Village of Wellington Economic Competitive Advantage Report II

Housing & Economic Development Strategic Plan Economic Competitive Analysis (Report II)

© 2018 Florida International University Metropolitan Center All rights reserved.

NO PART OF THE REPORT MAY BE REPRODUCED IN ANY FORM, WITHOUT PERMISSION IN WRITING FROM THE FIU METROPOLITAN CENTER

Study Team Edward Murray, Ph.D., AICP, Principal Investigator Associate Director, FIU Metropolitan Center Kevin T. Greiner, MUP, JD, Lead Author Senior Fellow, FIU Metropolitan Center

Maria Ilcheva, Ph.D, Economic Analyst

Assistant Director of Planning and Operations, FIU Metropolitan Center

Table of Contents Introduction ............................................................................................................................................ 1 Wellington’s Regional Context ....................................................................................................... 2 Palm Beach County ........................................................................................................................ 2

Industry Structure and Dynamics .................................................................................................. 7 Location ........................................................................................................................................... 7 Economic Size and Growth ............................................................................................................. 7 Industry Structure .......................................................................................................................... 10

Equestrian Industry Structure and Dynamics ........................................................................ 21 Direct and Indirect Economic Impact ............................................................................................ 21 Additional Economic Impact Considerations ................................................................................ 23

Resident Labor Force ....................................................................................................................... 26 Real Estate, Land & Employment Geography ....................................................................... 32 Land & Employment ...................................................................................................................... 32 Land Availability ............................................................................................................................ 32 Trends in Retail Development ....................................................................................................... 34 Industrial Market............................................................................................................................ 36 Office: Wellington and the New Geography of Work .................................................................... 36 Inflow/Outflow Analysis ................................................................................................................. 40 Where Businesses are Located in Wellington .............................................................................. 44

Findings: Key Opportunities & Challenges ............................................................................ 46 A High Performing, Competitive Regional Economy .................................................................... 46 A High Performing, Competitive Small Economy ......................................................................... 46 A High Performing Labor Force .................................................................................................... 47 Wellington’s Equestrian Sector ..................................................................................................... 48 A Unique, Possibly Underestimated, Brand .................................................................................. 48 Primary Threats & Challenges ...................................................................................................... 49 Changing Real Estate Market Trends ........................................................................................... 49 Wellington’s 21st Century Spatial Economy .................................................................................. 50 Wellington’s Growth Challenge ..................................................................................................... 50

Introduction This study is the second of three documents comprising the Village of Wellington’s 2018 Housing and Economic Strategic Plan. This document provides a detailed analysis of Wellington’s economic structure, labor force, economic geography, real estate market performance, as well as the most comprehensive analysis of the Village’s Equestrian economy ever completed. The study team from the FIU Metropolitan Center completed its research using publicly available sources including the American Community Survey, the Federal Bureau of Labor Statistics (BLS) Quarterly Census of Employment & Wages (QCEW), the BLS Occupational Survey, State of Florida QCEW data, the Palm Beach County Assessor’s, as well as Village of Wellington property records, and private third-party business databases.

However, given the nuances of Wellington’s unique economic structure, this study would not have been possible without the guidance and assistance of the Village’s Planning and Economic Development Staff, as well as the insights provided by members of the Village Equestrian Preserve Committee. The complete study is the product of the Team’s base research and numerous hours of interviews with Village government and business leaders. We are grateful for the generous participation of everyone who contributed to the study and the depth of understanding they provided to the research team.

This document looks at Wellington’s competitive position, economic strengths, and opportunities, including its unique equestrian community and equestrian industry businesses. This part of the study summarizes the research team’s key findings. Final recommendations are contained in the third and final document of the study — the Village of Wellington 2018 Housing and Economic Development Strategic Plan.

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Wellington’s Regional Context Economic growth at the local level depends on the structure, strengths and weaknesses of the region it is located within. Wellington’s economic growth is tied to the development of Palm Beach County.

Wellington’s constellation of businesses and resident employees work for, grow and trade within the network of businesses within the market area that surrounds it, as well as the greater County economy.

Small businesses, those employing 20 employees or less, especially depend on the network of businesses, services, and industries within the region for growth and expansion. The Economic analysis looks at the structure and performance of both Palm Beach County and the Wellington Market Area — zip codes 33411, 33413, 33414, 33449, 33467, 33470.

Palm Beach County Palm Beach County has developed a highly competitive economy, noted for its diversification, high-end manufacturing, and high skilled labor force. The distinguishing characteristics of the County’s economy include:  Size: Palm Beach County, based on its labor force, is the 5th largest County economy in Florida,

with 55,658 private business establishments employing 514,463 workers.

 Employment growth: Despite significant employment losses during the last recession, total

private employment within the County has grown over 23 percent since 2010, compared to 15 percent for the rest of the US during the same period.

 Highest average Wages: The County’s annual average wage for employees of private

companies, at $52,724 (2017) is the highest in Florida.

 Wage growth: Average wages, adjusted for inflation, have declined only twice year-over-year

since 2001. Private employer average wages have increased 4.2 percent since 2010, adjusted for inflation. However, the County’s median wage has declined by almost 7 percent since 2010, indicating that similar to the national pattern, earnings for workers in the middle and lower end of the pay scale have stagnated.

 A diversified industry structure: The County has been home to major tech and industrial

companies since the late 1950’s. Tourism, tourism support and travel services are a significant component of the total economy. However, the County’s top sectors by employment include a wide range of high-end professional services, medical care including hospitals and physicians’ offices, construction services and support, and manufacturing, especially aerospace components.

 Leading traded sectors: Industries and industry clusters are classified as local or traded. Local

industries serve the needs of residents and local businesses. Traded industries, sometimes called basic industries, are the “engines” of local economies because they serve and compete in markets beyond the region and grow the local economy by bringing in dollars from outside the Village. Local industries recirculate dollars. Palm Beach County has significant traded sector activity. Nationally, traded industries represent 36 percent of employment, 50 percent of income, and 95 percent of patent activity. The County’s traded industries represent 34 percent of all employment.

 8 of the County’s top 10 traded industries are concentrated in industries requiring advanced

education and/or professional skills, including management of companies and enterprises, legal

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services, Management and technical consulting services, architectural and engineering services, and computer systems design and related services.  High innovation rates: Palm Beach County has the highest number of annual patents filed of all

Florida counties, and has the 55th highest patent rate of all US counties.

 The U.S. Commerce Department's Economic Development Administration (EDA) and Indiana

University Business Research Center’s Innovation index ranks Palm Beach County 158 th among all 3,110 US counties, 5th highest among Florida Counties.

 Businesses in the County’s Advanced Industries — the 50 industries with the highest levels of

skills, knowledge, growth, and value-added productivity — employ 39,319, or 8 percent of the County’s workers. Nationally the Advanced Industries employ 9 percent of all workers.

Advanced Industry employment and its importance are discussed in detail later in this report.

 Lastly, the County’s business structure has evolved from a higher concentration of larger firms,

to a larger network of smaller firms. The average number of employees per establishment has shrunk by 25 percent since 2001 (12 down to 9). Employer establishments employing less than 20 employees make up 89 percent of all employer establishments. Combined with the County’s over 171,000 non-employer establishments (those with no employees and only an owneroperator), 98 percent of the County’s business establishments have 20 or less employees.

Palm Beach County: Total Employment (Annual Averages) 700,000 600,000 500,000 400,000 300,000 200,000 100,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: US Bureau, of Labor Statistics, Quarterly Census of Employment & Wages Analysis by FIU Metropolitan Center

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Industry Structure and Dynamics Location Wellington lies at the center of Palm Beach County. Its location is a County crossroads in two ways.

First, the Village lies at the border of vast agricultural lands to the west, and the most urban area of the County to the east, including the City of West Palm Beach. It is therefore only minutes (without traffic) from farming, nature preserves, and Lake Okeechobee to the west, and what used to be a short drive to the City center of West Palm Beach, urban entertainment, and the beaches. Wellington lies at the intersection of pastoral and urban land uses — this transition location has defined its development as a location that builds on both to create unique lifestyle and community flavor.

