STATE OF THE COMMERCIAL MARKETPLACE – JANUARY 2020
The Commercial Marketplace on the East End is going through a major transformation. As we enter 2020, we are witnessing the final stage of our “correction”. The lease rates for retail and wet use sites have decreased, the demand for office sites is lower than ever before and consequently the value of many commercial properties have decreased.
This is a result of several factors: the decline of bricks and mortar retail sales, the condensed seasonality on the East End and the continued expansion of Airbnb and other rental sites resulting in shorter rental periods and less people here during the weekdays – even during the key season.
Consequently, retail and restaurant sales and profits have declined over the last three years which impacts the overhead they can afford for their businesses. In addition, the shortage of affordable housing makes it difficult for business owners to obtain the necessary staff during the season without renting staff quarters which also impacts their bottom line.
Fewer national retailers are seeking long term sites in the Hamptons – preferring to open seasonal “pop-up” stores which impact landlords rent rolls. And while new restaurants continually plant their flag in the area – it has become more difficult to run the establishments due to the aforementioned reasons, resulting in lower demand in the Hamptons.
Most communities do lease all their sites by Memorial Day with the exception of Southampton which is has more capacity than the other communities and less foot traffic, particularly on Jobs Lane. Sag Harbor is the busiest village due to the fact that they are the only Southfork village to possess a sewer system allowing numerous restaurants and take-out food establishments, which become destinations and create more foot traffic overall. The antiquated septic systems limit the number of wet use sites in every other area. Consequently, Westhampton Beach, Southampton, East Hampton and Montauk have all started the exploration process to add sewers to the downtown business communities. A positive step forward, but an expensive and long-term proposition. The local governments also realize that they need to ease up on some of the existing restrictions and become more business friendly – another positive step forward.
Zoning limitations whereby the towns limit further development and congestion are another factor that hinders expansion of new business opportunities.
The good news is that we do not have to fill 500-unit malls in each community. The Hamptons has a built-in upscale clientele that under the right business environment will still attract an eclectic mix of retail and food establishments. Adaption on the part of the landlords and local governments is occurring which should stabilize business on the East End. This transformation is occurring, and the long-term impact will be positive.