Even though it’s the off-season on Long Island’s East End, the Hamptons commercial real estate market is experiencing a burst of activity.
One factor in this growth is an increase in the number of Manhattanites moving out east year-round, particularly to the tony Hamptons, where high-end retailers already dot the landscape. With the increase in residential activity, expectations for increased commercial demand have led to massive mixed-use and commercial properties coming onto the market — at an increasing velocity and higher price points.
Two unrelated properties — the legendary Gosman’s Dock in Montauk and the East Hampton Point Resort & Marina — are each on the market priced at $55 million.
Other South Fork property owners are also asking New York City prices: $40 million for the Montauk Yacht Club; $17 million for Deep Hollow Ranch in Montauk, one of the oldest ranches in the country; $10.5 million for the Maidstone Arms Inn in East Hampton; and $9.5 million for the Amagansett Farmers Market.
Commercial real estate locations in East Hampton, home to stores like Gucci, Cynthia Rowley, Tiffany & Co., Ralph Lauren, J. Crew, Theory and Cole Haan, are getting gobbled up by bigwigs like high-end women’s clothier Elie Tahari, who purchased three properties within 12 months. And that’s in addition to the property he already has on the two-block long downtown district.
Last month Tahari bought 54 Main Street, owned and occupied by the now-defunct Harold Shepherd Real Estate, for $4.7 million, said Barbara Weinman, the broker that handled the sale. The same day he also purchased, for $2 million, the 1,700-square-foot space behind the Main Street building, at 53 The Circle. Earlier in the year, Tahari paid $7.5 million for the two-story One Main Street, said Judi Desiderio, president and founder of Town & Country Real Estate in East Hampton and a listing broker for the property. Tahari reportedly paid $1 million more than the asking price.
“It’s the crown jewel of Main Street,” Desiderio said, and Tahari is expected to turn it into a two-story space for his line. Two years ago, Weinman handled Tahari’s $2.6 million purchase of 48 Main Street, the home of his current store.
“This was a very unusual year,” Desiderio said, noting there were more trades along Main Street in East Hampton by one person — Tahari — in the last year than in her 25 years in the business.
Ralph Lauren, who occupies a space in East Hampton at 31-33 Main Street, is expanding, opening a restaurant behind his store in the space of the eatery Blue Parrot. The designer is also opening another clothing store at 45 Main Street in the spring, according to local newspaper The East Hampton Star.
“I think this is all good as far as business is concerned,” Desiderio said, but on a personal note, “It’s sad to see the fabric change.”
Long Island Sound music store is said to be closing and Randy Lerner, the Cleveland Browns owner and former chairman of MBNA Corporation, a billion-dollar credit card company since acquired by Bank of America, reportedly purchased Amagansett Square, a group of stores on Main Street. He already owns a restaurant, The Meeting House, at 4 Amagansett Square.
“Commercial East Hampton Village is almost a private man’s Monopoly game,” said Joseph Kazickas, a principal in the East Hampton office of Brown Harris Stevens. And, he added, people like Tahari are willing to pay a premium because they predict that values will rise.
Sag Harbor, still a bit of a sleepy one-horse village, has relatively little by way of commercial real estate, though that is changing. The Bulova Watchcase Factory, purchased last year, is slated for development as a mixed-use property, assuming village approval. Michael Daly, principal broker at RE/MAX Beach Properties, said the property sold for $16 million and once converted will be worth more than $100 million.
Also in Sag Harbor, the town has given preliminary approval for the construction of an apartment building at 21 West Water Street, the ill-fated site of many restaurants and nightclubs, most recently Daniele restaurant and before that the hot spot Rocco’s de la Playa.
That amount of activity “is big for us,” said Katherine McCrosson, owner of the Sag Harbor-based Katherine R. McCrosson Real Estate. “Other than that, things are pretty stable.”
McCrosson does not foresee Sag Harbor falling victim to overdevelopment because many of the businesses are family-run and continue to be passed down from generation to generation.
RE/MAX’s Daly told The Real Deal in a September Q & A that there had been a great deal of commercial activity in Sag Harbor, with more than $40 million in commercial property purchased this year.
“There has been a great deal of turnover in commercial real estate in Sag Harbor in the last year,” Daly said, later adding, “Sag Harbor and East Hampton are particularly on fire, whereas Southampton seems to be in a lull.”
Southampton Town stretches from Westhampton Dunes to North Haven, with its center in Southampton Village.
From local people to New York City folks to other people with second homes in the Hamptons, “there are investors looking for commercial property out here,” said Lee Minetree, a vice president with the Corcoran Group.
Minetree is marketing a $4.5 million-plus property in Southampton that consists of two light industrial 15,000-square-foot buildings on the site of a 2.8-acre former potato field on Leecon Court. He said he was marketing it as space for contractors looking to have a local base.
Minetree noted inventory is becoming tight: “I have people looking for light industrial or commercial industrial land and there is virtually very little to choose from if any at all.”
But real estate is still cheaper in Southampton than in more active East Hampton, noted Minetree.
Southampton is home to mostly small, independently-owned stores although there is a Theory store there, a high-end apparel brand. Also in Southampton are the two revered Fudge Company stores, Sip ‘n Soda, the Parrish Art Museum, the local Herrick Hardware and a small Saks Fifth Avenue.
Yet Southampton commercial spaces appear to be emptying out, Daly said.
“There are quite a few empty storefronts on Main Street and Job’s Lane, and it appears that there’s a real transition going on for commercial real estate in Southampton. It’s a timing issue in terms of owners and what they’re looking for [in terms of] rents, supply and demand, and the fact that the village has been going through a lot of micromanagement of zoning.”
A large space was made vacant by the September closure of the separate men’s store at Saks Fifth Avenue on Main Street and Hampton Road; early last month, there was a for-rent sign in the window. The main store is still open.
Long prized by surfers, the small hamlet of Montauk is growing more upscale. The area has mostly been avoided by major developers because of its remoteness — it is as far east as you can go, past the Hamptons at the very tip of Long Island. However, Montauk is now seeing a spike in commercial activity. Some agents say the surge in commercial activity is due to the lower sales prices.
In Montauk, recent big sales include Shepherd’s Neck Inn, which Kazickas of Brown Harris Stevens said went for more than $8 million, and the former Andy Warhol estate, which went for under $30 million. The inn is expected to be turned into condominiums.
“Montauk commercial real estate is very hot,” said Martha Gundersen, an agent in the Brown Harris Stevens East Hampton office.
The hamlet of Bridgehampton is still far from a hotbed of commercial real estate activity. The area’s streets are dotted with antique shops and there is a chain-store shopping mall.
Deals include the sale of the old Bridgehampton National Bank Building (down the street from the current bank building) and the arrival of Starbucks about five years ago.
In the nearby hamlet of Water Mill, the Sisters of St. Dominic of Amityville have sold Villa Maria, a convent, for $35 million.
Despite the upsurge of activity in the Hamptons, commercial real estate deals are still handled by brokers who also do residential work.
Even with the flurry of activity on the commercial real estate front, the volume is not such that agents can solely focus on commercial transactions.
“Nobody can do that,” said Town & Country’s Desiderio. “They’d starve to death.”