Over the past two years, a number of financial companies have relocated their offices to West Palm Beach in Florida, leading some industry watchers to dub the area “Wall Street South.”
One of the nation’s leading VA mortgage lenders, NewDay USA, recently took over the top two floors of 360 Rosemary, a 20-story, 297,000-square-foot office building in West Palm Beach.
In addition, the company is in negotiations to relocate its Maryland-based headquarters to West Palm Beach. NewDay anticipates the West Palm Beach office to grow to over 500 team members in 2023, according to a press release.
“We continue to see a wave of financial industry giants moving to Palm Beach for a better business environment, an incredible talent pool and warmer winters,” West Palm Beach Mayor Keith James said in a statement. “NewDay USA’s commitment to growth and job creation is helping to turn our vision of creating a community of opportunity for all into a reality.”
Kelly Smallridge is President and CEO of Palm Beach County’s public/private economic development agency, the Business Development Board of Palm Beach County.
Under Smallridge’s leadership, the development board has received numerous state and national awards for recruiting and expanding companies.
Smallbridge is credited with leading the Wall Street South initiative. She recently sat down with The Mortgage Note Editor Kimberley Haas.
Haas: Thank you so much, Kelly, for speaking with us today. We really appreciate it.
We’ve noticed a large migration of individuals that have moved to the Sunbelt during the pandemic and I know that you are very good at recruiting businesses as well.
I’m from the New Hampshire area, so one of the big things that we always try to compete with is recruiting businesses to the state. Florida has done a really good job with that.
I’m wondering if you could tell me a little bit from your personal perspective as the CEO of the Business Development Board of Palm Beach County what you’re seeing on the ground. But first, I’d like you to maybe start by telling our audience a little bit about yourself.
Smallridge: My name is Kelly Smallridge and I serve as the CEO of Palm Beach County’s public-private economic development arm. We are charged with recruiting new companies from out of state to Palm Beach County, as well as expanding and growing those companies that are in our backyard.
If you take a look at the history of Palm Beach County, you will quickly note that we most often are referred to as a tourism destination or a place where you go to retire. But I would tell you, by way of background, I’ve been doing this for 34 years in Palm Beach County, was born and raised in the area, and have seen a complete transformation of Palm Beach County’s economy.
As a matter of fact, we went from tourism, real estate, agriculture, and construction to a knowledge, information technology, life science, and FinTech hub.
A short five years ago, before Covid, there were about five financial service firms of significance that made the move from New York, Boston, or Greenwich to Palm Beach County.
As of today, there are 102 financial service firms that have moved to the area.
Prior to Covid, financial service firms that moved to the area would sign about two-year leases and they would take maybe 3,000 square feet of space. Today, companies are signing eight to 10-year leases.
They are taking 8,000 to 50,000 square feet of space. They are legally domiciled in Florida, and they are taking their children out of private schools in the Northeast and moving them to Palm Beach County.
This is a move that we call Wall Street South. And it is private equity, venture capital, and hedge funds moving from the Northeast to our area.
Just after Covid, 11,000 people moved to Palm Beach County. 41% came from the Northeast.
The greatest switch of license plates from New York to Florida is taking place right here in Palm Beach County.
And so you may ask yourself why? Well, we have no state tax on personal income, but that’s always been the case. We have beautiful beaches. That’s always been the case and it helps.
But we have a very pro-business, business-friendly government, and I think that the mere idea that our governor made Florida open for business, our businesses and our schools, our restaurants, and our retail certainly, made companies realize that we were not going to be open one day and closed another.
And that certainty is something that CEOs and executives really place a big focus on. I think that that has a lot to do with why these companies have moved here.
Haas: Now, along those lines, how you said the certainty of knowing that your business wouldn’t be open one day and closed another, did a lot of people comment on that as they were considering making the move when they were talking with you and other leaders in the community?
I just spoke with a realtor recently who said that he saw a lot of people from New York that were moving because they just simply wanted to have their old lifestyle back. They wanted to be able to go out to eat.
So on the other end, I’m sure those restaurants wanted the certainty that they’d be able to be open. Did you see that in the particular markets you’re talking about, especially when it comes to lending and FinTech?
Smallridge: Yes. So CEOs did comment that certainty was a big factor in their decision to locate here.
I would also state that a lot of these executives were very familiar with Palm Beach County. Either they vacationed here, they had family here, or maybe they had a second home here. And so our area was not foreign to them.
Many of them probably thought that they were coming here because they knew that restaurants and retail were open. And then they looked around and said, “Why not just move my business here, or a portion of the business here?”
