2 min read October 2023 — Reid Boren, managing partner and founder of Two Roads Development, talked to Invest: about how the rapid demographic and economic growth of Palm Beach County has brought in potential buyers for the company’s luxury residential products. He listed rising interest rates, high insurance premiums, inflation and qualified labor shortages as the main challenges that the company must overcome to continue thriving.
What have been some of the most important milestones that Two Roads Development achieved over the past year?
We have been incredibly busy. We started construction on Forté on Flagler, our residential tower in West Palm Beach, and sales have remained robust. We have only five residences left and just recently completed the seventh-floor concrete pour. West Palm Beach in general has been an exciting place to be. The businesses that have moved here, from law firms and hedge funds to great restaurants, have been a huge driver for our market. This is a different city than it was when I first moved here in the early 1990s. There is a vibrant, young set of smart people who have made West Palm Beach their home.
How has demand for your services shifted in the past year?
In the specific case of West Palm Beach, Two Roads Development has a very specialized, high-end, luxury product. The least expensive unit we currently have on the market is almost $15 million, so we have highly specific buyers, and we have noticed more of these buyers than ever before.
There has been a demand shift from people wanting to be on Palm Beach island to preferring West Palm Beach because of its access to I-95, the airport and the great restaurants. These changes are naturally accompanied by their own set of challenges. There are locals who have been here for a long time who feel displaced, which is expected for any growing city. However, we think newcomers make the city more interesting and vibrant and have witnessed how the local museum and zoo, as well as organizations such as the Boys and Girls Club, have been beneficiaries of this expansion. I hope that will also trickle down to make it more livable for the people who work in local service industries.
What are some of the most important obstacles or challenges that Two Roads Development has faced over the past year?
The top issues affecting luxury real estate are high interest rates and insurance. Higher interest rates have made our business much more challenging. Inflation has also been a challenge as the cost of building has increased. We have seen how everything has become a little bit more expensive. Even though we are selling residences for more than originally anticipated, our margins are not notably different because costs have also increased.
Another challenge we have encountered is finding quality labor. Workers have a better chance of a nicer existence here thanks to new construction projects, fewer taxes and a nice environment, so thankfully we are seeing employees working in trades relocating to West Palm Beach to provide employers some relief.
What is necessary for real estate demand in Palm Beach County to remain sustainable in the long term?
I think it is sustainable. Thanks to a good tax environment, Florida is one of the few states that has more people moving here than leaving. For young people who are making $100,000 to $150,000 a year, moving here instead of to places like New York means saving about $13,000 to $25,000 a year right off the bat. They could have a beautiful apartment, a nice car and a better quality of life compared to other cities. As long as we offer interesting jobs and a business-friendly government, we can expect demand to remain sustainable.
We cannot really expect to see the meteoric rises in price that were common during COVID-19. There was a frenzy at that moment that was slightly unnatural and most likely cannot not be sustained. Nobody can expect to buy a house this year and sell it for 20% more next year as happened back then. Nevertheless, we can have a market that continues to grow and thrive.
How ready is Palm Beach County to weather out a potential economic downturn?
Seeing the high interest rates and inflation in our markets, I think everybody needs to position themselves for a possible downturn. Nevertheless, the dollar is doing well against pretty much every other currency and I think Florida is poised to continue to experience growth.
What advice would you give somebody who is planning to start a business or invest in the Palm Beach County market?
Some of our projects are expected to be delivered in January 2025, but other projects, and especially the larger ones, are much further out. Rather than focusing on the next six to 12 months, we focus on the longer term. Most people would agree that interest rates will be lower, and that Florida and West Palm Beach will be more valuable in three to five years. I think it might be rocky on the way, but I like our chances. Two Roads Development is well capitalized, and we are prepared for things to not go exactly our way. However, the horizon for our city and our state is good.
What are some of the most pressing needs that Two Roads Development has identified in the West Palm Beach area?
We need to make quality workforce housing a reality. The challenges in doing so are in ensuring that we take neighborhoods struggling with crime and homelessness and finding civilized places in which the people can live, get medical treatment and find jobs. Additionally, many people are driving their own car to work or commuting with Uber, but the Brightline has been a game changer that people must experience and take advantage of. The more people who can commute between Boca Raton, Fort Lauderdale, Miami and West Palm Beach, the better.
The West Palm Beach region needs more schools, including enhanced public schools. Currently, many of the local private schools have plans to expand because of increased enrollment. Additionally, our government must ensure there are suitable places for people to live and that they can earn good wages.
What is your outlook for your organization and the region over the next few years?
Most of the real estate projects that are either proposed or under development are beautiful, thoughtful and well-designed. The developers seem to be civic-minded, and I believe that they will be successful whether they sell out in the first year or go through a normal sales process that sells out a project over time. Two Roads Development is still seeing buyers moving to West Palm Beach from across the market, so while the next year or two may be challenging financially, they will still be good for our city and Palm Beach County as a whole.
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