Wellington is also at the intersection of major County and State north-south roadways, including the Florida Turnpike, State Route 441, and east-west arterials State Route 98 (Southern Boulevard), County Route 882 (Forest Hills Boulevard), and County Route 802 (Lake Worth Road). 243,393 vehicles traverse these routes alone each day — 224,047 cars, and 21,346 trucks.

Wellington’s location places it within a short drive of most of the County’s major economic, cultural, and educational assets, including all universities, entertainment venues, recreation, ports, airports, and

Economic Size and Growth Wellington and its Market Area Wellington is the economic hub of its surrounding market area, composed of zip codes 33411, 33413, 33414, 33449, 33467, 33470. The analysis will look at the structure and performance of both Wellington and its surrounding market area. Together, the market area has a population of 231,782, or 17 percent of the County, with aggregate household income over $17.3 Billion, or 16 percent of the total County aggregate household income.

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The Village of Wellington The Village’s economic performance since the recession has been outstanding, outpacing the County, the State of Florida, and the US. Businesses in the Village represent 3 percent of the County’s jobs base. However, from 2010 (the low point of post-recession employment across the County), the US Census estimates that businesses in Zip codes 33414 and 33445 added approximately 332 business establishments, or a 20 percent increase in businesses, and 3,399 jobs, or a growth rate of 26%.

Over the same period the County added 41,710 business establishments, or a 14 percent increase, and added 87,513 net new jobs, for a 20.5 percent increase.

Establishment Size Distribution The distribution of businesses by size is an important indicator of economic performance and long-term stability. Industry concentration, or Economies with too few large employers, can become a long-term local risk. Dependency on a small number of businesses means that at any time, an employment decision by a large employer can have disproportionate impacts on the local economy.

Outside the Manufacturing, Health Care, and Grocery industries, Wellington’s economy is marked by diversity and distribution by size. It is a market driven by small businesses. 86 percent of businesses in Wellington employ less than 20 employees, not including non-employer establishments, which are not reported at the local level.

The Village’s businesses are also predominately locally owned and controlled. 1,852, or 84 percent of all establishments, are single location, as opposed to chain or subsidiary locations. The bulk of branch locations are in retail and banking.

The same pattern applies to the distribution of establishments based on sales. 62 percent of all establishments in the Village earn less than $1 Million per year. However, the distribution of businesses by sales earnings is distinguished by the significant number of businesses earning more than $1 Million per year, approximately 38 percent.

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Industry Structure Wellington’s local economy is in fact sizable, robust, and dynamic. According to InfoUSA, a private third-party business analytics company, the Wellington Market area has 6,982 establishments employing 121,456 workers, with total annual sales of over $11.3 Billion. It should be noted that the numbers are slightly inflated — InfoUSA reports the total employment and sales of an entire headquarters location, even if employees are located outside Wellington or the Market area. This did not impact the analysis significantly, as the data has been adjusted to accommodate three major global companies. In the case of Oasis Outsourcing LLC, and Alpha Alarm Systems Security, Oasis sales are not reported, and their employment numbers have been adjusted to reflect regional employment. Alpha Alarm Systems sales numbers are included, but employment has been adjusted to reflect the best estimate of local workers at the firm. KLX Inc., a major manufacturer of aerospace products and services, has moved from Wellington and has been eliminated from the analysis.  The Market area is distinguished by an industry structure concentrated in three sectors – Admin

support, Retail Trade, and Health Care and Social Assistance, representing 32 percent of establishments, 62 percent of all employees, and 29 percent of total annual sales.

 Manufacturing also has disproportionally large economic impact in the Market area. Although it

is only 3.3 percent of employment, businesses in the industry account for over 12 percent of total sales.

 Data at the more detailed industry sub-sector level shows that the Wellington Market area, in

general, in addition to health care, is more concentrated in the retail, accommodation and construction industries, with a much smaller proportion of its employment, establishments, and sales generated by professional services.

The Village economy is composed of 2,147 business establishments employing 19,060 workers with total sales of over $3.2 Billion. The Village economy, upon detailed analysis, is surprising for its diversity and region-leading local strengths. It distinguishing structural characteristics include the following.  The Village represents an outsized share of the Wellington Market area — it’s a small economy

with considerable broader impact. By share of the Wellington Market area, the Village represents 31 percent of all businesses, only 16 percent of all employees, but 29 percent of all business sales.

 At the industry level, Retail Trade, Health Care and Social Assistance, and Accommodation and

Food Services account for 44 percent of employment and 31 percent of sales of businesses in Wellington. However, with 797 establishments in these three industries, they are widely distributed, and not heavily concentrated in a small set of firms.

 The large annual sales of the Village’s retail industry indicates that the village is a retail

destination for the Market area. At 35 percent of all retail establishments, and 32 percent of annual retail sales in the Market Area, Wellington is sufficiently “retailed,” that is, its retail base serves the needs of Village residents as well as excess demand from the surrounding market area.

 The Village’s Health Care industry has attracted attention as a priority for targeted development.

A focus on the industry is warranted, as the size and sales of Wellington’s Health Care complex is significant. The size and scale of this industry locally indicates a significant local competitive advantage. The number of establishments, employees, and annual sales are atypically large for a small economy. Only the Retail and wholesale trade industries have larger annual sales.

 An additional strength of the local health care industry is that it is highly diversified, with over

3,000 employees spread across over 300 establishments, indicating a wider array of smaller

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professional offices and practitioners. Health Care is more typically concentrated in fewer establishments, especially hospitals.  Wholesale trade, as an industry, has a particularly significant impact on the Village economy.

With only 2.6 and 2 percent of establishments and employees, it is the second highest grossing industry in Wellington, with over $518 Million in annual sales.

 At the more detailed industry sub-sector level, Restaurants, Offices of Physicians, Offices of Real

Estate Agents and Brokers, Grocery Stores, Clothing Stores, and Building Material and Supplies Dealers comprise the largest combination of employment and annual sales. This mix of established, strong retail performance, combined with the Village’s high number of small professional services establishments indicates that it is a particularly well-balanced small economy. Wellington is both a retail and professional services hub — its business mix serves the local residents as well as the region.

Traded Industries Industries and industry clusters are classified as local or traded. Local industries serve the needs of residents and local businesses. Traded industries are often called the “engines” of local economies — they serve and compete in markets beyond the region in which they are located. Without strong traded clusters it is virtually impossible for an economy to grow and attain high performance.

Wellington’s traded industries are competing in national markets, and as such, growing the local economy by bringing in sales revenue from outside Wellington and the County. The top 10 traded industry sub-sectors in Wellington are:  Other Professional, Scientific, and Technical Services  Architectural, Engineering, and Related Services  Other Crop Farming  Software Publishers  Aerospace Product and Parts Manufacturing  Other Financial Investment Activities  Advertising, Public Relations, and Related Services  Motion Picture and Video Industries  Professional and Commercial Equipment and Supplies Merchant Wholesalers  Scientific Research and Development Services

Traded industries in Wellington represent 12 percent of employment and 24 percent of total sales, compared to 36 and 34 percent of employment nationally and in Palm Beach County. However, the overall size and contribution of Wellington’s traded industries is probably understated, in that Equestrian related industries are typically not categorized as Traded. Wellington’s Equestrian related businesses serve a national and international clientele, and the Winter Equestrian Festival is a leading international event. The addition of Wellington’s Equestrian sectors as traded industries pushes employment to 18 percent, and sales to 28 percent of the Village totals, respectively.

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Industry Wage Structure Healthy economies are marked by the quality of jobs they grow as well as the number. A preliminary measure of the quality of jobs in Wellington are the number of establishments in which typically pay higher wages. By this measure, 910, or 42 percent of the establishments in Wellington are in industries that pay an average salary above the County annual average salary. These establishments represent 36 percent of all employment, driving a strong local wage structure.

Productivity A second measure of job quality is the overall productivity of the local economy, particularly the productivity of each worker across the economy. Areas with high productivity almost always indicates that its workers are more concentrated in high-skill, higher-wage occupations.

