4 million to 8 million, with a 92% increase since 2014. It is an important lifeline for the county. For instance, foreign travelers bring $431 million into the county, with $145 million coming just from hotel stays. ( )
TOURISM, ARTS & CULTURE INTERVIEW
Tourism state Florida’s No. 1 industry provides a career opportunity for students planning for the future
Glenn Jergensen Executive Director – Palm Beach County Tourist Development Council What are the opportunities and challenges Palm Beach County is experiencing? The labor shortage is a challenge. We’re holding career fairs with our hotel and restaurant partners to assist in combating this shortage. We want to assist our educational institutions to provide access to a great career path in the hospitality industry. We want students to see that they’re able to work up the corporate ladder and have a successful career in a line of work that’s customer-oriented. That’s what Florida is; we’re a tourism state. Florida is not a manufacturing state. Tourism is the No. 1 economic driver year round, with the agriculture industry being second. Tourism is a career students should consider as they plan for their future. What projects and initiatives are in place to address tourism growth? Four years ago, we started a tourism television channel that live streams programs highlighting the diverse community of Palm Beach County, 24 hours a day, seven days a week. The Palm Beaches, comprising 39 unique cities and towns, is the largest county east of the Mississippi. Our Roku Channel, THE PALM BEACHES TV, streams 45 hours’ of family friendly programming, which is also aired on network television, such as South Florida PBS. The channel is available on over 4,000 hotel room entertainment systems to our guests. How is the digital nomads phenomenon affecting tax revenue streams? We’ve seen the transition and how people are staying in single-family homes, condos and Airbnbs. It has allowed bed-tax revenues to explode through the pandemic. Many visitors who arrived in January 2020 stayed until May, June and even into July. That segment of our revenue stream went up significantly, from $200,000 or
$300,000 per month to $800,000 and up to $1 million per month in tourism tax (bed-tax) collections from non-hotel property stays. What is your near-term outlook? Our marketing organization Discover the Palm Beaches is advertising to leisure travelers’ groups and associations to bring meetings back to the county. Our Sports Commission will continue to drive tourism events to book future events as we near 2022. We’re looking forward to our performances inside the Performing Arts Centers and visiting museums; and in 2022 our Cultural Council is marketing a great year for cultural experiences. We’ll be back to pre-pandemic levels in early 2023. Sports tourism and the leisure traveler will bring us out of the pandemic recession and get us back to our growth levels. www.capitalanalyticsassociates.com
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Dave Anderson General Manager Palm Beach County Convention Center
Which industries are more eager to get back to inperson events? Our business is divided between short term and long term events. Short term is primarily made up of annual events with limited room nights associated with it — meetings, breakfast events, lunches, small corporate events, consumer shows, sporting events. The early return of business in fall 2020 and spring 2021 has been on the short-term end. Our sincere appreciation goes out to our annual short term client base for their continued support of the PBCCC even during this difficult time. From a national standpoint, sports has really been the juggernaut to get us back to in-person events and our local sports commission has done a great job on that front in Palm Beach County. Long-term business — conferences, conventions, trade shows — come with a sizable room night component and is our primary target. We refer to them as high impact events because they drive revenue to the convention center, room nights to the hotels and economic impact to the restaurants, entertainment areas and attractions in the convention center district. The true industry return for long-term business continues to be pushed back because of the delta variant. Our hope is that long-term business will make a strong comeback in late 2022 or early 2023. What role is technology playing in your daily operations? Technology is pretty much integrated into everything we do. It’s also essential to every client. Vendors on our floors more often than not have exhibits that are technology-based. They need to stream, which requires strong Wi-Fi and expandable bandwidth. Any event that we do, small or large, needs technology in some way. Palm Beach County has been a fantastic partner as owner of the building, and they recently did a Wi-Fi upgrade in the facility to ensure that the we can satisfy even the largest technology shows and handle as many concurrent users as the client requires. 124
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Despite these larger trends, the last two years have been bumpy. Obviously, COVID-19 was a force to be reckoned with. All over the world, people stayed home, flights never left the ground and hotels remained empty. As a result, tourism was one of the hardest hit sectors of the economy. Upon the initial fallout from the pandemic, it is estimated that 90% of union hospitality workers were out of a job. While there was a rebound from those dark days, by January 2021, employment in the sector was still down by over 20% compared to pre-pandemic levels. While some of the suffering has been offset by stimulus money, including $290 million for Palm Beach County alone from President Joe Biden’s signature American Rescue Plan, these are still challenging times for the tourism sector. In Palm Beach County, as with the rest of Florida, the ride has been especially tumultuous for the industry: first the fallout from the initial shock in March 2020,
With more than 150 golf courses, Palm Beach County has earned the nickname “The Golf Capital of Florida”.
