‘Open’ season in the Hamptons

The imminent arrival of the U.S. Open at Shinnecock Hills Golf Club in Southampton this June has helped bounce the high-end Hamptons summer rental market into high gear in February.

“We’ve definitely seen a robust rental market consistent with years past — if not a little more — in light of the fact the U.S. Open is out here,” said Carl Benincasa, a Bridgehampton-based regional vice president of sales for Douglas Elliman.

One change that will likely increase the number of rental transactions this year, notes Benincasa, is the amendment the town of Southampton made in December to its rental permit law, which allows shorter-term rentals than the two-week minimum that previously existed. The resolution allows the town to pass a waiver for special occasions and large events in order to alleviate a shortage of hotel rooms for events such as the U.S. Open.

And Benincasa and his team aren’t alone in finding that summer renters are getting an early start. James Petrie, a broker at Compass in East Hampton, was hearing from would-be summer renters in early February, too.

“We have been getting a lot of rental requests this winter, which is good for a healthy rental market in the upcoming summer,” said Petrie. “If people are looking now, it means they are confident they are going to rent over the summer.”

It’s not only the U.S. Open that’s sparking interest. Some believe the Trump administration’s tax cuts may also be inspiring confidence. “We know it’s favoring real estate investment,” said Diane Saatchi, associate broker at Saunders & Associates in East Hampton. “We also know the equity market is doing well. People are feeling wealthy. When they feel wealthy, they spend money.”

Even stock market volatility has not deterred Saatchi’s clients. “We’ve been so busy,” she said. “It seems like people are feeling really comfortable spending money. The market feels like somebody turned the lights on.”

Cody Vichinsky

But not everyone’s feeling so confident, which in turn also benefits the rental market. While Matthew Breitenbach, an associate broker who recently left Elliman and joined Compass in Southampton, said the season may be starting early, he added that some of his clients are exercising more caution regarding big real estate investments. Breitenbach is working with one couple that almost bought a high-end property over the winter but recently changed course and rented the same Wainscott house they had last year. “They’re watching the market a little,” Breitenbach said.

A swift pace of renting can indicate a worrisome slackening of sales, brokers noted. Ray Lord, a licensed real estate salesperson for Douglas Elliman, whose office is in East Hampton, is concerned about what the early rental market could portend for sales.

“Historically, if rental inquiries are up, it’s a good indication that sales are going to be down,” he said.

The hot spots

As of press time, there were about 34 full-season summer listings still available in the Hamptons at $500,000 and above, Saatchi estimated.

“It’s actually looking as good, perhaps better than last year. There are a lot of calls from brokers asking, ‘Do you have something for $200,000 for any two-week period on the ocean?’ The big money people are out there,” she said.

Among the highest-priced rentals still available for the summer, as of early February, was 700 Meadow Lane in Southampton, listed for $2.25 million, or $1 million in July and $1.5 million in August, with a $600,000, two-week minimum. The 18,000-square-foot, nine-bedroom house listed by Bespoke Real Estate sits on eight acres that extend from the ocean to Shinnecock Bay and includes a pool, a tennis court and a dock.

Another prestigious rental is the Jule Pond Estate, set on 42 acres in Southampton, which claims to have the largest ocean frontage —1,286 linear feet — in the Hamptons. The home, built for Henry Ford in 1960 and previously owned by the Ford family, was once the main estate on a 235-acre property called Fordune. The principal home, currently listed for sale for $175 million, is 20,000 square feet with 12 bedrooms. The rental asking price for the season is $1.7 million, according to Cody Vichinsky, co-founder and principal of Bespoke Real Estate in Water Mill, whose firm is also showing that property.

“We’re just getting into the thick of it,” Vichinsky said of the property’s rental demand. “Last year, we had $400,000 for nine days.”

