The Real Deal Tristate

An inside look at the Hamptons’ new hotspots this summer

While weekenders will see trendy new shops and restaurants, under the surface the commercial market is struggling — especially in Southampton, where storefront vacancies are soaring
By Edward Williams | May 20, 2019 12:00PM

(Illustration by Ryan Inzana)

When weekenders descend on the Hamptons at the end of May, they will no doubt notice lots of new additions to the landscape of restaurants, hotels and retail.

But for the real estate world, there’s a lot brewing behind the scenes that suggests the market is not in great shape.

Some pockets are seeing a wave of commercial activity, like Montauk — the favorite party spot of Instagram influencers, with a number of new pop-up retailers and restaurants ready to cater to surfers with disposable income to burn.

And there is a fair amount of commercial deals getting done on the East End more generally, but brokers say that on the whole activity is down as retailers become less committal and development and investment opportunities become scarcer.

In addition, some areas, like Southampton — which had been the choice market for ritzy restaurants and retailers for years — are facing a retail blight.

In mid-May, The Real Deal tallied more than a dozen vacant storefronts in Southampton Village. Preppy clothing retailer Vineyard Vines, for example, closed its 1,512-square-foot store at 54 Jobs Lane in January after nine years. 

But landlords — who have been called out by some for exorbitant rents in the past — are now responding with discounts. Retail asking rents in Southampton were around $110 per square foot earlier this year, brokers say. Now they’ve fallen to $85 a square foot on Main Street and as low as $50 a square foot on Jobs Lane.

“Look, Southampton sucks!” said one Southampton landlord who has properties across the East End. “The politicians are trying to shut everybody down. Getting rid of the share houses has destroyed the Hamptons. Fortunes are made off bridge-and-tunnel people. That’s how you make money.”

Despite those concerns, there are plenty of deals to chew on, and brokers say they’re expecting some 11th-hour transactions before Memorial Day weekend.

“Things are happening late this year,” said Hal Zwick, a retail broker at Town & Country Real Estate. “But some years I’ve done leases as late as May 15 and they’ve been open for Memorial Day. Sag Harbor is full. Bridgehampton is full. East Hampton is full. So this is a Southampton issue.”

While brokers and landlords feverishly try to fill those spots, here’s a look at the deals that have gone down since last year.

The restaurant rush

While a handful of high-profile restaurants and old standbys have shuttered on the East End, there are a bunch of newcomers on the scene.

Southampton’s Red Bar Brasserie and Little Red — which opened in 1998 and 2011, respectively — are both gone this season.

Restaurateur Will Guidara and chef Daniel Humm — whose Eleven Madison Park in Manhattan has three Michelin stars — will also not be bringing their pop-up EMP Summer House, a hotspot with backyard bocce, back to East Hampton.

But the owners of Paola’s, the swank Upper East Side Italian restaurant, snapped up a lease for the high-profile EMP space, which is in a picturesque white house with black shutters at 341 Pantigo Road. Brokers told TRD that while there was some demand for the space, landlord Bernard Kiembock — who is known to frequent the Upper East Side restaurant — had been “talking about doing something like this for a few years” and brought in the tenant directly.

While details of the deal were not disclosed, news reports indicate that it’s starting as a short-term lease, although Paola’s may consider signing on for longer if the rollout goes well. Still, it’s a big loss for Kiembock, who sources say had been receiving north of $200,000 a season from EMP. Paola’s is said to be paying under six figures for the space. (Kiembock could not be reached for comment).

But not everyone is getting a discounted deal.

“If you are looking to open a seasonal, 100-seat restaurant, you are looking at $200,000-plus for three of four months,” said Tony Cerio of Brown Harris Stevens, who is marketing the restaurant and marina East Hampton Point for $28 million. “There are no deals out here to be had. If you want to play the game, you have to pay the price.”

In Montauk, many restaurateurs seem to be up for playing the game — though the prices there are not as steep.

They are not opening white-tablecloth establishments, instead opting for more burger-and-oyster experiences.

Kristin Vincent, the owner of the trendy spot Sel Rrose on the Bowery in Manhattan, is opening the Sel Rrose Oyster Bar a block from the beach. Vincent paid $2.75 million for the building — a former home to the Bavarian-themed restaurant Zum Schneider — last September.

