The Real Deal New York

Ritzy rentals lag on East End

Demand for the priciest homes was slowed by the long winter, with market now playing catch-up
By Janna Herron | June 01, 2014 07:00AM
Images of the Sandcastle in Bridgehampton

Images of the Sandcastle in Bridgehampton

The summer Hamptons rental market didn’t heat up until temperatures rose.

Local brokers said demand for the priciest rental properties on Long Island’s East End froze as snowy days and a chilly spring kept potential summer renters away. By last month, interest was beginning to thaw, they said. But the sparse number of the most exclusive and coveted rental properties — those priced above the $600,000 mark for the season — may catch some über-wealthy renters by surprise this year.

“People weren’t thinking ‘Hamptons’ until it got nicer out,” said Saunders & Associates’ Terry Cohen, one of several brokers marketing 396 Meadow Lane, an oceanfront residence in Southampton asking $900,000 for the summer. “So, I think we’re going to see a very big last-minute rush. The inventory for very high-end is always limited, but this year, it’s especially low.”

Cohen and other sources attributed that limited amount of high-end inventory to a hot sales market and to renters who renewed last fall, well before the cold spell hit.

As of late last month, there were 20 Hamptons properties listed for $600,000 or more for the summer season, traditionally Memorial Day to Labor Day, according to Hamptons Real Estate Online, which compiles rental and sales data for the area, and news reports. While numbers for properties at that price point were not available for previous years, anecdotally, sources said inventory at this level is down this year.

Still, the 10 priciest rentals on the market last month will cost a pretty penny. They were listed for between $750,000 and $1 million (see accompanying chart).

Click to enlarge

Click to enlarge

One super-luxury rental, Bridgehampton’s 612 Halsey Lane, more commonly known as the “Sandcastle,” is being offered for a cool $1 million per month, but only for July or for August, not both. The house is asking a slightly more affordable $550,000 for a short-term, two-week rental.

“We’ve already done three television spots on the property. It’s gorgeous,” said Gary DePersia, a broker with the Corcoran Group who shares the 612 Halsey listing with Main Street Properties. The residence was featured on the local NBC show Open House NYC, on a local CBS show called Living Large and on Yahoo’s weekly video profiles of large estates.

While the owner, Hamptons homebuilder Joe Farrell, hasn’t found any takers for either month, big offers to rent the residence for both July and August have been turned down, DePersia said. The property was on the sales block for $43 million, but was delisted after Farrell decided to keep it for his family, said DePersia.

Beachfront just the beginning

These fantasy residences, which are often on the beachfront, not surprisingly offer a host of outlandish amenities.

For example, the “Sandcastle” — which has reportedly been rented in past summers by mega-celebrities like Beyoncé and Jay-Z and the Hanson brothers — has a total of 31,000-square-feet between the main and pool houses. The main house includes a screening room with a planetarium-like ceiling; a 1,500-square-foot master suite with an outdoor shower; a sports court with a moveable wall and a retractable hoop that can be used for squash, racketball or basketball; a two-lane bowling alley; an indoor half-pipe; a model train room; a children’s dance studio with a stage; and an eight-car garage with hydraulic lifts.

Similarly luxurious is the Linden Estate on Ox Pasture Road in Southampton, which is listed for $950,000 for the season. The 12-bedroom house spans 18,000 square feet on 10 acres. The estate has staff quarters, an outdoor pool, an indoor pool with slide, a spa, a grass tennis court, a paddle court, two pavilions with full kitchens and two four-car garages. It’s also for sale — for $45 million.

These kinds of properties draw wealthy families from all corners of the globe, said DePersia. They hail not only from New York City and its swankiest suburbs, but also from California, Florida and Chicago and as far as Europe, Russia, China and South America.

Timothy Hafstel, a broker with Halstead Property who is also marketing 396 Meadow Lane, said he relies on his brokerage’s network in New York City to funnel prospects, from Wall Street executives to rich foreigners, to his Hamptons listings.

This year, he said he’s noticed that many renters are interested in one or two months, rather than the full season.

“I think the last few summers, June has been kind of a bust, unseasonably cold, so they think, ‘Why waste the money, especially since the kids are still in school,’” he said. “But I’ve been really busy with just July and August deals.”

Slim pickings

Still, there is not a lot for moneyed renters who began looking late in the season and are willing to shell out hundreds of thousands of dollars this year. Part of the reason is that many repeat renters and some aggressive first-timers made deals in the fall and early winter, before the renting season really began.

But the biggest factor hurting the inventory of priciest rentals is the hot East End sales market, most brokers said.

“The sales market was so strong this year, and because of that, the inventory of rentals has gone down,” said Erica Grossman, a broker in Douglas Elliman’s Southampton office.

“Some new owners are not putting them back on the market this year,” added Grossman, who is also marketing 396 Meadow Lane.

The average sales price for luxury properties in the Hamptons jumped 56 percent in the first quarter to $7.4 million over the same period in 2013, according to data from the appraisal firm Miller Samuel. The number of sales also leapt 58 percent from the year before.

Now that some of the rental inventory has been lost to sales, well-heeled renters must compete with each other for the thin rental offerings. That means they have little negotiating room when it comes to price this summer, said Saunders & Associates’ Cohen. Most of the high-end rental deals done this year are close, if not at, the listing rental price. “They’ve had to pay up to get them,” Cohen said.

The competition isn’t just a renter issue, either. The brokers are battling it out, too. As customary, most Hamptons summer rentals are open listings, so there is not just one listing agent. That means whoever nabs the renter gets the 10-percent commission that comes with it.

Legal limitations

While rentals at the priciest end of the spectrum are in short supply for this time of the year, there’s a slew of properties “in the middle” of each price range that are still available, said Cohen, who declined to specify a price range.

“These are properties with three to four bedrooms in a good, but not great location. They may be a little older, with more personal stuff in them,” she said. “People aren’t coming out for those.”

One reason could be that many towns are cracking down on local laws on summer renting, keeping some potential renters from qualifying. For example, East Hampton and Southampton have long barred group rentals, or share houses, and required brokers to register their closed rental deals to make sure the local codes are being followed, said Elliman’s Mary Lappin Marmorowski. This year, Montauk is doing the same.

“We had someone from the town code enforcement stop by to make sure it’s being followed,” she said. “And most owners don’t want groups anyway. You see it all the time on the computer: ‘No groups.’ ”

Another reason for slower demand for the more reasonably priced rentals is that there is no post-Hurricane Sandy boom like last year, said Halstead’s Hafstel. In 2013, vacationers who typically summered at the Jersey Shore or on Fire Island couldn’t book rentals at those beaches because of the storm damage, and instead overwhelmed the Hamptons, taking up the more affordable rentals there.

“We don’t have the feeding frenzy as last year,” he said. “It will be interesting how it nets out this year.”