Labor productivity is typically measured by diving the Gross Domestic Product (GDP) of an area by the number of employed workers in it. GDP at the Village level is not available. However, based on the InfoUSA data, the total annual establishment sales per year can be used as an approximation in place of GDP. Annual sales in Wellington is equal to $169,442 per worker. By comparison, the current labor productivity of the Miami-fort Lauderdale-West Palm Beach Metro area is $109,528 per worker. GDP includes not only annual sales, but the total value of all goods and services produced — in this comparison Wellington’s labor productivity is considerable.

Advanced industry Sectors A third direct measure of the employment quality, as well as the Village’s relative competitive strengths, opportunities, and growth potential incorporates an analysis of its Advanced Industries Sector. The Brookings Institution has identified the U.S. Advanced Industries Sector — a set of core industries that concentrate in, and drive many of the nation’s best performing regional economies. The Sector is composed of 50 industries at the 4-digit NAICS level, and includes manufacturing industries, chemicals, pharmaceuticals, advanced metals, industrial machinery, medical equipment manufacture, energy development and distribution, software design, data processing and hosting, and medical and diagnostic labs. Industries in the Advanced Industries Sector have five important characteristics: 

Each of the industries in the sector has high relative levels of technology development and research and development spending, well above averages for the rest of the economy. The Advanced Industries Sector both drives and relies on constant innovation, technology advances, and new service business models to expand and grow;

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As a sector, the Advanced Industries employ 12.3 million workers nationally, or 9 percent of total employment. However, the sector produces $2.7 trillion in value added annually, or 17 percent of U.S. gross domestic product;

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The Advanced Industries Sector employs 80 percent of the nations’ engineers, funds 90 percent of private sector R&D, and accounts for 85 percent of all U.S. patents and 60 percent of U.S. exports.

The Sector and its component industries are crucial foundations of extensive supply chains and third-party employment in a wide range of support industries outside the sector;

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Output and employment growth of the Advanced Industries Sector has been far greater than the economy as a whole. From 1980 to 2013, advanced industry output expanded at a rate of 5.4 percent annually - 30 percent faster than the rest of the US economy. Since 2010, the sector has added nearly one million jobs. Employment growth and economic output of the Sector has been 1.9 and 2.3 times higher than their respective national averages since 2010;

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The Sector provides high-skilled, high-wage and high value-added employment. Workers in advanced industries generate over $210,000 in annual value added per worker compared with

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$101,000 for workers outside the Sector. Workers within the Sector, unlike the remainder of the U.S. economy, are experiencing rapidly rising wages. The average advanced industries worker earns $90,000 in total compensation, twice as much as workers outside of the sector. Absolute earnings in advanced industries grew by 63 percent from 1975 to 2013, compared with a 17 percent increase outside the sector.

The Village is home to 114 establishments within the Advanced Industries Sector. These business locations employ 873 workers, or nearly 5 percent of the City’s employment base, and generate over $183 Million in sales. Given that Advanced Industries employment represents 9 percent of U.S. employment, and only 3 percent of the state’s total employment, the Village has a growing potential as a leading, high-concentration Florida location for the Advanced Industry Sector, particularly Advanced Industry Services.

Entrepreneurial Dynamics Metro Miami, which includes Palm Beach County, has one of the most dynamic entrepreneurial economies in the US, relative to its size. While San Francisco and Santa Clara County, and the New York Metro areas dominate the total number of start-ups each year, Metro Miami, in terms of entrepreneurial density is among the nation’s leading locations for start-ups.

National start-up creation and growth numbers are skewed by great variation at the regional level. In fact, the US has been undergoing a large-scale regional shift in start-up dynamism since the late 1970s.

What looks to be a decline in start-up dynamism at the national level is really a result of dramatic concentration and re-distribution of start-up growth among a small number of regional economies. Metro Miami is among the Nation’s leading regions for small business and entrepreneurship.

The key indicators relative to Metro Miami’s entrepreneurial growth are as follows:  The nation’s highest rate of entrepreneurial participation among all metro areas.

According to the Kaufmann Foundation Index of Startup Activity, Metro Miami has been among the top three startup metros over the last five years, and finally took the top spot in its 2017 ranking. 560 out of every 100,000, or approximately 33,669 people, are becoming entrepreneurs in the Metro area annually. This is 1.8 times the national average.

 The region’s share of opportunity entrepreneurs has been steadily rising over the last five years.

Kaufmann’s 2017 index rates the share of opportunity entrepreneurs at 81.09 percent, or 4 percent below the national average.

 Startup density in the region also tops the nation.

At 107.8 startups per 100,000 employer businesses, the area produced approximately 20,156 startups in 2016. [Kaufmann 2017]

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Equestrian Industry Structure and Dynamics The economic contribution of Wellington’s equine sector to the Village’s and the region’s economy cannot be overstated. Wellington is home to, and anchors, the world’s largest permanent equestrian community, consisting of multiple jumping, dressage, and polo venues, permanent horse farms, training facilities, and home to the Palm Beach International Equestrian Center. Equestrian training, breeding, and support occurs throughout the year, but economic activity peaks during the Wellington Winter Equestrian Festival (WEF), which draws an estimated 200,000 spectators over 12 weeks from January through March each year.

Wellington’s equestrian community generates significant economic benefits to the Village, and is unique for its size, scale, and breadth of businesses, activities and services. Because the industries comprising the equine sector in Wellington drive economic activity across a wide number of dimensions, the sector is one of the key foundations for the Village’s unique and diverse economy.

Direct and Indirect Economic Impact Direct Impact This study defines the “equine industry” as consisting of activities involved in maintaining and supporting horses in Wellington, and activities associated with recreational and entertainment uses of horses. The foundation of the analysis is individual business data, with detailed information that includes location, industry sector, employment, and sales volume. Using these resources, we analyze the effect of various activities in the equine sector on other economic sectors. Activities in the equine sector are grouped in various primary economic sectors - breeding, recreation, racing, training, farm management, as well as secondary sectors that encompass animal health/veterinarians, horse stock and feed production, farm equipment, clothing and saddlery, etc. We estimate the overall contribution of the equine sector to the local economy in terms of jobs, wages and revenues.

This study utilized individual business data provided by InfoUSA®, a publicly traded third-party company.

InfoUSA collects establishment level data for geographies across the US, using state business tax and corporate filings, reports as well as its own direct research and survey work. As shown in the table below, according to the research team’s analysis, 140 businesses in the Village of Wellington are directly involved in the equine industry, employing 1,145 full-time employees with total direct sales over $130 Million.

These direct sales and employment findings are not the total impact of the equine sector. First, the FIU Study Team was tasked to analyze only the impact of the equine sector on the Village of Wellington, not its regional impacts. Second, the team completed a detailed review of the data to include businesses whose sole or majority business focus is on the equine industry. Small numbers of sales may be missed due to businesses involved in industries in addition to the equine industry, but these amounts are negligible and accounted for as part of the sector’s indirect impacts. For example, Insurance Agencies and Brokerages includes only establishments which provide insurance for the equine industry. Similarly, veterinary services includes only establishments that specifically focus on horses. Some businesses may be involved in multiple activities and their classifications into an industry sector is based on the primary activity of the establishment, as reported in the database. For example, some of the establishments can fall into several categories such as promoters, farms, and horse training.

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Additionally, the data does not capture part-time or seasonal employment as part of the direct base data, but is accounted for in the sector’s indirect impacts.

Wellington’s equine sector includes large establishments hosting and marketing events as well as the festival in the Horses and Other Equine Production industries, feed, in the Farm Supplies Merchant Wholesalers industries, promotions, Veterinary Services, and Sporting Goods Stores. In addition to these larger establishments, there are smaller support businesses that providing services and supplies to the equine industry, including pressure cleaning, horseshoeing, horse waste hauling, horse training, insurance agents and farriers.

