Why so many luxury townhomes are being built in Delray Beach

DELRAY BEACH — Over the past few years, Delray Beach has seen a surge in development in its downtown area, but one type of project is appearing more frequently than others: luxury townhomes.

Amid a scorching demand for housing, the luxury townhome market is booming in Delray Beach with project after project being presented to the city.

There are at least 14 luxury townhome projects in development in east Delray Beach by Federal Highway, totaling more than 100 units with each of those likely to fetch between $2 million and $5 million.

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Among the notable projects:

• Highland Park, a 31-townhome development with price tags hovering above $2 million each at 375 NE 6th Ave., just four blocks north of Atlantic Avenue off Federal Highway.
• Siréne Villas, which will include six three-story townhomes priced just under $5 million at 1236 George Bush Blvd., just east of the Intracoastal Waterway and one block from the beach.
• The North Edge, a nine-townhome development with units expected to be priced in the high $2 million range at 1405 N. Federal Highway, less than a half-mile north of George Bush Boulevard.

The surge in luxury townhome developments is due to a confluence of market factors; wealthy out-of-staters flocking to South Florida, a scarcity of available land and the profitability of building smaller, expensive units.

Coupled with the attractiveness of the city’s thriving downtown scene, proximity to the beach and the sunny weather, Delray Beach has become a prime location for these luxury products.

“From our perspective, we saw Delray as an opportunity,” said Joseph Kronberg, who helps oversee business development for Stamm Development Group. “It’s a market that we saw untapped growth potential and upside.

“I think it’s becoming a place where people are coming in and a destination where people want to be. And where people are willing to spend more money to be.”

Similar to many areas throughout South Florida, Delray Beach has seen an influx of wealthy buyers moving into the area. And many of these buyers are empty-nesters or people looking for a second home, making luxury townhomes an alluring option because they don’t need a great deal of space, said Elliot Koolik, principal for the Koolik Group and founding agent at Compass Boca.

“This is what a lot of people are looking for,” said Koolik, who has specialized in luxury homes in Boca Raton and Delray Beach for more 30 years. “Being near these fun, urban centers where they have bars, restaurants, cafes, workout places, yoga and cool little hotels and a feeling of a residential area.”

[ RELATED: The demand for Delray Beach luxury homes remains sky-high. New $5 million townhomes are on the way. ]

While many of the townhomes may not include the types of amenities you may have in a gated community or a condo association, they also come with significantly less financial overhead with no HOA fees. For a non-country-club, gated community, Koolik said owners could pay between $15,000 to $30,000 in yearly fees and for a condo between $20,000 to $40,000 in annual fees.

“That’s a big recurring expense you avoid in a townhome,” said Koolik, who added he’s seen similar luxury townhome developments in Boca Raton, Pompano Beach and Lauderdale-by-the-Sea. “For the right person, you’re getting more because you’re getting the downtown vibe and what a downtown area offers and that’s what they’re looking for.”

Luxury townhomes have also been a reflection of circumstance, too.

More than 98% of Delray Beach is already built out, making it difficult to find large parcels of available land. That’s especially true in east Delray Beach, making townhomes an appealing option because developers can scatter them along smaller pieces of land near Federal Highway.

The only sizeable housing project in the east Delray area is the $300 million Atlantic Crossing project along Atlantic Avenue by Federal Highway, which will include 261 luxury apartments that range from $2,450 a month for studios to $3,800 for two-bedroom apartments.

With a limited supply of available land, developers also are targeting older buildings in the east Delray area to demolish and build new luxury units. Koolik noted as city planners initially began building out Delray Beach, they began in the east and then moved west, leading to many older homes and buildings by Federal Highway.

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Stamm Development Group, a Philadelphia-based development company that opened an office in Delray Beach earlier this year, has been a prominent figure in the luxury-townhome boom. The company has seven townhome projects in development in east Delray Beach, totaling 28 units.

In addition to the surge of buyers interested in these products, townhomes also are a profitable business model.

In October 2021, the company purchased a .30-acre, single-family home that was built in 1948 for $1.3 million, according to Palm Beach County Property Appraiser records. Stamm Development plans on turning that into three two-story townhomes, ranging between 2,500 square feet to 3,100 square feet.

While pricing has not been finalized, a three-bedroom, 3,400-square-foot townhome less than a half-mile east that was also built by Stamm Development is being listed for $2.7 million, according to MLS listings.

[ RELATED: What’s being built there? $2.5 million townhomes in the mix for Delray Beach ]

“We’re trying to find opportunities that create value and find opportunities that have some scale on them,” Kronberg said. “If you see a house on a double lot, the incentive to try and make two townhomes there makes sense.”

The trend of luxury townhomes is one that is likely to continue, Kronberg and Koolik both said.

“For better or worse, Delray Beach as a city is becoming more dense,” Kronberg said. “Land becomes more finite and in that, seeking to maximize units for people to be able to live in is going to be that trend.”