By Jane Smith
Property values continue to increase by double-digit percentages in Delray Beach’s Community Redevelopment Agency area.
When the county property appraiser released its 2016 taxable value estimates on May 27, the numbers showed a 13.2 percent increase in Delray’s CRA district from 2015. That follows a 12.8 percent increase from 2014.
The uptick comes mainly from property sales on the bustling Atlantic Avenue, now a popular adult playground for tourists and county residents.
“It’s been a steady climb,” said Tom Prakas, a restaurant broker who said he placed 30 to 40 restaurants along the avenue. “The sales prices are 10 times what they were trading for 10 years ago. … Everyone wants to be there.”
He predicts the prices will triple again in 5 years — “if restaurants and retailers continue to do well.”
But longtime merchants wonder how the character of the street will change when tenants have to pay increased rental rates to go along with the high-priced sales. Even if a tenant has a long-term lease, that business may face an increase in property taxes charged as part of the common area maintenance fees, said Bruce Gimmy, who owns the building for his store, The Trouser Shop & Shorts.
“I’m concerned about the health of the downtown,” Gimmy said. He predicts some merchants who pay the $100-square-foot rental rates will soon leave and the avenue will turn into a “food court by the sea.”
During 2015, 13 properties changed hands along the avenue according to the property appraiser.
The top sales price of $19.5 million raised eyebrows for even the jaded Atlantic Avenue watcher. Two buildings, 326 and 400 E. Atlantic, were sold by the George family to an affiliate of Menin Development, which built the Downtown at the Gardens in Palm Beach Gardens and owns the Regal Cinemas in Royal Palm Beach.
Menin has since moved its headquarters to Delray Beach. CEO Craig Menin paid $17 million in September for an oceanfront mansion in Delray Beach.
The Delray Beach commercial buildings straddle the SE Fourth Avenue intersection. On the west side, at 326 E. Atlantic, sits the Green Owl Restaurant. The diner has rented the space for 33 years. County property records show that building as having 7,572 square feet. Tenants on the east side, in the 14,704-square-foot building at 400 E. Atlantic Ave., include Huber Health Mart Drugs and Kilwins Delray Beach.
The company wanted a higher rental rate for 326 E. Atlantic and offered to move the Green Owl across the street to Southeast Fourth Avenue, behind Huber Drugs. Menin will build out the space to the Green Owl’s specifications. Terms of the lease still need to be worked out, said Dave Gensman, the diner’s owner. The restaurant will close in June and open in November in a slightly smaller space with 20 fewer seats, Gensman said. He will take most of the owl knickknacks — the ones he likes “because they have sentimental value,” he said. “Others may get lost in the move.”
In its space, Capital One Café, a bank division, will lease 5,840 square feet. Patrons will be able to try new digital banking tools and grab a cup of Peet’s coffee, its partner in the café business.
“You have to have corporate backing to remain on the avenue,” said Gensman, “unless you own your building. They are pushing the charm off the street.”
Real estate broker Jim Knight agrees. “The locals have reached that point. They can’t afford Atlantic Avenue rents,” he said.
The local businesses that want to remain in Delray Beach will have to move to Pineapple Grove or the new SOFA district, under construction south of Atlantic, Knight said.
Delray Beach has several programs to keep small retailers and restaurateurs in the city, said Joan Goodrich, economic development director.
The GEAR program — grow, expand and retain — works with partners at the Downtown Development Authority, Greater Delray Beach Chamber of Commerce, West Atlantic Redevelopment Coalition and CRA to find suitable spaces, Goodrich said.
The program has a commercial property database with connections to real estate brokers. Thirty small businesses, including merchants and restaurants, are using the GEAR program, Goodrich said.
The CRA also offers site development grants to help businesses on West Atlantic modernize their spaces, she said. In addition, the city plans to steer merchants to the Congress Avenue corridor.
For Gensman, the high-priced sales are a sign of the times. “When buildings are sold for high prices, the new owners have to increase rent,” he said. “Soon Atlantic Avenue will have national tenants only.”
By Jane Smith