TOURISM, ARTS & CULTURE OVERVIEW
Tony Coppola President – United States Polo Association
When I first came to Florida in 1969, there was a club in Lake Worth and another in Boca Raton with approximately 30 members each, and a total of twelve polo fields. Now in Palm Beach County, there are approximately 150 polo fields. During polo season, about 300-plus people from around the world participate in our activities. I would venture to say that during polo season in Palm Beach County there are well over 3,000 horses. Clearly, the equestrian industry has become a big factor in the county. The Palm Beach County Sports Commission has joined forces to promote the sport of polo, as well as other equestrian events. We have a lot of support and the numbers are there to prove it.
followed by a recovery into 2021, which turned Palm Beach County into a tourism hotspot for the country thanks in part to Gov. Ron DeSantis who kept the state’s economy open as many governors kept theirs closed and then the delta surge, which hit Florida harder than most other states and put the economic triumphs of the last year at risk. The numbers in Palm Beach County can speak to this tumult: by April 2020, hotel occupancy rates had fallen to 48% from a high of 89% the year before, with average room rates falling by half, from $279 to $135; bed tax dollars, collected upon hotel stays and the source of funding for many county tourism projects and marketing schemes, fell by 20%, from $54 million in the 2019 fiscal year (a record high) to $43 million in 2020, and that included the first three COVID-free, recordbreaking months of the year; by July 2020, 71 sporting events had been canceled, postponed, or relocated, which resulted in $20 million in economic impact and 80,000 hotel rooms lost; Palm Beach International Airport saw passengers numbers drop 55% from 2019 levels, and in April 2020, only 23,842 passengers passed through the airport (this number had gone up to 270,867 by December); all together, Palm Beach County saw 5.2 million visitors in 2020 (3 million fewer than the year before), which meant $1.6 billion less in economic impact over 2019. Then began the recovery, when the state drew 26.16 million visitors in the first quarter of 2021. By June 2021, Palm Beach hotel occupancy was at 70%, almost double where it had been a year before and even 6% higher than June 2019. With this rise in occupancy came a rise in ( ) www.capitalanalyticsassociates.com
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Market voices: Hospitality trends
Nick Falcone
Managing Principal NDM Hospitality & Rentyl Resorts
When you talk about the hospitality space, there was a massive shift in trends. We all know that in the hospitality space, hotels and resorts make decisions concerning what rates should be, how much occupancy there should be in a particular period. Those changes were really highlighted this year with the COVID-19 pandemic. No one had a crystal ball; no one knew where things were going to go. An area where we were able to create a lot of value for our partners and businesses was to find where those changes were really coming from. We have some very cool technology that allows us to pinpoint who is looking to travel, where they are traveling from, what their interests are and what they’re looking for from an accommodation perspective.
When COVID hit, the hospitality industry told people in lower-paid positions that there was no work and they would need to find something else, so they did. They learned new skills and started to do work that, in many cases, allowed them more flexibility in their schedules at a time when their home lives required it most. There has also been a change in how people see work. There’s an increasing number of people who want to work to live and not the other way around. I think the hospitality industry needs a better understanding of people’s needs, to offer them better conditions if they need a work schedule to take care of children or to study. The industry needs to be respectful and to listen and make sure we offer a work schedule that is adapted to people’s needs. We have to decide to be a great place to work and to let people know that they can have an amazing career in the hospitality industry. We need to learn more about how to attract and retain talent and recognize that workers in this industry want a better work-life balance. That is how we stay relevant and competitive.