Indirect Spending Impacts An equine facility’s relationship to other businesses and consumers in the area is not fully described by its direct effect reflected in sales and employment. Sales by farms within a local area will mean increased sales for agricultural support firms, increased incomes for farm proprietors and workers, and increased sales for local retail and service businesses that support the agricultural sector and provide goods and services to farm owners and employees. For example, horse facilities will spend sums on suppliers, vendors, and utility services, including water and electricity, cleaning, landscaping, legal services and so forth, which become revenue for the suppliers of these services and goods, who in turn purchase goods and services from their suppliers and so on. In short, the indirect effect derives from a business purchasing goods and services from other businesses. Indirect impacts differ from direct impacts insofar as they originate entirely off-site, although the indirect impacts would not have occurred in the absence of the newly created business. Induced impacts are the multiplier effects of the direct and indirect impacts created by successive rounds of spending by employees and proprietors. Total impacts are the sum of the direct, indirect, and induced impacts.

The total economic contribution is comprised of three components: 1) direct effects, 2) indirect effects and 3) induced effects. The direct effects are the sales, income and employment created by the equine related purchases. The indirect effects are the purchases by businesses up and down the supply chain.

Indirect effects can include the purchase and installation of horseshoes by the farrier. As a result, direct spending has a multiplier effect in its economic contribution as spending from one source results in respending within the area by employees and vendors that receive payment from the industry.

The FIU Study Team utilized IMPLAN, the most widely accepted economic impact modeling software to calculate the indirect and total impacts of the equine sector on the Village economy. Based on our analysis, in addition to the base sales and employment created by the sector, the equine industries create an additional 779 jobs, and over $66 Million in additional indirect revenues for a total of 1,924 jobs and over $196 Million in total economic activity just in the Village of Wellington.

This means that the equine sector represents 10 percent of the total full-time employment and over 6 percent of total sales revenue of businesses in the Village. It is the second largest industry sector and cluster in the Village economy, just behind offices of physicians and medical care. On average, every ten jobs in the equine sector generate seven additional jobs in Wellington. For every ten dollars of sales, another five dollars of output are generated by the equine industry in Wellington.

The model does not account for leakages outside the Wellington economy. In other words, the model relies on the estimated total sales of each firm in the respective sector and assumes the total sales amount would circulate back in the economy. Both employee compensation and proprietor income are assumed to be retained in the local economy by IMPLAN. Proprietor income consists of payment for work received by self-employed individuals. Overstatement of employee compensation because of income leakages created by commuting is important because most workers employed in Wellington

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reside outside the boundaries of the Village, and therefore, are likely to spend most of their income outside of Wellington. An economic contribution analysis also does not account for how spending on one industry may crowd out spending in another industry.

Additional Economic Impact Considerations Given the unique character and leading global competitive position of Wellington’s equine sectors, additional issues need to be considered in determining its full economic impacts.

Wellington’s Largest Traded and Basic Industry Traded industries are often called the “engines” of local economies because they serve and compete in markets beyond the region, and grow the local economy by bringing in dollars from outside the Village.

Since the vast percentage of income generated by businesses in Wellington’s equine sector is from sales to businesses, individuals, visitors, and spectators from outside Wellington, the equine sector is actually Wellington’s largest traded industry sector/cluster. In this sense, the equine sector and cluster of industries plays an outsized role in growing and sustaining the Village economy.

Additional Spending and Sales Effects Traditional economic models do not include hospitality spending as core to equestrian businesses because in most parts of the US they are local businesses that do not generate significant tourism. Such is not the case in Wellington, as the Winter Equestrian Festival alone attracts over 200,000 spectators, in addition to participants from around the US and the world. The 2018 WEF Economic Impact Report commissioned by the Palm Beach County Sports Commission estimates that the festival generates 130,193 hotel room-nights, a number which has been growing steadily each year. According to the Cultural Council of Palm Beach County, average daily room rates range from $202 to $271 from January to April in Palm Beach County. At these average room rates, the WEF could be driving as much as $38 Million to $58 Million of hotel spending across the rest of the County each year.

In addition, AirBnB rentals of private homes has been increasing during the WEF each year in Wellington. According to AirBnB data, 254 full home rentals at an average price of $229 per day were available throughout the 2018 WEF. At 85 percent occupancy (according to AirBnB), and a season length of 135 days, AirBnB rentals could be generating an additional $5.4 Million in spending within Wellington.

Lastly, local catering and food service provided throughout the WEF could also represent additional business income not accounted for in the data. It is impossible to pull out equestrian income from this sector at this time, as most food service providers serve the equine sector as well as the rest of the region.

The Anchor of a Regional Equine Industry Wellington’s equine sector supports a large regional equestrian economy, including all of the services and goods provided inside Wellington, by businesses that rely on Wellington’s equestrian community and the WEF. Calculating the size of the regional equestrian industry was beyond the scope of this study. However, the Wellington Equestrian Preserve anchors the County equine industry cluster.

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Marketing Value and the Wellington Brand Each year the WEF draws between 200,000 and 250,000 visitors, spectators, competitors and their support teams. According to the 2018 WEF Economic Impact Report, the median household income of visitors to the event was $180,000. This means that the festival alone is placing Wellington in front of at least 200,000 of the nation’s highest income households, including many owners of major businesses from around the country. We concur with the findings of the 2018 Economic Impact Report in regard to the value of the positive marketing across multiple media that Wellington receives from the exposure of the festival to such a high-end market cannot be overstated. The dollar value for attracting and keeping that many visitors for an average length stay of 30 days (also according to the WEF Study) is priceless.

Lastly, the equestrian preserve, the equestrian community, and the equine industries have for 40 years defined Wellington’s brand as a unique, high-quality community in which to live, work, and play. The distinctive aspects of the equine industry complex provides Wellington with a brand identity and competitive platform which very few, if any, communities can claim. The value the equine community imparts on Wellington is an intangible, yet real additional value to the Village’s economy and competitive position.

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Resident Labor Force Resident Workers The characteristics of the local labor force drive local economies. The workforce of an area is comprised of workers who work in them, which includes residents but also workers residing outside the area.

Sometimes the workforce working in a municipality is very different than its employed residents.

According to 2016 ACS estimates, the Village of Wellington has 32,326 residents of working age (16 years or older). 29,280 worked part or full-time in 2016. 20,680 residents were employed full-time in 2016. The labor participation rate for Village residents in 2018 reached 65.4 percent, compared to 62.9 percent for the US.

Educational Attainment Wellington’s residents are extremely well educated. 29.6 percent of Village residents have a bachelor’s degree, and 17.6 percent have a graduate or professional degree, compared to 21.5 and 12.7 percent for the County, respectively. Nationally, only 18 percent of adults over age 25 have a bachelors and 11 percent a graduate or professional degree.

Employers and Occupations Most (65 percent) of Wellington’s 29,280 residents are employed in private, for-profit companies.

However, the Village’s percentage of self-employed workers, at 15.7 percent, is both higher than the rest of the County (14.1 percent), and significantly greater than the U.S. average (9.7 percent).

Wellington’s residents are overwhelmingly employed in managerial positions across all major industry groups. 46 percent of all resident workers are employed in managerial occupations, compared to 35.9 percent for the rest of the County. Residents are employed as managers most predominantly in Educational Services (76.9 percent), Manufacturing (63.4 percent), and Professional and Scientific and Administrative Services (56.1 percent).

Resident Worker Earnings Employed residents in Wellington earn far more than workers across the County. The 2016 median earnings for all full-time employed workers over 16 years old living in the Village, at $52,908, is 27 percent more than the County median full-time worker, earning $41,585.

The residents of Wellington, on average, earn more than their counterparts across the County in every industry except Information and Accommodation and Food Services. The median earnings of residents employed in Agriculture, Construction and Manufacturing are 190 percent or more than workers in those industries elsewhere in the County.

However, despite high current wages relative to the county, wage growth across industries for Village residents has been a mixed bag. From 2012 to 2016, median earnings for residents have increased in 15 of 27 industries but declined in the remaining 12. Average wages increased 4 percent during the same period. The difference between the path of median and average wages indicates a faster accumulation and/or growth of wages at the top of the income scale, with relative earnings stagnation for workers at the middle and bottom.

Another comparative gross measure of earnings is the 75/50 ratio — the ratio of workers earning more than $75,000 per year, compared to those earning less than $50,000 per year. 33 percent of 26

Wellington’s employed residents earn more than $75,000 per year, while 45 percent earn less than $50,000, for a ratio of .7. The comparable percentages for the County is 22 percent, and 59 percent earning less than $50,000 for a ratio of .4. The number of resident workers earning $75,000-plus grew by 28 percent in Wellington since 2010. Additionally, the national ratio is also .4. By comparison, Wellington’s 50/75 ratio would rank it 21st among all US Counties.