Meanwhile, Circle Burger is taking the former Saltbox space in downtown Montauk, and Morty’s Oyster Stand is moving into Cyril’s Fish House, the famed roadside outpost on Montauk Highway, which was vacant for two seasons after its operators were found guilty of 45 misdemeanors for violating the East Hampton Town Code. The family sold the building to Jeremy Morton for $1.3 million, according to published reports. 

And there’s lots more in the way of musical chairs.

In East Hampton, partners Chris Eggert and Kevin Boles are taking over the Bay Kitchen Bar space and installing Bostwick’s on the Harbor. In turn, the owners of the Bay Kitchen, Marc and Eric Miller, are relaunching in the diner at the turn onto Route 27 in Southampton. The Millers are renaming the space Silver Lining Diner.

Meanwhile, Ian Duke is opening Union Burger on a site connected to his party spot Union Cantina in Southampton, and Ed McFarland’s Ed’s Lobster Bar will replace Bay Burger in Sag Harbor. (Bay Burger’s owners sold the property, which had been asking $3.2 million.)

“There weren’t any concessions here,” said Zwick, who handled the deal. “It’s a sought-after place, but Ed is a very good operator. He’s going to do casual seafood. He is adding a bar. He is very experienced.”

Zwick added that McFarland took a lease option to buy it: “They want to see if they do well first.”

Gurney’s has rebranded the former Montauk Yacht Club Resort & Marina on Star Island.

In Amagansett, the Honest Man Restaurant Group — the owner of Hamptons institution Nick & Toni’s, Townline BBQ, Rowdy Hall and La Fondita — is unveiling a ceviche-and-tequila spot dubbed Coche Comedor. The company already owned the space, which it had been using for its catering services.

And there’s a batch of upscale establishments debuting.

Terrance Brennan of the Artisanal Group locked in a lease at owner Zach Erdem’s 136 Main Street in Southampton, where the company is opening Blu Mar, a Mediterranean seafood spot.

And finally, Mark Geragos, celebrity attorney to Mike Tyson and P. Diddy, has brought in the hot steakhouse Brooklyn Chop House to Southampton’s Capri Hotel.

Geragos nabbed the 30-room hotel in 2015 for $4.7 million. The sellers — former Surf Lodge owner Steven Kamali and W South Beach owners David Edelstein and Jackie Mansfield — had been asking $5.2 million.

Hotels, not motels?

Glamping has hit the Hamptons in the form of $300-a-night tents outfitted with stylish couches, books and showers.

Last year, the Suffolk County Parks Department issued a request for proposals for a high-end campground — with the goal of drawing campers to a site overlooking Gardiners Bay in Cedar Point County Park in East Hampton.

Brooklyn-based Terra Glamping won the bid and is debuting 30 tents that will remain open from May 24 through October with queen-size beds, six-foot decks and a gourmet menu to boot.

“[It’s] an ideal setting,” company co-founder and CEO Rebecca Martin said of the park.

But for those not interested in sleeping in a tent, even a swanky one, there are plenty of other new East End lodgings.

Most notably, Gurney’s, now the biggest player in the Hamptons hotel business, has officially rebranded the former Montauk Yacht Club Resort & Marina on Star Island. Gurney’s owners — George Filopoulos of Metrovest Equities and Lloyd Goldman of BLDG Management — closed on the property last spring for a rumored $60 million and poured another $17 million into renovating it, according to published reports. Andrew Farkas of Island Capital Group was the seller.

The only other new hotel opening this season is the 10-room A Room at the Beach in Bridgehampton. Owners Lucy Weber and Charles Lemonides bought the old Bridge Inn (also known as the Enclave Inn) in 2017 for $1.7 million from designer Donna Karan, her daughter and her son-in-law.

Other recent motel sales include Gosman’s Culloden House Motels and the Soundviewer Motel — both in Montauk, both to LLCs and both for $3.4 million.

Despite all of those deals, brokers say there’s actually been a lack of major hospitality transactions for a market with so much wealth. But they attribute it to the dearth of prime development sites, along with the fact that existing hotels don’t come on the market that frequently.

“The first thing you have to realize is that there just aren’t a lot of commercial properties for sale out here to begin with,” said Cerio of BHS. “But the ones that are out there that are priced properly, they move.”

Retail rotations

Hamptons retail — once a hive of ultra-luxe deals — has been one of the least active sectors of the Hamptons’ commercial market.

Sag Harbor, Amagansett and Bridgehampton saw little turnover this season. And in Southampton, the deals are practically nonexistent, with the exception of the abovementioned restaurants.

