Sales prices and lease rates in the Central Beach business district have shot up in the past several years, driven by intense demand and tightly limited supply, according to longtime AMAC Alex MacWilliam agent T.P. Kennedy.

“They are getting $1,000 a square foot on Ocean Drive now,” says Kennedy, who handles many commercial transactions and invests in commercial real estate. “Back in 2021, 2022, 2023, properties on Ocean were going for $300 to $500 a foot, maybe $600.”

The dramatic jump in values has pushed per-square-foot prices for the most elite Central Beach commercial properties within shouting distance of what billionaires pay for buildings on Worth Avenue in Palm Beach.

When Ken Griffen sold the old Neiman Marcus property at 151 Worth Ave. in November, for instance, the 50,000-square-foot building went for $80 million, which amounts to about $1,600 per square foot – only 60 percent more than a small retail building on Ocean went for in August.

That 2,685-square-foot building with two small storefronts at 3309-3315 Ocean Drive, next door to Veranda on the west side of the street, sold for $2.7 million, slightly over $1,000 per foot. Built in 1951, the building now houses women’s clothing store Frou Frou St. Tropez and VB Private Jewelers.

Its relative value compared to Palm Beach commercial property is in sharp contrast to the delta in housing values between the two locations, with Palm Beach’s median home sales price of $10 million nearly 10 times higher than the median home sales price in 32963.

Kenndy says there is strong, pent-up demand for retail and office space in the island business district, with retailers, financial advisors, law firms, med spas and concierge doctors clamoring for a spot.

“Their clients live on the island, so they want to be here, too,” he says.

Limited supply and high demand have driven up lease rates, too.

“We have seen lease rates as high as $75 a foot on Ocean Drive,” Kennedy says, which is triple what they were before the pandemic. “On Cardinal Drive, on the ground floor, you’re pushing $50 per square foot and 40 bucks on the second floor. There’s just a lot of demand for office space over here along Cardinal, and for retail and restaurant on Ocean Drive.”

Of course, even in a small business district like the one in Central Beach, there are significant value differences from block to block and a wide range of properties, so not every office or storefront will pull the highest lease rates or sales price. Location, condition and encumbrances all affect value.

A small office on the second floor of a building without an elevator still leases for more like $30 or $35 a square foot. And not every building will fetch $1,000 a foot, but values are on a steep, upward trajectory throughout the district.

That’s great news for property owners and brokers lucky enough to snag a listing, but there is a big caveat – the central island commercial real estate market is tough to crack into. Would-be investors and business owners looking for space often end up with their noses pressed against the glass, looking in but unable to gain entry.

“Many of these Central Beach commercial properties are trophy properties, and the old families that own most of them tend to be buyers, not sellers,” says AMAC broker-owner Buzz MacWilliam, whose business is about 15 percent commercial. “The cap rates are low [because prices are so high], but they have long-term intrinsic value.”

“A handful of families own a lot of the property – the Sextons, the Baileys, DeChellis, Derek Arden – and a lot of them never sell,” says Kennedy. “I have people call me all the time and say, ‘T.P., I want to buy something. I want to move to a place on Ocean Drive. I want an office on Cardinal,’ but there is nothing available.”

“I make my usual calls to Ben Bailey or DeChellis and ask if they have anything, but the answer is usually no, and I have to tell the client, nope, there’s nothing.”

Even when there are potential deals, many of them are done off market, within established island networks, adding to the challenge faced by newcomers who want to buy or rent on Ocean or Cardinal.

“I’d say 50 to 60 percent of commercial sales are off market,” says MacWilliam.

“Many of the old families have owned these properties of 50 years and they are never sellers, only buyers,” says Kennedy. “I joke that you have to be out there with your ear to the sidewalk to see if you can tune into someone who is thinking about selling.

“Even if someone does consider selling, they don’t want the property listed; they want it marketed quietly. When we put word out on the street we get multiple offers in a few days, but the owners don’t want anyone to know about the deal until it closes. Very little actually gets listed.”

Kennedy, a fifth-generation Vero native, is perfectly positioned to operate within the island’s insider network. His great, great uncle was Frank Ayers, the guy who discovered the famous “Vero Man” fossils that lead to rewriting the history of human migration to North America, and the Kennedy’s were one of the most prominent citrus families in Vero when the groves were golden.

T.P. Kennedy’s great grandfather, John Alexander Kennedy, “came to what is now Indian River County in 1909, purchased a 40-acre tract of good grove land, and planted the family’s first grove. After his death in 1930, his sons, Thomas and Purnell, carried on and expanded the business, adding a retail and mail order operation ... 3,000 acres of groves and a modern packinghouse,” according to growingproduce.com.

T.P. was active in the farming business until 2014, when the family auctioned off its grove land and packing house and he shifted more of his attention to real estate.

“I went to St. Ed’s, then the University of Florida and then came back home,” he says. “I still basically hang out with many of the same people I grew up with.”

When one of those people wants to do a deal quietly with someone they trust, Kennedy often gets the call.

Looking ahead, Kennedy and MacWilliam don’t see the central island business district loosening up any time soon. There are only so many blocks of commercial buildings and Ocean Drive and Cardinal Drive cannot be stretched to accommodate more.

“It kind of is what it is,” Kennedy says.

Both say there is a need for more high-end restaurants and a Ritz Carlton-type luxury hotel to upgrade the island’s commercial property ambiance, but those goals run up against the lack of space for new development.

There is some room for new development around the margins of the Central Beach business district, and redevelopment within the district happens occasionally.

There is a new three-story office building under construction on Bougainvillea Lane a block west of Cardinal that will add some square footage for business activity, and Anthony DeChellis is redeveloping the site of The Tides restaurant, replacing a worn-out converted bungalow with a larger, modern restaurant.

But major change or expansion of the district seem unlikely in the foreseeable future.

“Things happen slowly in Vero Beach,” says MacWilliam.

With little new supply and steadily growing demand, prices likely will keep going up.