Household Incomes and Income Inequality Driven by high earnings, median household income for Village residents is one of the highest in Florida.

At $83,270, median household income is 50 percent more than the rest of the County. The Village’s poverty rate is also lower than the County, but still high at 20.8 percent.

However, despite Wellington’s high median earnings and incomes, the relative inequality between households at the top and those at the bottom is far less than the County and Nation. The 95/20 ratio is the ratio between the average income of households in the top 5 percent compared to those in the bottom 20 percent (or bottom Quintile). Households in Wellington in the top 5 percent have incomes 21.8 times more than the average of those in the bottom 20 percent. However, Wellington’s measure of resident inequality is far less than the US, at 29.3, and vastly less than all of Palm Beach County, at 36.6, and its 95/20 ratio has grown considerably slower than the County and Nation.

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Employment by Occupation Civilian employed population 16 years and over Management, business, science, and arts occupations Management, business, and financial occupations Computer, engineering, and science occupations Education, legal, community service, arts, and media occupations Healthcare practitioner and technical occupations Service occupations Healthcare support occupations Protective service occupations Food preparation and serving related occupations Building and grounds cleaning and maintenance occupations Personal care and service occupations Sales and office occupations Sales and related occupations Office and administrative support occupations Natural resources, construction, and maintenance occupations Farming, fishing, and forestry occupations Construction and extraction occupations Installation, maintenance, and repair occupations Production, transportation, and material moving occupations Production occupations Transportation occupations Material moving occupations Source: US Census, ACS, 2016 5-Year Estimates

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Village of Wellington 29,280 13,483 46.0% 5,638 41.8% 1,276 9.5% 3,519 26.1% 3,050 22.6% 5,039 17.2% 589 11.7% 1,114 22.1% 1,436 28.5% 745 14.8% 1,155 22.9% 7,847 26.8% 4,061 51.8% 3,786 48.2% 1,603 5.5% 141 8.8% 807 50.3% 655 40.9% 1,308 4.5% 427 32.6% 533 40.7% 348 26.6%

Palm Beach County 636,646 228,377 35.9% 100,187 43.9% 24,740 10.8% 65,633 28.7% 37,817 16.6% 139,875 22.0% 17,843 12.8% 15,719 11.2% 45,493 32.5% 36,165 25.9% 24,655 17.6% 165,164 25.9% 85,577 51.8% 79,587 48.2% 57,450 9.0% 4,265 7.4% 34,214 59.6% 18,971 33.0% 45,780 7.2% 16,972 37.1% 19,101 41.7% 9,707 21.2%

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Real Estate, Land & Employment Geography Land & Employment The patterns of retail, office and industrial development have been undergoing rapid and fundamental change across the US, and Wellington is no exception to these trends. On the demand side, the expansion and development of new commercial space is no longer tied to traditional growth of population and employment. On the supply side, the inventory of available commercial space to accommodate economic expansion is considerably less than it has been in modern industrial history.

Detailed analysis of where its residents work and where businesses are located indicate that Wellington is a leading the deep changes occurring in how we work, where we work, and who we work for. New employment and commercial development in Wellington is being shaped by a new geography of work, shoping, and recreation. The future of work and its location in Wellington is being shaped by the following factors.

Land Availability Wellington is for the most part built-out. Large 10 acre or more commercial or mixed-use zoned vacant properties are growing scarce across Palm Beach County, and have been scarce within Wellington since the last recession.

Demand for new development is exploding around Wellington, but for the most part, large-scale commercial development will be the result of redevelopment and/or re-purposing of existing commercial properties within the Village. The redevelopment of the four corners properties has been reconsidered for new retail and/or medical services development. In addition, Wellington has a necklace of smaller commercial plazas connected throughout the norther half of the Village. Zoned as Community Commercial in the Village future land use map, these properties, such as the Old Wellington Mall, Wellington Plaza, and Wellington Marketplace could be considered as opportunities for mixed-use redevelopment to support future employment growth.

Even small development opportunities stitched together in a broader strategy could provide considerable space to support office workers, though by not using traditional office space. The Village has already explored this concept with the proposed long-term development of Midtown — a string of commercial properties anchored on one end by the Village City Center and municipal complex, and at the other by the Mall at Wellington Green. These possibilities are considered in the development strategies in the final Document.

The Village’s single largest redevelopment and re-purposing opportunities may become available as the structure of retail at the Mall at Wellington Green continues to change. The [property has over 1.5 Million square feet of land of land with close to 1 Million square feet of buildings and a vast expanse of surface parking. The properties are also attached to the Wellington Green MUPD/PUD NO 2, approximately 35 acres of vacant property zoned Community Commercial.

The largest immediately available, vacant and commercially zoned property in Wellington is the K-Park property, a 66-acre vacant agricultural plot located at Route 441 and Stribling Way. The Village has had

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a difficult history reaching consensus on the future use of the site, but it must be considered as a future development opportunity that could accommodate a variety of uses, including office and office support.

Other smaller commercial properties along Route 441 with large parking lots can be considered redevelopment and repurposing opportunities, but would require re-zoning.

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Trends in Retail Development Real estate professionals refer to rapid closing and loss of retail space across the US as the retail apocalypse, but as punishing as the last recession was on retail real estate, the shrinking US inventory and demand for of retail space is the result of a number of longer-term trends. The future of retail in the region is being dramatically affected by the rapid growth of E-Commerce. According to Deutsche Bank’s RREEF Global Real Estate Research Group, although e-commerce accounts for a relatively small share of total retail sales, it is capturing a significant share of sales in commodity items. E-commerce sales are pervasive — excluding auto-related purchases (which are now also selling on-line) e-commerce grew 53 percent from 2007 to 2012, seven times the overall retail sales growth rate.

According to Deutsche Bank, the growing shift to online shopping has significant real estate implications.

The amount of e-commerce retail sales in 2012 ($157 B) would equal between 350 million and 500 million square feet of leased retail space based on sales volumes, which represents about a third of the vacant retail space in U.S. shopping centers and retail districts. The direct effects on the national retail market include:  Portfolio Rationalization through store elimination: Chains are rapidly closing significant portions

of their physical store locations;

 Fewer and smaller stores, and a business focus on productivity (sales per square foot) over

growth: Commodity retailers, especially big-box retailers, will be especially vulnerable to online sales loss, and shopping centers not anchored by stores with items that cannot be sold easily online (grocery stores, etc.) will also be hard hit with shrinking sales. Best Buy, the Gap and Abercrombie, among other retail giants, are busy permanently closing physical locations across the nation;

 Using an “Urban” Strategy — moving stores closer to urban consumers, with smaller footprints:

Wal-Mart is rolling out its Wal-Mart Express format at just 15,000 square feet, compared to its normal prototype of close to 200,000 square feet. Similarly, Target developed a new CityTarget format, sized at 60,000 to 100,000 square feet, compared to over 130,000 for its typical suburban stores. Other brands are following suit.

 Flagship Stores in high-end and high-rent locations, designed to market the brand, often at

boutique scale size; and

 Multi-Brand Stores, bringing multiple brands under one roof: The Gap and Toys R Us are both

adopting prototypes in which their multiple flags (e.g., Banana Republic, Baby Gap and Old Navy for the Gap) in order to encourage cross shopping across their brands and reduce restocking costs and rent for the combined flags. Another strategy is the “store-within-a-store” format in which one retailer co-locates within others.

The Dead Mall phenomenon and a rush for Mall owners to find new uses, sometimes completely new development plans, has hurt retail employment, but has created significant opportunities to reconsider properties large and small for new mixed use planned developments. Traditionally, population growth drove new retail development in very predictable ways. This connection is no more. In Palm Beach County, despite a growing population, the County’s total inventory of retail space recovered since the recession, but is flattening. Total retail square footage per person, which grew through 2009, is now less than it was in 2006.