Compass’ Petrie said that he is seeing a lot of interest in “anything that becomes available on Lily Pond Lane in East Hampton.” The properties in this area tend to rent for $300,000 a month or more, he said. This pricey enclave is where hedge fund investor Scott Bommer sold three parcels of land to natural gas magnate Michael Smith for $110 million in February 2016.

There aren’t many properties in this spot that are available, Petrie said, adding, “It’s hard to put a price tag on them.”

Compass recently facilitated a July rental on Jones Road in East Hampton for $200,000. “That’s the highest one we’ve done so far,” Petrie said. The 7,800-square-foot property has six bedrooms and is about a block and a half from the ocean.

Douglas Elliman broker Michael Daly pointed to the village of Sag Harbor as an increasingly appealing location among renters. In the last week of January, he facilitated the rental of one house in the hamlet for $325,000 for the season. The luxury four-bedroom home in the historic district has a pool and guest house.

“Sag Harbor has become a hotter and hotter destination over the last five years,” Daly said. “It’s kind of becoming the West Village of the Hamptons…It’s the one village that hasn’t taken to the major brands. We have a five-and-dime, which is charming and reminiscent — and an important part of the community.”

Supply and demand

Whether there are enough high-end rentals on the market to satisfy demand is an open question, with brokers surveyed by TRD arguing both sides.

Vichinsky said good rental options remain slim. “I think that’s a consequence of people who have purchased significantly over the last five or six years,” he said. “You see a lot of the better homes have been snapped up and purchased. A lot of people who own these homes want to use them. The material impact of a rental is not something they are look-
ing for.”

But other brokers think they’ll have plenty of options for their clients — even the latecomers. Nicole Gary, an associate real estate broker at Keller Williams Tribeca in New York City, said her clients are just starting to talk about summer rentals in the Hamptons.

“I have a couple of clients thinking about waiting until March or so to figure out exactly where they want to be,” Gary said. The agent isn’t pushing them to make a quick decision. “There is definitely inventory out there,” she said.

And in the past, Gary’s clients have found it pays to bide their time. “Sometimes, if they wait until May or right after Memorial Day, I’m able to get them a better deal for the month they want,” Gary said. “The owner wants to get rid of it at that point.”

Either way, there could be some new options on the horizon. Daly said he has seen an increasing number of luxury rentals placed on the market by owners who have not rented out their properties in the past.

“I’m not sure I have a fully formed opinion on why,” he said. “Many times, they are investment homes. They are looking to maximize their income on the houses. They’re saying, ‘I’ll rent for one month and we’ll travel.’”

Among those who’ve rented in the past, there hasn’t been an uptick in pricing, Daly added. “The majority of people are keeping them the same this season,” he said.

Airbnb: both friend and foe

One factor that continues to affect summer rentals across the market in the Hamptons is the presence of sites such as HomeAway and Airbnb. Owners of very high-end homes tend to be cautious about whom they rent to. “Owners want agents to bring clients they can vouch for,” said Daly. Even so, more owners are looking at such short-term rental sites.

“If my clients are serious investors and they depend on their income from renting to make their investment work for them, I think it’s irresponsible to pooh-pooh or talk down Airbnb,” Daly said.

Daly recommends that many owners consider that route, particularly at a time when renters are often looking for short-term rentals more spontaneously than in the past.

Some towns, including East Hampton, have required people who want to rent their properties on sites like Airbnb to add them to rental registries, while others have outright banned short-term stays.

“I tell all of my rental owners that they should abide by the regulations and the law but to look at Airbnb as an option for meeting their goals,” Daly said. “Frankly, when the houses don’t rent, the landlords are calling all the agents and saying, ‘How come you haven’t rented my house yet?’ Airbnb can be an aid,” he added.

Vichinsky said renting very high-end homes can be “riddled with complications, unless you’re dealing with fantastic people on both sides.”

Fortunately, he said, for the ultra-luxury, ultra-high-end rental, the renters often treat the properties even better than the owners.

“They come prepared,” Vichinsky said. “They have their own staff. They are excellent stewards of the property.”