Rents on homes in West Palm Beach historic communities soar after pandemic buying spree

Annual rental prices upwards of $20,000 a month are hitting some of West Palm Beach’s most popular neighborhoods in a housing market where rules are still being rewritten by the pandemic.

Single-family homes that may have fetched $8,000 a month for a year-long lease in 2019 are going for more than double that. A pre-Covid $4,000-a-month rental home in the sought-after south of Southern Boulevard community but near noisy Dixie Highway with no water view is rented for $10,000 a month.

And a $25,000-a-month lease was signed Nov. 3 on a landlocked, but fully renovated, home south of Southern. That’s an on market record-toppling $300,000 a year for the so-called SoSo neighborhood on a home that likely would have rented for at least $100,000 less before West Palm Beach was dubbed “Wall Street south.”

“We are definitely forging new price points for rentals in the last year or so,” said Rosalind Clarke, a Realtor with Premier Estate Properties. “Covid started the whole frenzy and it’s just carried on with the rentals.”

A home for rent in the El Cid Historic District in West Palm Beach for $14,500 a month in November 2022.

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The reasons people are willing to rent at the higher prices runs the gamut.

Some are Covid-era transplants who are having their own home built in South Florida or are renovating a newly-purchased home and need a place to stay during the process. Others want to give the area a test drive before committing to buying a house. Higher interest rates that averaged more than 7% on a 30-year mortgage in mid-November may be keeping a few buyers on the sideline, even those that can afford a $20,000-a-month rental, said West Palm Beach real estate developer Sam Fisch.

“You don’t have a lot of money without being smart about it and if interest rates are high, you may not be in a rush to buy,” Fisch said. “No one ignores interest rates, no matter how much money you have.”

Accurate numbers on single-family rental prices can be difficult to get with some of the haughtiest homes never making it to the public marketplace and no official records filed, such as a deed when a home is sold. The online brokerage and home search firms Redfin and Zillow both said they couldn’t hone in on annual rental costs for individual communities.

Realtors acknowledged it’s even difficult for them to find timely information about home rentals on the Multiple Listing Service where entries may not be updated with the actual rental price versus the asking price or marked as no longer available. Also, seasonal leases may not be designated as such but are often more expensive than a long-term lease.

But it was widely agreed that prices for annual leases on properties that may be 60 to nearly 100-years-old in SoSo and the historic El Cid and Prospect-Southland Park neighborhoods just south of downtown West Palm Beach have increased substantially.

“I was shocked on Sunday to read the real estate ads in the Shiny Sheet (Palm Beach Daily News) to see the rental fees being tossed out for homes in El Cid and other neighborhoods that were listed,” said long-time El Cid resident Nancy Pullum.

A home one block north of Pullum on Pershing Way was on the market to rent for $40,000 a month, according to Zillow. It was unclear if the listing was for a seasonal rental, but on the same street a 5-bedroom house is advertised as an annual rental for $11,500 a month.

“Rental prices that were solely reserved for Palm Beach island are now commonplace in West Palm  Beach,” said Michael Melear, a Realtor associate with Douglas Elliman of Palm Beach. “I think there is still historically-low inventory in the rental market and more people are moving here every day.”

Melear was excited earlier this year when he negotiated a deal for a $240,000 annual lease, $20,000-a-month, on a home at 110 Arlington Place. The 2,400-square-foot house has a dock on the C-51 canal with access to the Intracoastal Waterway, but it’s still 60-years-old and sandwiched between homes on 0.19 acres of land.

It was leased the first day it was on the market. Melear said the price tied the record in the community for highest annual rental cost.

Record-breaking rental price for West Palm Beach’s SoSo community

But then Compass Realtors Brooke Murphy and Kyle Backmon snagged a $25,000-a-month lease for 18 months on a home less than two miles north at 215 Essex Lane.

Murphy said she was surprised she and Blackmon were the new on-market record-holders in the neighborhood. Off market leases, where the home isn’t advertised, have been higher.

Daniel Ekerold, executive director of luxury sales for Douglas Elliman of Palm Beach, said he did an off-market annual lease this fall for $39,000 a month on a home in SoSo.