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Palm Beach County Population 1.50 1.45

Millions

1.40 1.35 1.30 1.25 1.20 1.15 2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Source: U.S. Census Bureau, Annual 1- Year American Community Survey(s)

Palm Beach County Retail SF Per Capita 82

60

80

59 59

59

SF Per Capita

57

57

57

76 57

56 55

74

56 56

56

SF in Millions

78

58

72 55

55

55

54

54

70 68

53

66

52 2006

2007

2008

2009

2010

2011

Retail SF Per Capita

2012

2013

2014

2015

2016

2017

Total Retail SF

Source: U.S. Census Bureau, Annual 1- Year American Community Survey(s); CoStar

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Industrial Market Wellington and the County both have significant employment in manufacturing, manufacturing support services, wholesale trade, and transport and transshipment. The industrial and warehousing real estate markets are in the midst of a renaissance, having been ignored in many markets until a few years ago, and are one of the hottest current real estate segments for institutional investors.

The bulk of the regional demand for warehousing, flex, and transshipment space has been filled in Miami-Dade County, especially surrounding the airport. Even with the addition of new industrial and warehouse inventory, vacancies in south Florida are expected to remain below the national average.

[CoStar] According to CoStar Inc., the Miami metro ranks in the top 15 percent of markets nationally for warehouse and distribution space construction, deliveries and asking rents. Sales volume in the Metro ranks in the top 15 markets with more than $1 billion in trades in the past 12 months. [CoStar Analytics] The development of industrial, manufacturing and distribution space in Palm Beach County is less than in Miami-Dade, but has seen a significant increase in inventory along the Turnpike corridor. From the end of 206 to the end of 2017, the County’s total industrial inventory increased by 25 percent, from over 49 Million to over 61 Million square feet.

Demand is being driven by the rise in e-commerce, but overall any industry making daily use of warehousing is going through quiet revolution. High-performing mature industries utilizing extensive warehouse services, include Scheduled Air Freight Services, Process and Logistics Consulting, and General Warehousing and Storage Industries. New demand for modern warehousing space is being supported and driven by technology — the industry is shifting to shared, third-party, multi-tenant warehouses using high end computerized inventory systems, communications, and in some cases, robotics. Retailers, wholesalers, distributors and manufacturers are finding significant cost savings by not owning expensive warehouses that sit idle most of the day, leasing shared facilities that make better use of space, machinery and labor.

Office: Wellington and the New Geography of Work Wellington’s predominance of small, but successful business establishments, its industry concentrations in professional and business services, its high percentage of self-employed residents, and the education and earnings of its residents, all point to a local economy at the forefront of the new geography of work.

Across the US, traditional office-based employment is changing quickly in favor of more remote work and telecommuting, non-traditional office space and office sharing, and solo business ownership. The three major trends driving the new geography of work and office development, are as follows.

Rise of the Gig Economy The Miami Metro’s percentage of small, micro, and non-employer business establishments are unusually high. According to a recent study by the Fuller Institute at George Mason University, the Miami-Fort Lauderdale metropolitan area (which includes Palm Beach County) leads the nation the total number of non-employer firms per capita and has the fastest growing number of non-employer businesses. Non-employer firms are sometimes called the “Gig” economy — businesses that are selfemployed and usually perform work as independent contractors. Between 1997 and 2015 the number of non-employer establishments in the Miami metro area grew by 142 percent, more than twice the national average, at 58.6 percent.

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The Changing Economics of Traditional Office Development Despite its local improvement, five significant trends are continuing to shape office demand across the County:  After the recession, U.S. companies are rethinking their use of office space, consolidating and

re-engineering their business practices, to find ways to shrink and share office space, including outsourcing non-core functions, such as IT, accounting, human resources, marketing and legal to lower cost providers;

 Across the U.S., employers are aggressively shrinking the amount of square footage per

employee. According to the CoreNet Global Corporate Real Estate 2020 survey, square feet per employee in the office sector shrank from 225 square feet in 2010 to 176 in 2012, and is projected to reach 151 or less in 2017;

 Miami-Metro’s Co-Working Market: Yardi Matrix, a real estate analytics company, just completed

a study of Co-Working, or shared office space. According to the study, the Miami Metro market has 59 co-working locations totaling nearly 1.4 Million square feet of space. However, according to the study, at 2.7 percent of all office space, the Metro has the highest percentage of coworking space of 200 metro areas studied, including New York, Los Angeles, and San Francisco.

Demand is driven by the County’s large number of small business and start-ups; and

 Office-less development: Even as the county economy adds jobs, the combination of occupation

structure and changed business practice means that economic expansion will take place with much less new office space development than has been historically required in the past.

Telecommuting as a Major Work Location and Lifestyle Choice Global Workplace Analytics and Flexjobs recently completed the most comprehensive analysis of telecommuting in the US. The key findings of its 2017 report are:  Corporations are adopting workshift strategies, placing talent closer to their customers and

away from the central office. Aided by technologies such as Skype and GoToMeeting, telecommuting is not only a way to save on office space but offering it as part of employment packages is ranked by 46 percent of corporate leaders in a recent Deloitte survey as second only to compensation as the best way to attract talent. A 2017 Gallup survey found that 43 percent of workers now work at least one day per week from home;

 Regular telecommuting grew 115% in the past decade, nearly 10 times faster than the rest of

the workforce.

 The average annual income for most telecommuters is $4,000 higher than that of non-

telecommuters.

 The

percent of women and men who telecommute is about equal.

Half of telecommuters are 45 years of age or older, compared to just 41% of the overall workforce.

 Telecommuters are, on average, more highly educated than other employees. Approximately

53% have at least a bachelor’s degree, compared to 37% of non-telecommuters.

 Telecommuting is most common in Management occupations, but employees in Computer,

Mathematical, and Military occupations work at home much more frequently than their peers.

 While the Professional, Scientific, and Technical Services industry has the highest percentage

of telecommuters relative to its share of the workforce, the Management of Companies and Agriculture industries top the list because of an administrative job component.

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ď Ž In more than half of the top U.S. metros, telecommuting exceeds public transportation as the

commute option of choice. It has grown far faster than any other commute mode.

According the US Bureau of Labor Statistics American time Use Study, 24 percent of all workers in the US do all or some of their work at home, up from 21 percent in 2006. The percentage varies widely by occupation. 37.8 percent of workers employed in Management, business, and financial operations occupations report working all or some part of their workweek from home.

Regional and Local Impacts The net effect of these trends is that like retail space, traditional office space is becoming less tied to employment growth, and less important to the functioning of modern organizations. The regional impact is clear: although Palm Beach County’s employed labor force is 22 percent larger than in 2010, the total office square footage per employee is 17 percent less.

The Wellington office submarket has traditionally represented a very small share of the County office market. Despite the Villages rapid employment and establishment growth, according to CoStar, the Royal Palm/Wellington consisted of only 1.7 Million square feet of office space, and added just over 43,000 square feet from the beginning of 2014 to the second quarter of 2016 (a 2.4 percent increase), and has remained flat since. Traditional office space in Wellington supports a considerable chunk of its economy, but since the recession it has become significantly less important.

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Palm Beach County: Total Employment (Annual Averages) 700,000 600,000 500,000 400,000 300,000 200,000 100,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: US Bureau, of Labor Statistics, Quarterly Census of Employment & Wages Analysis by FIU Metropolitan Center

Palm Beach County: Total Office Square Feet Per Employee 56

120

100 91

Square Feet

80

91

87

87

111

110

108

54 104

100

90

97

94

92

52 50 48

60

46

40 44

20

Total Office Inventory (Million SF)

109

100

42 40

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 SF Per Employee

Total O ffice Inventory (Million SF)

Source: US Bureau, of Labor Statistics, CoStar.

Analysis by FIU Metropolitan Center

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Inflow/Outflow Analysis Wellington has a relatively high employment density, or jobs per resident worker, compared to communities across the County. As discussed, 2,148 business establishments located in the Village employ 21,860 workers, while 29,280 Village residents are employed throughout the County. The 75 percent ratio of local jobs to employed residents is atypically high for suburban communities. However, the numbers would indicate that the bulk of Village residents enjoy a short commute by working in the Village, but that is not the case.