Scott Webb
President Kolter Hospitality
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Bernardo Neto General Manager The Ben Hotel
Travel is just starting to come back now, which includes small and midsized groups. We had the opportunity to host a national soccer team in our Westin Hotel in Sarasota in January 2021 and lodged a very large world-famous sports entertainment group at our Hyatt Place hotel in St. Petersburg. It’s wonderful that things seem to be ramping back up nicely. The transient leisure business has picked up substantially as well, particularly in the drive-to-leisure markets. The booking window is short, within two to three days, and can be weather dependent but we’ve seen great results thus far. What has been very interesting is the demand that has continued into the early summer months, which is nothing short of incredible. The next step in the return to a normal cycle is the need for business travelers to come back in the mix and to level out the weekday bookings. We’re starting to see this occur. The final step is for large groups and convention business to come back and we hope to see that in early 2022.
| Invest: Palm Beach 2021 | TOURISM, ARTS & CULTURE
TOURISM, ARTS & CULTURE OVERVIEW
( ) the cost of rooms: the average daily rate for a room in June 2021 ($175) was 30% higher than in June 2020 and 35% higher than in June 2019. Palm Beach County’s tourism sector has been able to keep the momentum going throughout the first half of 2021 due to a number of felicitous circumstances and factors beyond the county’s control. For one, during the pandemic, what has been prized by tourists are lowdensity destinations. With its great beaches, plentiful outdoor activities and lack of a major city, Palm Beach County is nothing if not a low-density destination. This popularity has made for an exceptionally busy summer season in the county, an area where the time of year with most visitors is usually the winter, when well-heeled Northeasterners make a beeline for Florida’s sunny shores. In summer 2021, hotel occupancy was up to 70%, an increase from the typical 55 to 60% (room rates have also gone up accordingly). This upswing in visitors, though, was countered by the fact that there were severe labor shortages resulting from the pandemic, a shortage felt particularly acutely in the hospitality industry. Added to this is the growing popularity of Florida (and the entire Southeast) as a place to live: thousands of residents have moved in from denser and more
The average daily rate for a hotel room in June 2021 was 30% higher than in June 2020 high-priced locales out of state, adding to Palm Beach County’s cache as a destination for intrastate travel. Intrastate travel — in which traveling smaller distances is implicit — has indeed taken off in this time of reduced air travel. Such activity has helped offset the decline of international travel in Palm Beach County, which has been quite precipitous: of Palm Beach County’s annual visitors in a normal year, 10% are international, a number that dropped by nearly 75% during the pandemic. Business travel has taken a similar hit, as remote ( )
TOURISM, ARTS & CULTURE INTERVIEW
Leisure recovery After devastating 2020, leisure travel, which is a key segment for The Palm Beaches, is starting to rebound
Jorge Pesquera President & CEO – Discover The Palm Beaches to demand higher rates for rooms, which produced very good revenues from a bed-tax perspective.
What is the state of tourism in the region? 2020 was a devastating year for the tourism industry around the world and we took a huge hit in The Palm Beaches. Our overall tourism activity dropped about 30 to 40%; however, we have the good fortune of being a predominantly leisure destination and leisure travel has recovered quickly. Our destination rebounded much more swiftly than other regions that are more driven by meetings and business travel. This year, we’ve had several months of very good hotel performance and outperformed our record year in 2019 in the months of April, May, June and July. A lot of that had to do with the pent-up demand from a year of staying at home and the image as a place where health and safety measures are taken seriously and effectively monitored. This allowed our local hospitality industry 128
| Invest: Palm Beach 2021 | TOURISM, ARTS & CULTURE
How should the hospitality industry reinvent itself to attract more talent? Proper staffing has become one of the biggest challenges for the industry. Thought leaders in The Palm Beaches, such as Florida Atlantic University Professor Peter Ricci, are promoting very innovative ideas regarding compensation, scheduling and work-life balance. I agree wholeheartedly with Roger Dow, president and CEO of the U.S. Travel Association, who likes to say, “The hospitality industry provides that first step into the American Dream.” We’ve watched individuals rise from entry-level positions to general manager or vice president and even CEO positions. That’s the beauty of this industry. If you work hard, the sky’s the limit. We’ve seen this play out again and again. What really helps hospitality industry workers are the people and communication skills they must develop through customer or peer interactions, which are critical in any industry. There will always be the need for entry-level positions that don’t have the compensation levels that the high-tech, life sciences and aerospace industries may have, but it’s an opportunity for folks to acquire those communication and selling skills and open doors to fruitful opportunities, perhaps even in other industries. What is your outlook for Palm Beach County? The outlook is very positive for Palm Beach County and The Palm Beaches is favorably poised to capitalize as one of the greatest travel destinations in the world. Our vision statement is to position the Palm Beaches as Florida’s premier travel destination; not the biggest, nor the sexiest, but the one that everyone puts on their bucket list because it has that “must visit” allure created by an effective brand strategy.
