Could a high-profile financial firm boost the Clematis Street business district?

Two years ago, an investment group took a hard look at downtown West Palm Beach and thought about the future of the city’s business district.

At the time, all eyes were on a new steel-and-glass office tower dubbed 360 Rosemary, which was filling up with financial firms fleeing crowded Northeast cities during the pandemic.

But an investment group thought there was a market for something else: boutique office buildings offering luxury perks in the heart of the city's historic downtown.

Together with Wheelock Street Capital, Brand Atlantic Real Estate Partners began building 300 Banyan, a waterview office tower planned with ultra-luxury finishes on the site of an old parking lot. They also bought the three-story building next door, renamed it 111 Olive and commenced a gut renovation of the 1936 building, designed in the Art Moderne style.

This month, the Banyan & Olive complex inked its first major tenant, Alvarez & Marsal Capital of Greenwich, Connecticut. The private equity firm, which manages more than $4.6 billion, will open a new office at 300 Banyan when the building is finished next year.

The lease is a coup for the project's investors and a win for the Clematis Street business district, the longtime center of commerce in downtown West Palm Beach. The deal also is a boost to West Palm Beach's reputation as a growing financial center at a time when real estate analysts are signaling alarms about the nation's slowing commercial real estate market.

Interviews with real estate investors, attorneys, brokers and developers indicate that for now, Palm Beach County and in particular West Palm Beach are an exception to the national slowdown in commercial real estate.

More: Terraces, outdoor patios at the office? New West Palm complex seeks companies wanting perks

Why Alvarez & Marsal is opening a West Palm Beach office

In a statement, Alvarez & Marsal founder Jack McCarthy said he was drawn to 300 Banyan's design, proximity to restaurants and the nearby Brightline passenger rail station. The building won't just have office space; it also will have outdoor terraces, an amenity deck and an indoor/outdoor fitness center befitting a luxury hotel.

Brand Atlantic managing partner Andrew Dance said his goal in building 300 Banyan was to create a building so filled with perks that tenants and employees would want to go to the office despite the prevalence of today's work-from-home arrangements.

Alvarez & Marsal's management "got it from the start: the location, the design, the amenities," Dance said.

UPDATE: Clematis Street eyed for investment, revival as money pours into West Palm Beach

Will West Palm Beach's office market maintain its momentum?

Demand for West Palm Beach office space has slowed from the frenzy of the past couple of years when the pandemic prompted a wave of companies moving to the city from crowded urban climes in the Northeast.

For the most part, those companies landed at Class A office properties built or owned by the city's dominant real estate developer and investor, Related Cos. of New York.

These days, lease activity isn't moving as quickly as it was even last year, said Stephen Ross, Related's chairman and the owner of the Miami Dolphins football team.

"I think people are being more cautious," Ross said in a recent interview with The Palm Beach Post. That said, "we're talking to a lot of tenants," Ross added, "and the activity is still there."

Indeed, Ross recently likened West Palm Beach to Greenwich, a suburban enclave for New York executives and a financial hub in its own right.

In addition to 360 Rosemary, Related owns three other top-tier office towers downtown. And more are on the way.

Construction continues at One Flagler, a 25-story ultra-luxury office tower at 154 Lakeview Ave., overlooking the Intracoastal Waterway. Meanwhile, at The Square, the mixed-use center (formerly known as CityPlace) that Related built and still owns, Related plans to build two more office towers, East and West. The towers will be built where the AMC Theater and the Improv Comedy club used to operate.

What's coming to the Square? See details on the two high-rise towers coming soon

Ross' bullishness comes amid changed market conditions that have delayed at least one major corporate expansion to West Palm Beach.

New Day USA, a mortgage refinance company, was expected to move its Maryland headquarters to a planned 500,000-square-foot tower at 515 Fern on the north side of The Square. New Day USA reportedly planned to lease about half the building in what Related billed as the largest office complex ever built in the city.

Ross said plans for New Day USA’s relocation are on hold due to higher interest rates, which affect the mortgage refinancing business.

"The company is sensitive to interest rates, and I want to see how they're doing," Ross said.

Even if New Day USA doesn't move its headquarters to West Palm Beach, the company still has a major presence at The Square, where it leases two floors at 360 Rosemary. New Day USA’s CEO, Rob Posner, did not return a phone call seeking comment.