And so they started looking around for commercial office real estate to set up something maybe a little small and ended up signing longer-term leases with larger footprints.
Haas: When you talk about these people moving in for these longer-term leases and bigger spaces, how was Palm Beach County prepared for that?
I mean, did you have the right zoning? Did you have the space that you could offer people? Did you have to have the buildings to put these businesses in?
Smallridge: That’s a very good question. And I would say that fortunately the stars were aligned.
What I mean by that is as Covid hit, we happened to have a building that was going vertical by a very well-known developer by the name of Stephen Ross, of the related company.
Mr. Ross, as you know, developed Hudson Yards in Manhattan. So he has a lot of New York connections. He has big developments in Times Square, the New York City area, as well as California, and Miami, and he was going vertical with a building in downtown West Palm Beach of about 300,000 square feet of office space.
The building opened 100% fully leased with 70% of the business coming in from out of state, primarily New York.
That is a complete reversal of the mix that would go into a new office building years prior. If you were a developer and you put up a building 10 years ago, chances are 70% of your leases came from an attorney or an accountant or a bank across the street that was just jumping over to get a newer building.
This time, it all came in from the outside. The activity has been so robust that as we speak today, 1.5 million square foot office space is going up in and around the downtown West Palm Beach area, which is just due west of Palm Beach.
Some of those buildings are already 60% pre-leased and again, showing strong signs that the leases are coming from out-of-state companies.
So I do not see the pipeline shutting off. I continue to see a steady flow of companies that have a very strong interest in moving out of high-tax states to a state like Florida with no state tax on personal income.
Haas: Now, how did zoning boards plan for this and how is your organization instrumental in making sure that they understood that they had to approve some of these high-rise structures to accommodate this need?
Smallridge: So the city of West Palm Beach is the government jurisdiction where a lot of this office space is being developed, and multiple developers came in and assembled properties that were already in the downtown core.
So to answer your question specifically, there was already commercial activity going. It was a matter of revitalization in the downtown core from something that may have been a parking lot to a high-rise 15-story structure.
The commercial activity was not foreign to the city. It was a matter of just increasing density.
The city welcomed that because like most areas throughout the United States, we have ebbs and flows and everyone in Florida, most economic development platforms and government jurisdictions, have always been looking for ways to balance out tourism, real estate, and construction with more knowledge and information-based companies.
So going vertical to attract FinTech, corporate headquarters, and life science companies has always been very attractive. And that’s exactly what these buildings are capturing.
Haas: It sounds like then, that this was a place that was commercial anyways, and people were open to the idea of revitalizing, like you said, maybe a parking lot into a 15-story building.
Smallridge: Right. There was only one area that was controversial, and it’s called One Flagler. And it’s because it abutted up to First Church of Christ, Scientist on South Flagler Drive.
It took multiple years to get through the zoning process. And it probably now is the building that is furthest along in construction.
That is a Stephen Ross development. They did not give up. They ended up making some concessions whereby they would help restore the church, which was financially struggling.
So the giveback – there were a couple of givebacks – restoration of the church, making the church more financially viable, and some other things that they did to make it even better than it is today.
And then in return, they got to go vertical.
Haas: In your position as CEO, you could almost offer that as advice to other communities, a little give and take.
If a developer wants to come in and the residents are concerned, well maybe there are some things that they could do to revitalize properties and make it a better fit for the entire community.
Would you endorse that philosophy in other places?
Smallridge: I sit on the International Economic Development Council for the United States. I represent Florida.
I also sit on the Southern Economic Development Council, which are the southern states of the U.S. and I do and have contributed exactly that because I think that all eyes are on South Florida and the state of Florida right now in terms of the way that we are managing growth.
As I travel throughout the United States, I’m constantly sharing the balance that can be struck. A lot of people will say, “No, I don’t want that in my backyard.” But what I always tell policymakers is that you must already have some commercial activity approved.
You either have a shopping center or maybe a rundown one-story center that it’s already commercial. It’s already a strip mall.
So why not go vertical with something that’s a little bit more dense rather than plowing down green fields in other areas?
I’m not for knocking down trees and changing green areas. I’m really advocating to go a little bit more dense on what we’ve already come to expect commercial activity to be on.
For example, we have a workforce housing crisis in Palm Beach County. And what I’m advocating for is that there are single-story shopping centers that may be empty and built in the 1950s that we could build eight-story workforce housing units on.
We could still keep all of our beautiful parks and we have a lot of preserved areas in Palm Beach County.