“From our point of view living here, they seem like high numbers,” Murphy said. “But as West Palm Beach continues to grow and new development increases along the Dixie corridor, the demand is overwhelming supply, especially in quality homes.”

215 Essex Lane in West Palm Beach rented in Nov. 2022 for $25,000 per month with an 18-month lease.

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Fisch said his company sold many single-family homes in West Palm Beach during the past two years to investors who saw the increasing demand in South Florida. He said it’s become a new investment category for high net-worth people because it’s easier to rent one big house than multiple apartments.

With Wall Street firms and private equity financiers and hedge funds announcing moves to West Palm Beach, and new Class A office buildings planned, investors saw a chance to make a buck off transplants accustomed to renting and paying New York prices.

Also, in the older communities near downtown West Palm Beach there are no formal homeowners associations to make sweeping rental restrictions, which is a lack of oversight attractive to investors.

“A non-HOA community is a renter heaven where an investor can go in and do whatever they want,” said Jeff Lichtenstein, president of Echo Fine Properties. “And West Palm Beach is a special market because you can go out to eat, go shopping, go to the symphony and the museums, all right there.”

The market for vacation rentals through companies such as Airbnb and VRBO has also increased, according to the Denver-based company AirDNA, which studies the short-term rental market.

A home for rent in the Prospect-Southland Park Historic District in West Palm Beach in November 2022.

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In September 2019, West Palm Beach had 1,206 available listings to rent an entire home on Airbnb and VRBO. That jumped 41% to 1,705 listings this past September. The average daily cost to rent an entire home rose from $248.38 in September 2019 to $318.40 in September 2022. That’s a 28% increase.

Not all landlords want to do short-term or seasonal rentals. Lisa Wennick, a broker associate and director of luxury sales with Douglas Elliman in Delray Beach, represents an owner who is adamant she only wants an annual renter for a home on Greymon Drive in the Southland Park Historic District.

The owner bought the 1926 historic house, which is between Dixie Highway and Olive Avenue, in June for $1.5 million then put it up for rent for $13,000 a month. At 1,640 square feet, it’s been getting less attention than bigger homes, but the owner is readying to fully furnish it in the hopes that will make it more attractive.

“People hear $13,000 a month and they say they could have bought the same house for $1.2 million a year and a half ago and that this is out of their budget,” Wennick said. “You have to look at the competition. Suddenly there are a lot more rentals.”

Still, investors expect the rental market will stay elevated.

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Palm Beacher Martin Sprock has purchased at about a dozen single-family homes in West Palm Beach and Lake Worth Beach the past two years under a limited liability company called Round Boys. Several of them are historic homes that he’s renovating with plans to rent them once construction is completed.

“We bought a lot in Prospect Park, which I think is one of the most wonderful neighborhoods anywhere,” Sprock said. “We don’t want to gouge anyone. It’s not a get rich scheme.”

Sprock is the co-founder of Moe’s Southwest Grill and Planet Smoothie. He’s since sold those companies but has a number of new fast-casual restaurants, including Kid Cashew, Ru Ru’s Tacos and Tequila and The Flying Biscuit Café. He’s hoping to put a Kid Cashew at the corner of Edgewood Road and South Dixie Highway in West Palm Beach, and a Ru Ru’s Tacos and Tequila in the former Blue Front BBQ restaurant in Lake Worth Beach.

Mae Ferguson, founding agent and senior global real estate adviser for Sotheby’s West Palm Beach office, is working with Sprock to ready his homes to rent and would like to do so with year-long leases.

Sprock’s smaller homes may fetch $12,000 a month. But she is hoping to get $20,000 to $25,000-a-month for a renovated 2,600-square-foot house built in 1925 on a double lot in West Palm Beach’s Prospect Park Historic District.

Before Covid, it might have gotten $8,000 to $10,000, she said.

“I think people who would normally rent in Palm Beach are coming over the bridge,” Ferguson said. “They are going to be paying in West Palm Beach closer to what they used to pay on the island, and the houses here are beautiful.”