TRD counted roughly 15 vacancies on Southampton’s Main Street and Jobs Lane alone.

In addition to Vineyard Vines, they include 57 Main Street (formerly Rose Jewelers), 42 Jobs Lane (formerly swimwear store Vilebrequin), 46 Jobs Lane (formerly women’s clothing shop Twist) and 50 Jobs Lane (formerly M.E.N.U., on the market for $3.4 million with Douglas Elliman). Meanwhile, Brooks Brothers consolidated its store, reducing its size to about 3,800 square feet from over 6,000 at 50 Main Street.

Southampton’s Capri Hotel brought in Brooklyn Chop House

“Southampton has had a high vacancy rate for several years,” Cerio said. “On the other hand, East Hampton’s Main Street, which in my opinion is comparable to Rodeo Drive, a vacancy there lasts a couple weeks at best.”

But he noted that retailers pay premiums for pop-up shops.

“Some of these prices they are asking are through the roof,” he noted. “You are looking at $75,000 to $100,000 for an entry-level pop-up, depending where it’s at.”

But many of these retailers are part of large corporations and are less concerned with running profitable East End stores than having their brand associated with the Hamptons, sources said.

And despite being late in the game, there were still deals happening into mid-May. “Retailers don’t do the expensive buildouts here anymore necessarily,” said Town & Country’s Zwick. “They bring in some nice tables and racks.”

“[They] have these professional crews that come in and work for a week straight. The major retail chains have groups that can do that,” he said. “The independents, with the seasonality of the business out here, they make the store look nice but they don’t spend a fortune.”

Still, big brands have become more tentative. Part of Southampton’s problem is its size.

While landlords have lowered rents in both East Hampton and Southampton, the latter had few short-term leases and more stores to fill. “You have to remember they also have a lot more stores,” Zwick said. “Main Street is large. They have Jobs Lane, Nugent and Hamptons roads.”

Elsewhere on the East End, deals are trickling in.

In Montauk and Westhampton, for example, there’s a smattering of boutique fashion and homeware stores opening.

And in Sag Harbor, Harbor Books, which opened in 2014 in the old BookHampton space, is jumping to a nearby location. Landlord Ted Seiter has leased the bookstore space to White’s Apothecary, a boutique pharmacy with locations in East Hampton, Southampton and Williamsburg.

“It was the bookshop owner’s decision to leave,” said Zwick, who handled the deal. “She had an under-market rent. [Seiter] was good to her. She wasn’t forced to leave. Her lease was up, and she decided to go.”

Also in Sag, Manhattan Skyline Management signed two new leases on Main Street with lifestyle store Sunny and resort wear brand WildSide. 

Frances Valentine — the design brand launched by Kate and Andy Spade and Elyce Arons — is adding a second retail pop-up location on Main Street.

Over in East Hampton, the latest arrival is Room & Board, which is opening a 4,000-square-foot pop-up store at 51 Newtown Lane. 

And while Fifth Avenue retailers are not storming Southampton this season, there are some new nightlife openings.

Brooklyn-based Terra Glamping is debuting 30 tents in Cedar Point County Park in East Hampton.

Erdem is rebranding the inn portion of the old Maison Vivienne at 75 Main, which was home to his nightclub AM. The space will reopen as Harpoon House — a nod to the village’s nautical roots. Erdem is reopening AM at the adjacent 136 Main to a more exclusive crowd (those willing to drop thousands of dollars on bottle service).

Meanwhile, the Hedge Club will replace the old 1 Oak at 125 Tuckahoe Lane. Hollywood producer and Southampton landlord Michael Tadross has leased the building with the right to buy it — and spent more than $1 million renovating the space.

And a Japanese-inspired wellness resort — the 13-room Shou Sugi Ban House — has opened in Water Mill offering “retreats” focusing on “transformation, healing and an exploration.”

More broadly, Southampton Village Mayor Michael Irving said any fears of retail apocalypse in his town are overblown.

“It’s a general trend, and every year, for as long as I can remember, people go, ‘Oh my God, all the stores are closed,’” Irving told the website 27 East in January. “And when spring comes, all the stores get filled again.”

Still, while brokers may be signing some deals, “turnover is minuscule at best,” said BHS’ Cerio. “Nobody is making a killing in the commercial market out here,” he said.

Correction: A previous version of this story stated that Brooks Brothers had shuttered its Southampton’s location. The store actually closed for renovations and reopened in a smaller space at the same site. The reference has been updated and a related quote on the deal was removed.