Haas: I was gonna ask you about workforce housing. As you recruit these businesses, particularly businesses like NewDay USA to the area, are they looking for employees? Are they concerned about workforce housing? What are they saying, especially bankers, lenders, and FinTech people?
Smallridge: So, NewDay USA is probably the biggest win for West Palm Beach in decades. And I mean that in terms of the number of employees that they’re bringing to the area, but there’s also something super unique and cool about what NewDay has done for our downtown core.
NewDay USA is bringing in very young people who are bringing a lot of energy to our community. Here are 21 to 27-year-olds, hundreds of them that are frequenting our restaurants and our retail.
It’s just so nice to see the average age come down considerably due to the presence of NewDay USA.
So it’s a big win for us. And other lending companies, I’m sure, are keeping their eyes on how easy it was for NewDay USA to open up shop in Palm Beach County.
We were able to expedite their permit, we were able to help them with the sign on their building, and we have served as a concierge service to companies like NewDay because they’re new in the area and don’t really know all of the services that are available. They don’t know where to go.
It could be anything from a top executive wanting to know if they could get a private tour of a public school or private school, or maybe they need access to some doctors, or maybe they are looking to contribute to a charity organization that serves veterans or they want access to a particular facility or an introduction to a mayor. All they need to do is pick up the phone.
Haas: Now, did they approach you Kelly, or did you approach them? Are you actively recruiting?
Smallridge: We are actively recruiting. I travel to New York next week and plan to meet with a hundred or so brokers. I’m constantly pitching and traveling.
We have a $300,000 advertising campaign outside of the state of Florida. And it’s digital and it is print.
It’s a very aggressive campaign. It starts with “Hello Sunshine,” and it’s billboards print ads. We do geofencing. We find ourselves in areas where we know that top executives will be, whether it’s an art show, or maybe it’s a boat show, or maybe it is a FinTech show in Manhattan.
We travel with the state’s economic development arm run by Governor DeSantis as well.
Haas: Do you have a sense of what the economic impact has been to the region and whether or not wages for the average worker have gone up as a result of the recruitment of these companies from out of state?
Smallridge: The values of our homes have almost doubled.
It wasn’t too long ago that the average salary of Palm Beach County, the median wage, was $61,000. Today it is $68,000.
To put it in perspective, it is the highest median wage of all 67 counties in the state of Florida.
Typically, our median wage year over year goes up about $200 to $300. It went up a couple thousand dollars. It’s the largest jump we’ve ever seen.
Haas: And how about the other businesses that benefit from having these lenders, these FinTech companies? Like you said, you have all those young people going out to eat in the restaurants, they’re buying items right there within a walkable distance. They’re even thinking about maybe purchasing homes in the area. What has the response been?
Smallridge: Our area businesses love it. They are overjoyed that they’re doing well financially, whether it’s your dry cleaners, your florist, your little sandwich shop, your brewery down the street, or your full-blown restaurant along the water.
You know, there’s a big difference in economic impact when you’re just employing someone that’s lived here already versus someone that’s coming in from the outside.
If I were to go take a job somewhere else down the street, then I just go over to that new employer and that’s it. But when someone comes in, say from Maryland, they have to buy a house, they have to establish a new connection for the maintenance of their car.
They have to establish a new relationship for the dry cleaners and all their personal services. That’s a net new to Palm Beach County.
Haas: I always think about the schools, you mentioned private schools for the executives of some of these companies, but how about the public schools? Have they had any problems accommodating these students and how have they worked around that influx of new people?
Smallridge: There’s been no problem accommodating the students. It’s an A-rated school district.
Any executive that has given me the opportunity to show them the sophistication of our public schools realizes that that adage or old perception that Florida didn’t have good public schools, they realized that the perception is not reality.
However, given the fact that the primary market companies relocating is from the Northeast, there’s this sentiment among the executive level that it doesn’t matter how good our public schools are, they’re still going to send their children to private school.
It’s the mid-level managers and the support staff that are going to public school. And it works out just perfect because here in Palm Beach County, there is a system whereby if you want to put your child in a finance academy or a life science academy, or some other area of interest, and there are probably 25 types of academies.
The academies are in alignment with the industries that we are nurturing.
According to leaders at the Business Development Board of Palm Beach County, between October of 2021 and 2022, 33 companies relocated to or expanded in Palm Beach County, creating 2,502 high-salary jobs and 1,689,109 square feet of occupied commercial or industrial real estate.
These companies, specializing in life sciences, distribution, manufacturing, financial services, and aviation, brought $1.12 billion in capital investment and 13,110 jobs to the area.
$362,588,797 was invested back into Palm Beach County as a result of the relocations and expansions.
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