TOURISM, ARTS & CULTURE OVERVIEW
Kate Arrizza President & CEO – South Florida Science Center & Aquarium In the past decade, we’ve raised and invested $15 million into the center through projects like Journey to the Human Brain and the Amphitheater. We have a 5-acre science trail and one of the Top 10 mini-golf courses in the country as rated by the Travel Channel. We have the largest refractor telescope on this side of the Mississippi. We have the only public observatory and planetarium in the county. Palm Beach County deserves a top-rate science center. Our goal is to become one of the Top 5 medium-sized science centers in the country. We’ve recently embarked on an ambitious $45 million capital campaign to double in size to do that. We’ll expand to 100,000 square feet and will then be the fourth-largest science center in the state.
( ) work became the norm and traffic from business conventions fell. It is estimated that business travelers will generate less than 50% of what they did in 2019, and conventions are estimated to bring in one-third of what they did two years ago. But, for this year, business travel is unlikely to generate even 50% of the numbers posted in 2019. At best, next year might bring a little more than two-thirds of pre-COVID numbers. As for just convention business, 2021 may generate just one-third of what was pocketed two years ago. In the face of this mixed bag of good news and bad news has come the summer 2021 delta variant surge. July alone saw a tenfold increase in COVID cases in Florida, with the month ending with an average of 15,817 infections per day. In August, a state of emergency was declared in West Palm Beach on account of the rising cases. This has called into doubt the strong showing the state had maintained until that point. Much of this has to do with a low vaccination rate among residents. Vaccinations have clearly been shown to stop the most extreme instances of the virus but that is of no help to a state where only 50% of the adult population is vaccinated. On a positive note, there are early indications that the delta surge has convinced many to change their minds on the necessity of vaccinations. Technology and innovation Technology and innovation helped many sectors of the economy survive through the pandemic that might otherwise have floundered. The relatively seamless continuation of office work through shutdowns is a prime example of how our world was able to adapt
The number of International travelers to Palm Beach County has dropped 75% during the pandemic in ways that would have been unthinkable just 20 years ago. Tourism in Palm Beach County had its own versions of digital and technological adaptability. All over the country, restaurants were able to stay alive by integrating technological solutions for delivery and airports were able to maximize their safety by making the traveling process one where physical touch was left to a minimum. This rise in remote work has prompted many workers and companies to move to the area. Attracted by the beautiful setting, fabulous weather and far less dense populations than what many workers were used to in New York or Chicago, technological entities such as Airbnb, Zoom and Slack allowed for the rise of the “work staycation,” in which work could continue being done from the comfort of a Palm Beach rental. Not that this hasn’t been without its own problems. www.capitalanalyticsassociates.com
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TOURISM, ARTS & CULTURE OVERVIEW
Palm Beach County has 47 miles of coastline, which is part of the Florida Reef Tract, the third-largest coral reef in the world.
The efflorescence of Airbnb has led to some level of abuse, as the Palm Beach Police Department can attest. There have been multiple instances of shortterm renters breaking the rental agreement and COVID protocol by throwing large and loud parties on the weekends that would last until the wee hours of the morning. This is a problem especially acute in Palm Beach County on account of the fact that there are so many part-time residents, as well as residences with guest homes, which can be easily rented out on a temporary basis. In some cases, contact tracing, developed to help manage the spread of the virus, was used to uncover the existence of these huge parties. Another area helped by technology was the shift to virtual meetings and conventions. Without inperson meetings, technological solutions were able to step into the void. Across Palm Beach County, town meetings and other necessary civic functions — such as a hurricane preparedness seminar — were able to transpire over Zoom. Conventions and festivals, a vital lifeline of the Palm Beach County tourist economy, were also able to continue online. Of course, by continuing online, the much sought-after spending brought into the community by visitors does not come. It is estimated 130
| Invest: Palm Beach 2021 | TOURISM, ARTS & CULTURE
