CITY, NEIGHBORHOOD AND MARKET DESCRIPTION & ANALYSIS
The City of Delray Beach is located in southeastern Palm Beach County. Delray Beach encompasses roughly 16 square miles and was developed throughout the 20th century. The city limits development to four stories. Delray Beach is 90% developed, according to published information by the city.
The city was first developed from the 1920s to the 1960s; the commercial core has historically been E. Atlantic Avenue. Through the 1970s and 1980s, new development was focused was in western parts of the city as well as west of the city in unincorporated Palm Beach County. Several once vibrant areas of eastern Delray Beach were not performing well and appeared neglected. The city established a Community Redevelopment Agency (CRA) in 1985 encompassing 1,968 acres east of I-95. In the 1990s through the present year, the city has experienced tremendous market activity, including redevelopment, property owner reinvestment and price appreciation.
The city is extremely diverse. The city has been recognized as al All-American City in both 1993 and 2001; this designation identifies communities which have had constructive citizen participation and collaboration of public, private and nonprofit sectors in identifying and resolving critical issues.
The area is generally defined as the area south of George Bush Blvd (NE 8th St), west of A1A, north of SE 10th St and east of Swinton Ave. It has reached a revitalization stage in a typical neighborhood life cycle.
Atlantic Avenue and Federal Highway are the primary downtown thoroughfares. Atlantic Avenue is known for its pedestrian-friendly wide sidewalks covered by canopies and trees and lined with small boutiques and restaurants and vibrant nightlife. Federal Highway is known for its recent trend towards redevelopment of a town home, residential condominium, commercial or mixed use product. Six-lane Federal Highway is split into northbound and southbound lanes by one full city block containing commercial and residential structures.
Several residentially-focused projects have been completed, are under construction, or are proposed and sales had been strong in recent years. Sales for these town homes and condos have been in the $300,000 to $800,000 range, or $200s to $400s/ SF. According to our research, Delray’s downtown/ Federal Hwy market has absorbed 820 units since 2000; any project constructed through 2005 had been sold-out. Currently, just over 2,000 units are in various stages of the development cycle, which represents 245% more than the number of residential units built and absorbed since 2000. Some large residential projects are being cancelled due to recent softening of the market, which has been in part due to excessive inventory, but also due to increases in construction costs.
A total of 193,500 SF of office space is planned to be developed in upcoming years in Delray’s downtown and Federal Highway corridors; this represents an 18% increase of the existing space in this same area. The majority of this development is planned in two projects along S Federal Highway, near the fringe, and outside of the downtown core.
Also, a total of 337,190 SF of retail space is planned to be developed in upcoming years in the Delray’s downtown and Federal Highway corridor. This represents a 38% increase over existing space in this same area. These spaces primarily consist of ground floor retail of mixed-use projects (primarily residential) and are primarily focused in the downtown core.
Many projects proposed for development from 2004 to 2006 are experiencing similar current development constraints, such as rising construction material costs, rising interest rates and softening of the market for residential projects. It is unknown at this time how much of this planned increase in inventory will be constructed; several projects have recently been cancelled.
Existing space along Atlantic Ave is considered the one of the most, if not the most desirable retail space in the Delray market. Spaces are generally between 1,000 and 5,000 SF. Rents are at the high end of the range for this space and are expected to remain desirable whether or not the new projects are constructed. Trends observed for both retail and office spaces include a decrease in vacancy rates and increases in lease rates; this trend started in 2002 for retail space and in 2005 for office space. The trends are expected to continue.
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