Key West Commercial Real Estate Redevelopment: Why No Apartments?

"This near exhaustion of BPAS capacity is a fundamental constraint on new housing in Key West independent of any regulatory requirement." Patrick Wright, the city's Growth Management director, wrote that line in a memo to City Manager Brian L. Barroso this summer. It explains a lot about North Roosevelt Boulevard.

The number behind it is small. According to the city's 2026 BPAS annual report, Key West had about 0.84 Equivalent Single Family Units of residential allocation left for Year 13, which is the 2025/26 cycle. That is less than one house's worth of permission to add a new home anywhere on the island.

That figure explains why the island's two biggest commercial rebuilds are coming back with less retail space and no apartments. It also changes what anyone buying commercial property here should expect zoning to deliver.

Two 1960s Plazas, One Owner, Two Timelines

Publix controls two of Key West's three original strip malls, and both are slated for phased demolition and rebuilding. Key Plaza's applicant is Real Sub LLC, a Lakeland-based real estate subsidiary of Publix Super Markets Inc. Work has already started at Searstown. Key Plaza is still going through city approvals.

Searstown Plaza was built in 1965. Publix anchored one end for more than 40 years and bought the whole center in January 2022. The plaza also holds Royal Furniture, TJ Maxx, Outback Steakhouse, Imagination Station, medical offices and the local driver license office run by the Monroe County Tax Collector. Demolition of the long-vacant Sears began in late June 2026, and the rebuilt center will be called Conch RePublix Shoppes.

Key Plaza, at North Roosevelt and Kennedy Drive, covers about 19 acres and is about 60 years old. Its Kmart closed in 2022.

The city staff report puts Key Plaza's existing commercial floor area at 255,959 square feet, so the plan removes about 64,000 square feet of retail space.

The Incentive Was Offered. The Permits Were Not.

Housing over these plazas has been discussed in Key West for a long time. At the April 2025 Searstown vote, Commissioner Sam Kaufman reminded his colleagues that officials had talked for decades about workforce apartments above Searstown, Overseas Market and Key Plaza. "The city even approved a density increase of 40 units per acre to incentivize shopping centers to add housing," he said, according to Keys Weekly. He cast the only vote against the project.

Wright's memo spells out how that incentive works. In the General Commercial, or CG, zoning district, base residential density tops out at 16 units per acre. Developers who build affordable housing can go up to 40 units per acre. The bonus is voluntary, and it does not apply to a commercial project like Key Plaza as a requirement.

On paper, a 19-acre CG site at the bonus density works out to hundreds of units. Density is only a ceiling, though. Every new unit also needs a BPAS allocation, and the city has to keep a 24-hour hurricane evacuation time for permanent residents. The Building Permit Allocation System exists to protect that clearance time.

Here is how fast the latest allocation year went, according to the 2026 annual report:

1. 6.62 units were available for Year 12 and beyond.
2. 4 were awarded through Planning Board Resolution 2026-018.
3. 1.78 were awarded at the staff level: one affordable unit at 901 Fleming Street and an affordable accessory unit at 2929 Patterson Avenue, which counted as 0.78 of a unit.
4. That left 0.84.

The separate state-authorized pool of 300 deed-restricted workforce units is almost gone too. Garden View Apartments on College Road took 103 units, the Monroe County School Board property on Trumbo Road took 150, and 907 Caroline Street took 4. Another 38.8 are on hold for 3401 Duck Avenue, leaving 4.2.

Even a fully committed developer would have had no permits to build at the scale those acres allow. Wright wrote that this will keep limiting housing unless the hurricane evacuation model changes and new units are advocated for at the state level.

The 60 Units That Turned Out to Be Spoken For

There was one moment this summer when it looked like the count might grow. On June 30, 2026, the city told FloridaCommerce that an internal audit had found an apparent gap of 60 affordable units from Year 11. The spreadsheet showed 271.56 units deducted but only 211.56 assigned to specific projects.

The units weren't unused. Ordinance No. 24-09 had assigned them to the Lang Milian Apartments, owned and operated by the Housing Authority of the City of Key West, and the spreadsheet had never linked them to that project. The city corrected its records and concluded that no change to its total or remaining balance was needed.