that, in 2019, over 1 million business travelers arrived in Palm Beach County, many of these being the result of traffic from conventions. The question of whether these will return in traditional form in 2022 remains open. The Palm Beach Poetry Festival, for instance, is scheduled for January 2022 as a digital-only event. On the other hand, a representative for the Discovery of Palm Beaches reported that there had been more in-person events planned for summer 2021 than even in pre-pandemic 2019, a fact that speaks to the power of the pent-up demand for physical contact that has grown through the pandemic period. Of course, the recent delta surge may put a stop to in-person meetings for some time. Tourism initiatives and strategies All over the country, the decline in tourism resulting from the pandemic has led to diminished municipal revenues, prompting tourism bodies to implement marketing initiatives and tourism strategies to counter the losses. In this vein, Palm Beach County has taken to advertising its tourism offerings with great alacrity. Authorized by the Palm Beach County Commissioners, the Tourist Development Council will bring together $6.5 million in an effort that will include
TOURISM, ARTS CONSTRUCTION & CULTURE OVERVIEW
Dave Lawrence President & CEO Cultural Council for Palm Beach County
attracting domestic tourism. The bulk of the funds, $4 million, will go to Discover the Palm Beaches. While international travel is still at a relative standstill and is not expected to pick up for some time, domestic travel has nearly returned to pre-pandemic levels after the Center for Disease Control gave its go ahead to allow travel for those who have been vaccinated. In a time of COVID, a time when avoiding large crowds and major cities, Palm Beach County has a lot going for it, a fact that the tourism campaign does not hesitate to emphasize. With its wealth of beaches, a premium placed on outdoor activities and world-famous outdoor gardens, Palm Beach County is the ideal destination for many travelers concerned about the virus. By embracing this angle, Discover Palm Beaches hopes to advertise itself to the rest of the state and country as a place where families can be safe from the virus. It’s a wise move. Even if the virus calms down, vaccination levels increase and herd immunity becomes a reality, the lingering anxiety from the pandemic is sure to remain in place for some time. Arts and sports It is not just fabulous beaches and world class hotels that draw visitors to Palm Beach County every year. ( )
What were some of the strategies used to manage the pandemic? As an agency responsible for leading the arts and culture sector in Palm Beach County, the first thing we did was to create a web portal with relevant information for the sector about the pandemic. This site was created within 48 hours. The website included up-to-date CDC guidelines and safety protocols for cultural institutions, links to resources and information, as well as opportunities to apply for available funding. Additionally, we created weekly meetings with cultural leaders to hear concerns from the community. Those gatherings continue today. We also launched a survey for cultural organizations designed to measure the impact on the sector, such as disruptions to programming, and the impact on audience and income over a period of six months. Just over half of the organizations responded to the survey. The results indicated that due to the pandemic, the cultural sector lost $48 million, lost nearly a million in audience and close to 600 full-time employees were laid off or furloughed. Clearly, the impact on the sector was real and immediate. Those numbers provided us with great talking points to advocate for more relief resources for the cultural sector. Through the Council-created Artist Resource Fund, we were able to aid members of the industry by providing them with some essentials, like payroll, rent and even groceries. We also created the Cultural Resiliency Fund in partnership with the Tourist Development Council to fund cultural organizations with up to $25,000 in grants to assist the recovery efforts. How is the process of reopening advancing? The impact on cultural tourism was profound. We had a 30% decrease in funding awards to cultural organizations. Despite the challenges, the sector has been rebounding significantly ever since. Our grant funding is already back to 2019 levels and we see a good trajectory for future growth. We’re seeing huge demand from people to return to cultural venues. www.capitalanalyticsassociates.com
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Labor woes Workforce shortages are being felt across the hospitality industry but Lessing’s long history is proving a plus
Michael Lessing President & COO – Lessing’s Hospitality Group positions available. In Florida, our company is not seeing any significant issues within the labor market at present.