The US Census Bureau’s Longitudinal Employer-Household Dynamics (LEHD) data tracks where workers live and work. The most recent data for the LEHD is 2015 and captures employment data slightly differently than the Bureau of Labor Statistics. However, the LEHD indicates a significant mismatch between the jobs located within the Trade Area, and where employed residents actually work.

The key indicators of the Inflow/Outflow analysis available through the LEHD data are as follows.  Although close to 24,750 employed residents live in the Village, only 2,847 (11.5 percent) of

them work in Wellington;

 This means that 21,903 employed residents are employed by businesses somewhere else in the

County;

 This also means that 12,620 jobs within the Village are filled by workers who live outside the

Trade Area;

 Almost 36 percent of Village employed residents work in one of four municipalities: West Palm

Beach, Wellington, Palm Springs Village, and Boca Raton; and

 The average commute time for resident employed workers in wellington is over 26 minutes,

indicating a significant portion leave the Village to work each day.

This analysis does not definitively mean that all resident workers employed outside Wellington leave each day — the telecommuting data indicates that a high percentage, if the local population mirrors national trends — increasingly work from home each day. However, the Inflow/Outflow analysis does indicate that continuing this pattern, without a significant change in working locations, cannot be sustained, risks exacerbating Wellington’s traffic congestion issues or negatively affecting its quality of life.

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Figure 1. Inflow and Outflow Analysis, Wellington, 2015

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42

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Where Businesses are Located in Wellington More surprisingly, an analysis of the exact locations of Wellington’s business establishments shows that a large percentage are located in single family homes in residential neighborhoods throughout the Village. Looking at the distribution of business throughout the Village by industry indicates that a significant number of sophisticated business services, consulting, and merchant sales are home-based.

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Findings: Key Opportunities & Challenges Wellington was a surprise to the research team for many reasons, including the dynamism, scale, diversity and quality of its economy. Wellington has many characteristics that make it unique among the state’s smaller communities. The following distills the results of the Team’s economic research, identifying the key opportunities, strengths, issues and challenges facing Wellington that provide the platform for a final comprehensive strategic plan.

A High Performing, Competitive Regional Economy Wellington’s economic future will be tied to the performance of the County’s economy, leveraging its own strengths against opportunities created by Palm Beach’s high performing economy. The crucial aspects of the County’s’ economy supporting future growth in Wellington include:  Despite significant employment losses during the last recession, total private employment within

the County has grown over 23 percent since 2010;

 The County’s annual average wage for employees of private companies, at $52,724 (2017) is

the highest in Florida. Average private employer average wages have increased 4.2 percent since 2010, adjusted for inflation;

 A diversified industry structure with top sectors including a wide range of high-end professional

services, medical care including hospitals and physicians’ offices, construction services and support, and manufacturing, especially aerospace components;

 An economy that trades with the world: Palm Beach County has significant traded sector activity.

Nationally, traded industries represent 36 percent of employment, 50 percent of income, and 95 percent of patent activity. The County’s traded industries represent 34 percent of all employment;

 8 of the County’s top 10 traded industries are concentrated in industries requiring advanced

education and/or professional skills, including management of companies and enterprises, legal services, Management and technical consulting services, architectural and engineering services, and computer systems design and related services;

 Palm Beach County has the highest number of annual patents filed of all Florida counties, and

has the 55th highest patent rate of all US counties; and

 Businesses in the County’s Advanced Industries Sector 8 percent of the County’s workers.

Nationally the Advanced Industries employ 9 percent of all workers.

A High Performing, Competitive Small Economy Wellington is one of Florida’s highest performing small economies, successfully building an industry and employment base that serves as a model for the rest of the state. Its important characteristics include the following.  By share of the Wellington Market area, the Village represents 31 percent of all businesses, only

15 percent of all employees, but 24 percent of all business sales;

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 From 2010, business establishments in Zip codes 33414 and 33445 increased by 20 percent,

while the jobs base grew by 26%, far ahead of the rest of the County;

 Wellington’s economy is marked by the size diversity of its businesses. 86 percent of businesses

in Wellington employ less than 20 employees, not including non-employer establishments. The Village’s businesses are also predominately locally owned and controlled. However, 38 percent of its businesses earn more than $1 Million per year;

 A local economy that interacts with the world: Traded industries in Wellington represent 12

percent of employment and 24 percent of total sales, but the addition of Wellington’s Equestrian pushes traded sector employment to 18 percent, and sales to 28 percent of all the Village totals, respectively;

 42 percent of the establishments in Wellington are in industries that pay an average salary above

the County annual average salary, representing 36 percent of all employment;

 Wellington’s Labor productivity outpaces the County — Annual sales in Wellington is equal to

$169,442 per worker, while the current labor productivity of the Miami-fort Lauderdale-West Palm Beach Metro area is $109,528 per worker; and

 Advanced Industry Sector businesses employ 5 percent of the Village’s workers and generate

over $183 Million in sales. The Village has a growing potential as a leading, high-concentration Florida location for the Advanced Industry Sector, particularly Advanced Industry Services.

A High Performing Labor Force The success of a local economy is also tied to the quality of its labor force. Wellington employed residents represent one of the State’s best overall labor forces.  Wellington’s residents are extremely well educated. 29.6 percent of Village residents have

a bachelor’s degree, and 17.6 percent have a graduate or professional degree, far ahead of the County and US;

 The Village’s percentage of self-employed workers, at 15.7 percent, is both higher than the rest

of the County (14.1 percent), and significantly greater than the U.S. average (9.7 percent);

 Wellington’s residents are overwhelmingly employed in managerial positions across all major

industry groups. 46 percent of all resident workers are employed in managerial occupations, compared to 35.9 percent for the rest of the County.

 Employed residents in Wellington earn far more than workers across the County.

Median earnings for full-time employed workers over 16 years old living in the Village, at $52,908, is 27 percent more than the County median full-time worker, earning $41,585. The residents of Wellington, on average, earn more than their counterparts across the County in every industry except Information and Accommodation and Food Services;

 33 percent of Wellington’s employed residents earn more than $75,000 per year. The number

of resident workers earning $75,000-plus grew by 28 percent in Wellington since 2010. By comparison, Wellington’s 50/75 ratio would rank it 21st among all US Counties.

 Driven by high earnings, median household income for Village residents is one of the highest in

Florida. At $83,270, median household income is 50 percent more than the rest of the County; and

 Despite Wellington’s high median earnings and incomes, the relative inequality between

households at the top and those at the bottom is far less than the County and Nation.

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Wellington’s 95/20 ratio (the ratio between the average income of households in the top 5 percent compared to those in the bottom 20 percent), at 21.8, far less than the US and the County.

Wellington’s Equestrian Sector Wellington’s Equestrian Preserve, and the growth of the Winter Equestrian Festival (WEF) makes Wellington truly unique place to work and live. The WEF is the largest Equestrian event of its kind in the world, and the Businesses in Wellington’s equine sector anchors the regional equestrian economy.

Wellington’s equestrian community generates significant economic benefits to the Village, and is unique for its size, scale, and breadth of businesses, activities and services. Because the industries comprising the equine sector in Wellington drive economic activity across a wide number of dimensions, the sector is one of the key foundations for the Village’s unique and diverse economy.  140 businesses in the Village of Wellington are directly involved in the equine industry, employing

1,145 full-time employees with total direct sales over $130 Million, and due to reporting limitations, and conflicting business definitions, is probably understated;

 The equine sector represents 10 percent of the total full-time employment and over 6 percent of

total sales revenue of businesses in the Village. It is the second largest industry sector and cluster in the Village economy, just behind offices of physicians and medical care. On average, every ten jobs in the equine sector generate seven additional jobs in Wellington. For every ten dollars of sales, another five dollars of output are generated by the equine industry in Wellington;

 Wellington’s equestrian sector also trades with the world, serving a national and international

market of clientele and businesses. Since the vast percentage of income generated by businesses in Wellington’s equine sector is from sales to businesses, individuals, visitors, and spectators from outside Wellington, the equine sector is actually Wellington’s largest traded industry sector/cluster. In this sense, the equine sector and cluster of industries plays an outsized role in growing and sustaining the Village economy;

 Each year the WEF draws between 200,000 and 250,000 visitors, spectators, competitors and

their support teams. The median household income of visitors to the event is $180,000. This means that the festival alone is placing Wellington in front of at least 200,000 of the nation’s highest income households, including many owners of major businesses from around the country. The value of the positive marketing across multiple media that Wellington receives from the exposure of the festival to such a high-end market cannot be overstated;

 The equestrian preserve, the equestrian community, and the equine industries have for 40 years

defined Wellington’s brand as a unique, high-quality community in which to live, work, and play.