Why the City Could Not Require Homes

Supply is half the story. The other half is legal. Wright explained that a housing requirement on a project needs a rational connection "between the project's impacts and the condition imposed." A rebuild that reduces commercial square footage, he wrote, "does not generate a housing demand impact sufficient to support a housing requirement." Staff also cannot require anything beyond what the adopted land development regulations call for, and Key West has no inclusionary housing ordinance that covers this kind of project.

So the smaller footprint makes a housing requirement harder to justify. A rebuild that adds space gives the city a basis to ask for something in return. One that shrinks gives it much less.

The timing adds a third limit. Florida's SB 180 bars local governments from adopting new, more burdensome development regulations until October 1, 2027. The memo suggests the city use the time to prepare nexus studies, draft amendments and hold community engagement, so it could be ready to adopt new requirements for the North Roosevelt corridor once the moratorium ends.

What the Rebuild Does Deliver

The new Key Plaza is designed for flood conditions. The existing buildings sit low in the floodplain. They will be replaced with structures built to current flood codes, including a new Publix raised a full story with parking underneath. The plan reduces paved surface, reworks stormwater handling and, according to the developer, adds about 130,000 square feet of green space.

For tenants, attorney Anthony Davila of Smith Hawks told Keys News the phased schedule is meant to keep existing businesses open, that tenants who want to stay will get preference, and that no tenants have been signed for the mid-size "anchor" spaces on the plans.

The project has moved steadily through review. It went before the Development Review Committee on June 25 and was scheduled for the Tree Commission on July 21. At a public hearing on September 17, 2026, the Planning Board recommended approval with conditions. The City of Key West staff report says the draft resolution calls for final landscape approval and 16 more bicycle parking spaces before the project goes to the City Commission. As of that staff report, no Commission date had been set.

What This Means When You Price Key West Property

If a CG parcel looks underbuilt, it's tempting to value it at its zoning. In Key West, density on paper does not turn into homes unless the allocation exists. The 40-unit bonus is real, but the BPAS balance limits what can actually be built.

That makes existing, legally established dwelling units and transient licenses a separate kind of asset from the land under them. The City of Key West has a formal process for moving transient units or licenses from one site to another, with Development Review Committee and Planning Board review. Under the Key West land development code, the transfer of development rights program is narrower. It lets density rights from conservation-district sites move to designated receiving parcels in the Key West Bight area, at one unit per acre, and it covers density only, not commercial square footage.

Old Town's recent trades follow the same pattern of reusing what already exists. Pier House Resort & Spa at 1 Duval Street, with 142 rooms, was reported sold for $190 million to Sixth Street Partners and Riller Capital, with Braemar Hotels & Resorts as the seller. Hard Rock Cafe closed at 313 Duval Street on April 30, 2026. The property was later reported sold for $13.5 million, and Smokin' Tuna Saloon announced plans to move in after renovations. In both cases, buyers bought an established operation in an existing building.

Along North Roosevelt, the supply of retail space is going down. Key Plaza alone is set to lose about a quarter of its floor area, and the rebuilt Searstown won't fully open until 2031.

FAQ

When is the next chance for new residential allocations in Key West? According to the City of Key West BPAS schedule, the Year 14 BPAS cycle for 2026–27 opened July 1, 2026; applications are due November 6, 2026, initial rankings are scheduled for January 15, 2027, and the Planning Board's final ranking and awards are scheduled for May 2027.

Will Key Plaza businesses close during construction? The plan uses four phases to keep existing businesses open where possible, and tenants who want to stay will get preference, according to the applicant's attorney.

Could the city require housing on North Roosevelt later? The memo describes preparing studies and draft rules for the corridor so they could be adopted after SB 180's moratorium ends on October 1, 2027. No such rules exist today.

If you're weighing a commercial or mixed-use property in Key West, start by checking which development rights come with the property, not only what its zoning allows. The team at Bascom Grooms Real Estate has followed North Roosevelt Boulevard and the BPAS process for more than 25 years. Contact us to talk through what a specific parcel can realistically become.

This article is general information, not legal, tax or financial advice. Consult a qualified professional about your situation.