How is your company and the industry navigating ongoing labor shortages? Just like the pandemic, the labor shortage has hit our industry hard. When we were able to reopen and welcome back our teams, we thought there would be more people looking for work. Once the federal increase in unemployment assistance took place, we found it difficult to fill positions in both the front and back of the house. The shortage is even more prevalent when looking for kitchen staff. We’ve always tried to be a company that attracts talent and we pride ourselves on that. People who work for us recommend Lessing’s as an employer of choice and our long-standing history goes a long way in helping us retain incredible talent. Even coming into the summer season, our business has remained strong and that has translated into great 132
| Invest: Palm Beach 2021 | TOURISM, ARTS & CULTURE
How has the sizable influx of new residents into the region impacted the events industry? What would typically be a slower time of year in South Florida, is holding up to be much better than we’ve seen in the past. We believe that result is directly linked to the influx of new people who are moving to Florida and staying year-round. That can only have a positive impact on the state and local businesses. Operating in both New York and Florida, we’ve been able to observe firsthand that people are leaving New York and moving to Florida. There are still plenty of people in New York, but there is no question that there has been an influx of New Yorkers and tri-state area residents down into South Florida. We’ve been in the Florida market now for the past five years. We’re leveraging our name recognition in South Florida and growing our reputation quickly, especially in the Palm Beach County area. What is your outlook for your company? We’re going to continue to evolve our company in Palm Beach County. It has been a great offset to the seasonality of some of our business in New York, especially on the catering side, which is why we started in Florida with the catering operation at Pelican Club. Following our fiveyear plan, we’ve just taken over a new operation in St. Lucie County. We opened Crane Club at Tesoro, which is a club community that is being revitalized. We’ve taken over the clubhouse building and we’ll be doing events, weddings, galas and nonprofits in that 100,000-squarefoot building within the next couple of months. We plan on evolving and looking for opportunities, especially within the Palm Beach County area.
TOURISM, ARTS & CULTURE OVERVIEW
Palm Beach County is host to the Month of Shows, Art, Ideas & Culture, a series of events to promote the local culture.
( ) As befitting this sophisticated region with an extremely high concentration of great wealth, there are diverse artistic and cultural offerings that reliably attract visitors. The Flagler Museum, the former home of the magnate who first developed the area at the end of the 19th century, is a National Historic Landmark that boasts a world-class art collection. The Boca Raton Museum of Art and the Norton Museum of Art also have impressive collections and help diversify the county’s cultural offerings. On a smaller scale, galleries abound in pockets of Delray Beach, such as Old School Square and Pineapple Grove. The entertainment offerings are similarly outsized for this county with a relatively small population size. Among the venues where concerts or shows can be taken, there is the Kravis Center for the Performing Arts in West Palm Beach, Maltz Jupiter Theatre and the Crest Theatre in Delray Beach. Festivals and fairs such as Shakespeare By The Sea, the South Florida Fair, Oktoberfest and Festival of the Arts BOCA also dot the tourism calendar, drawing thousands of visitors in a normal year. All of these institutions were hit hard by the pandemic. Museums had to close and shows could not be staged. Once these places were allowed to reopen, they had to operate at a reduced capacity and had to dedicate a sizable portion of their budget to anti-COVID measures, such as sanitizing stations and glass partitions. Festivals had to be canceled or postponed throughout 2020.
Using CARES Act funds, the Cultural Council for Palm Beach County allocated $189,191 to local arts groups Seasons had to be shortened. But these institutions are looking forward to enjoying a major rebound year in 2021, one that will continue into 2022, especially after long-distance travel returns to full strength. Obviously, the biggest fear in this projected scenario is that the virus will continue to spin out of control. Government relief was able to offset some of the damage wrought by the pandemic. Using some of the federal relief money allocated by the CARES Act, the Cultural Council for Palm Beach County was able to award $186,191 to a number of local arts groups. Furthering this relief, the Palm Beach County Cultural Resiliency Fund, in partnership with the county, was established in October 2020 to provide relief to arts organizations. www.capitalanalyticsassociates.com
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The money was doled out by a panel of arts, tourism and business leaders in the community, with the approval of the Cultural Council executive committee, to different entities according to the strength of their applications, demonstrable financial needs, operating revenue, prior history with CARES Act funding and proof that the organizations in question serve a diverse audience. Ultimately, 15 groups received grants, among them Delray Beach Arts Inc, the Chamber Music Society of Palm Beach, the Spady Cultural Heritage Museum, Lake Worth Cultural Renaissance Foundation and the Palm Beach Shakespeare Festival Inc. Sports is also a big draw for Palm Beach County. The salubrious weather throughout the year makes it an ideal destination for outdoor pastimes. Golf and tennis can be played year-round. Despite the fact that Palm Beach County does not have a major professional sports franchise, no fewer than four major league baseball teams arrive every year for spring training (the Houston Astros, Washington Nationals, St. Louis Cardinals and Miami Marlins). It is the equestrian sports, though, that offer the biggest draw nationally. Riders from around the world come to Palm Beach County to compete in shows and the county is home to a number of worldclass institutions in this sphere, including the Palm Beach International Equestrian Center, the Wellington Equestrian Center, the Palm Beach International Polo Season and the International Gay Polo Tournament. The fabulous weather of Palm Beach County — where it is temperate year round and even in the winter rarely gets below 50 degrees Fahrenheit — makes the region an ideal location for stately botanical gardens. In fact, it was for the cultivation of his garden that Henry Flagler was first drawn here during the Gilded Age. Looking ahead Palm Beach County has a lot going for it. It has beaches, restaurants, amenities, museums and outdoor activities galore. It is located in a prime location in a state primed to be a bellwether in the story of the next generation of American progress. As thousands move to Florida and grow the economy in innovative ways, the attractiveness of Palm Beach County tourism will continue to rise and its cultural offerings should also become increasingly diverse. The worry is that the impending boom —and everincreasing tourist dollars into Palm Beach County — gets thrown off course by a prolonged COVID-19 impact, especially as variants spread. Until the arrival of the delta variant, Florida had done a commendable job at managing its re-opening. But if the path is cleared, tourism, arts and culture in Palm Beach County is poised to live up to its boundless potential. 134
| Invest: Palm Beach 2021 | TOURISM, ARTS & CULTURE
Palm Beach county receives approximately 3,000 horses during polo season.