The distinctive aspects of the equine industry complex provides Wellington with a brand identity and competitive platform which very few, if any, communities can claim.

A Unique, Possibly Underestimated, Brand The combination of its economic performance, labor force, and its Equestrian preserve make Wellington a truly unique community, with a unique lifestyle. However, Wellington is perceived widely as an Equestrian community, but little broad understanding of the depth and quality of its entire economy.

In addition, the potential marketing value of the Equestrian Preserve, the WEF, and Wellington’s Equestrian sector businesses is also underutilized. Wellington’s world-leading position as an equestrian

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center could be used much more effectively to market all of Wellington’s strengths and opportunities to a wide audience of potential investors and business owners.

Primary Threats & Challenges Despite its considerable strengths and opportunities, Wellington faces crucial challenges.  Wellington’s central location fueled its development. However, the Village is surrounded by

newer communities with large developable land inventories. The same locational factors that helped grow Wellington are helping to fuel a rapid increase in population and traffic from surrounding communities poses threat to the Village’s quality of life;

 Wellington, as all communities, needs to continue to evolve and strengthen its economy.

However, the Village is largely built-out, with a limited inventory of vacant commercially zoned land. The lack of immediately developable vacant land area to support traditional office, retail, and housing development means that ground-up vacant land development will be limited to a handful of properties. Sustaining the Village’s economic growth and diversification can’t rely on traditional office and commercial development, but will need to shift to other strategies, specifically redeveloping and re-purposing exiting commercial sites;

 Too many employed residents are employed and commute to locations outside of the Village,

exacerbating traffic congestion, and representing lost local spending that could otherwise be captured during the day by local retailers and service providers;

 Although measures of income disparity in the Village are lower than the US, the Village’s poverty

rate, 20.8 percent, is high. Additionally, although average wages have increased, the Village’s median wage has declined by almost 7 percent since 2010, indicating that similar to the national pattern, earnings for workers in the middle and lower end of the pay scale have stagnated;

 Also, despite high current wages relative to the county, wage growth across industries for Village

residents has been a mixed bag. From 2012 to 2016, median earnings for residents have increased in 15 of 27 industries but declined in the remaining 12. Increasing job access and opportunities for workers and families at or below the middle remains a challenge, but is a considerable opportunity. Previous research by the Metropolitan Center has shown the extensive economy-wide benefits of increasing household incomes for families in the middleand lower-income strata;

 Wellington’s Equestrian sector is facing growing national and international competition. Venues

designed to compete directly with the WEF are currently being developed in Europe and Argentina; and

 Solving Wellington’s growing transportation congestion issues can’t be accomplished by adding

more road lane-miles. Instead, the Village’s transportation congestion problems will require alternative land use, business and housing development strategies.

Changing Real Estate Market Trends Rapid disruption of traditional real estate development markets represent a challenge and opportunity for Wellington. The rapid loss and closing of traditional brick & mortar retail locations will harm retail employment over time, but the loss of retail space in the Village’s existing commercial properties

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represents an opportunity to re-purpose these properties — as has been accomplished elsewhere — for new, higher value-added uses, including alternative office and mixed-use development; Despite the region’s rapid expansion of industrial and warehouse facilities, Wellington is not well suited to capture a large expansion of industrial and/or distribution properties. The Village doesn’t have the land inventory, and development of these uses may create unwanted land use conflicts; and Wellington’s economy and labor force has significant strengths and concentration in high-end professional, technical, and business services, with industries and occupations with high proportions of office-based work. However, traditional office development in relation to employment growth is slowing significantly in Palm Beach County, as the growth of the total inventory of office space flattens, and the total square footage per worker declines.

Employers and employees are seeking alternative, more flexible and affordable workplace solutions that are closer to home, including shared offices, co-working space, and telecommuting options. Wellington also lacks the immediately available land inventory to support large-scale office development. The Village’s challenge will be to sustain and grow employment in high-skill, high-wage industries and occupations by supporting the growth of office space, home-based business locations, and telecommuting.

Wellington’s 21st Century Spatial Economy One of the biggest surprises to the research team is that Wellington may be an emerging model of the new geography of work, where employees spend a greater portion of their workweek working from home, are based in alternative workspaces, or operate small businesses from home. Our analysis of the exact locations of Wellington’s business establishments shows that a large percentage are located in single family homes in residential neighborhoods throughout the Village. Looking at the distribution of business throughout the Village by industry indicates that a significant number of sophisticated business services, consulting, and merchant sales businesses are home-based.

The growing use of distributed co-working and shared office spaces, located near residential neighborhoods, rather than a regional central downtown, may be a significant opportunity for Wellington.

Traditional office park development requires large tracts of land, and can be inefficient, with employment densities ranging from 143 to 167 jobs per acre. Alternative working spaces, on the other hand, can be developed in much smaller footprints and converted from other existing commercial uses. A typical coworking space can accommodate 750 members in 40,000 square feet of space, representing an employment density of 816 worker per acre.

Given the Village’s land inventory conditions and these new trends, strategies to support new employment should promote traditional office development to support larger firm locations in Wellington, but should increasingly apply workshifting strategies — development of alternative working spaces and telecommuting — to grow new employment. Small alternative workspace development strategically placed throughout the Village could have a large employment impact while simultaneously reducing traffic and keeping workers within the Village during the work day.

Wellington’s Growth Challenge Wellington’s economy is as much distinguished by its quality as its rate of growth since the recession.

Given its competitive characteristics, its fundamental challenge will not be to kick-start dramatic new 50

growth, but manage growing employment in harmony with its established quality of life. This is not to say that the Village can stand still, but that its economic development strategies will be more about managing and sustaining quality employment growth over the next 10 years. Developing the Village’s final detailed economic development strategy package rests on the following considerations:  What is Wellington’s growth future? How much is possible? How much is desirable? Structuring

the right balance of new economic growth is crucial, so that Wellington does not become a “victim” of its own success;

 Identifying target industries and occupations is crucial. Typically target industries are selected

based on an analysis of those most likely to succeed and grow, based on regional industry growth forecasts, matched against local sector strengths and competitive advantages. However, given Wellington’s competitive strengths and the benefits its economy provide to residents, it would be well advised to identify and support high performing industry sectors — those industries with not only strong growth potential, but have stronger wage performance, wage growth, and innovation rates. Wellington is a compact economy, and its growth potential isn’t unlimited. Promoting industries with higher-skilled, higher paying jobs provides greater spin-off and economic multipliers is important to sustain its growth and overall quality;

 Wellington’s economic development strategies can be structured to support other community

development goals, in particular supporting reinvestment in its older single-family housing stock; and

 Growing and expanding opportunity for workers at the bottom of the income ladder also matters.

The village’s high poverty rate indicates that there is significant slippage in local job opportunity and vertical income growth. Growing opportunity for those at the bottom creates income across the economy and income spectrum.

Lastly, given the new employment geography, land use patterns, and the Village’s strengths in sophisticated business services, sustaining the growth of a high-quality economy probably won’t’ require a radical re-thinking its physical development, zoning, or land use strategies, nor will it require traditional big investments in infrastructure or incentives. The continued development of Wellington as a 21 st Century Live-Work Community will be based on:  Creating low impact employment generating development;  Employment development that takes cars off the road;  A focus on traded, high income industries and occupations;  Focus on occupations and industries making mist use of telecommuting, home work, and home

business formation;

 Incremental redevelopment and re-purposing of existing commercial properties; and  Market education: informing major property owners of Wellington’s advantages and strengths.

The final document in this series, the 2018 Wellington Housing and Economic Development Strategic Plan, details the specific strategies incorporating this research.

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