Migration to West Palm blunts national office space slowdown

West Palm Beach’s gains are in contrast to some office buildings elsewhere in the country, where buildings are half-empty and employees still work from home for at least part of the week.

New York University and Columbia University researchers recently said the value of New York City's office real estate declined by more than 40%, in large part because some office tenants aren’t renewing leases.

The finding is not unique to New York. In fact, the study found that, nationwide, the overall value of commercial office buildings is expected to decrease by $500 billion.

Earlier this year, a Morgan Stanley strategist even warned a commercial real estate crash could be imminent.

Real estate experts said they don't see evidence of a coming commercial crash in Palm Beach County, but there are caution signs.

Some industry experts say they're seeing increased pockets of subleases in South Florida.

Others, such as Barry Lapides, a commercial real estate lawyer with the Berger Singerman law firm, said he's seeing law or accounting firms wanting shorter-term leases for smaller space. "You’re talking two to three years sometimes," Lapides said.

Lapides said he's not seeing this trend at new Class A properties in West Palm Beach, however. There, financial firms are willing to pay big rents on long-term leases for nice space and perks, Lapides said.

West Palm Beach Class A office space pricey, but still 95% full

How much does this nice new space cost?

In West Palm Beach, Class A rental rates are least $80 per square foot, not including taxes, insurance and maintenance, said Kevin Probel, senior managing director with the JLL commercial brokerage in West Palm Beach.

Even at these prices, Class A buildings are about 95% full, Probel said.

Overall, "the West Palm Beach office market is still pretty active,” Probel said. ‘It’s not as active as 2020, but there’s still a lot of interest.”

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Anthony Librizzzi, managing director of Cushman & Wakefield brokerage, agreed.

Together with Cushman vice chairman Brian Gale, Librizzi represented the landlord on the high-profile Alvarez & Marsal lease.

Librizzi said he's also been busy with leases in older buildings, including a recent large lease at 1501 Belvedere Road for co-working space.

The Press complex garners tenants, possible buyer

Another older office building property seeing activity is the Workspaces at The Press, where The Palm Beach Post has its newsroom. Several new office leases recently were signed.

Among them is a lease with Palm Beach Atlantic University.

The private Christian university in West Palm Beach will occupy 18,000 square feet, or half a floor, for staff members working in its physicians’ assistance program, said Dustin Ballard, Tricera president and head of leasing for Tricera Capital, the building's owner.

Tenants taking space at The Press "aren't necessarily new to market," Ballard said, "but they're still looking to take large blocks of space."

In fact, interest in The Press site, which also includes Starbucks Coffee, Joseph's Classic Market and other retailers, is so strong that the entire complex could sell by year-end.

The 2751 S. Dixie Highway site went up for sale earlier this year after Tricera began fielding unsolicited interest from suitors, Ballard said.

The 11.6-acre property is just south of the downtown area, in the booming South Dixie Highway corridor.

Not only does The Press have a water view office building, but the site also has 3.5 acres for development into multifamily housing, Ballard said. Recently, a pedestrian bridge was built over the FEC railroad train tracks to the 3.5-acre parcel, now a parking lot on the west side of the property.

Could history be a draw for office tenants?

Meanwhile in the downtown, Dance said he's optimistic that the historic 111 Olive will ink leases, too. The post-Art Deco building was designed by John Volk and built with 14-foot ceilings made of Dade County pine wood.

Under Brand Atlantic's ownership, plenty of modern perks were added to the structure, too, including a suite featuring a golf simulator.

Downstairs, Pubbelly Sushi will open in the fall. And an unnamed signature restaurant is coming to ground-floor space in both 111 Olive and 300 Banyan, with an outdoor dining terrace between the buildings.

Even in the sluggish summer months, prospective tenants are eager to see the spaces.

"We've been doing tours even in the heat, and we're getting a great reaction," Dance said. "We feel very good about things."

Alexandra Clough is a business writer and columnist at The Palm Beach Post. You can reach her at aclough@pbpost.com. Twitter: @acloughpbp. Help support our journalism. Subscribe today.

This article originally appeared on Palm Beach Post: Top finance firm snared for luxury West Palm Beach office tower