TOURISM, ARTS CONSTRUCTION & CULTURE OVERVIEW
J. Michael Prince President & CEO USPA Global Licensing Inc.
How has demand for your services changed and what trends are you preparing for? What became most important was digital, e-commerce and innovation. We were already on an aggressive innovation and digital journey but we accelerated over last year, going from a handful of websites to 30 global websites in 15 different languages in a matter of 12 months. We built our social media following to more than 6 million and we continued working on our omnichannel approach between stores and our online business. What is the impact of polo events on the local economy of Palm Beach County? The impact of equestrian sports on Palm Beach County is in the hundreds of millions of dollars that is spent here every season. Equestrian sports create jobs for the teams, the staff and athletes. You also have the impact in dollars spent at hotels, Airbnb’s, restaurants, shopping and transportation. From November until the end of April of every year, Palm Beach County is the equestrian capital of the world. The Europeans come, visitors from Latin America and the Northeast come. We are the epicenter for all things equestrian for five to six months. What is your outlook for your brand and the sports industry in Palm Beach County? Our outlook, despite the many challenges we all face, is quite positive. We continue to pivot in ways that strengthen the business and build the U.S. Polo Assn. brand, including supporting our global partners and focusing on brick and mortar as well as digital innovation. In terms of the sport, we continue to focus on bringing the best players and their equine partners to Palm Beach County for the benefit of the sport, the fans and the county overall. We also have some exciting, first-time global events coming in 2022 that will drive tremendous regional and international traffic here to Palm Beach County. This includes hosting the FIP World Polo Championship in 2022. www.capitalanalyticsassociates.com
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2021 Winter Equestrian Festival Economic Impact: Between tourist expenditures and horse expenditures made by participants, the Winter Equestrian Festival, a cornerstone of the Palm Beach County sports landscape, is a leading economic generator for the region. In 2021, the WEF generated the following impact:
GDP increase:
Labor earnings:
Total horse expenditures:
$83.9 million
$221.1 million
Jobs created:
$278.9 million
2,880
percent of total: Total visitor expenditure: percent of total:
$57.8 million
80%
20% (this figure was lower than expected due to the coronavirus pandemic) Source: Palm Beach County Sports Commission
Overall Tourism Impact on Palm Beach County Economy Economic Impact: Direct Spend
Indirect + Induced
57%
$7
$5.9
Billions
$6
$5
$4
s
0 year
$8
h in 1 Growt $6.6
$4.9 1.7
1.8
1.9
2.0
$7.0
2.2
2.3
2.4
2.4
$7.7
$7.1
$6.3
$5.6 $5.2
$6.9
$7.5
2.5
2.6
-29%
$9
2.7 $5.5 1.4
$3
$2
3.2
3.4
2009
2010
3.7
3.9
2011
2012
4.1
4.3
4.5
4.6
4.7
2013
2014
2015
2016
2017
4.9
5.1 4.1
$1
$0
2018
2019
2020
Source: Palm Beach County Tourist Development Council
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| Invest: Palm Beach 2021 | TOURISM, ARTS & CULTURE