According to the Hal Zwick and Jeff Sztorc commercial real estate power-team of Compass, “2021 was the most aggressive year for commercial activity we have ever seen.”
According to the team, new developers and prospects entered the market, primarily those who either moved to the East End for the pandemic period full or part-time or purchased new homes in the area.
“They sought land or under-developed sites to expand their uses. However, they learned quickly that local zoning laws are difficult to navigate. We, more than ever, witnessed an influx of institutional investors, even publicly traded companies looking to expand their real estate portfolios into income-producing assets in marquis locations such as the Hamptons,” the report detailed.
“The core business districts within separate municipalities were more aggressive in allowing change. Mainly Westhampton Beach, Southampton, and East Hampton Villages — all with the goals of enhancing the downtown business areas,” the report continued. “The actual towns of Southampton and East Hampton (not Villages), which control the larger geographic areas, remained protective to secure that any new development or enhancements to current properties did not severely impact the environment, congestion, or nature of the communities.”
Insights from the report from Zwick and Sztorc:
- New types of housing dominated the search by buyers and discussion in the community. Developers want to create more multi-family housing which faces its own set of challenges. The towns and business community acknowledge the need for more affordable housing to offer the workforce, which includes town workers, teachers, as well as restaurant, retail, and trade professionals. We have seen some interesting deal movement in this sector.
- The hospitality sector witnessed the most activity. We completed record-breaking transactions with select resorts and restaurants as new individuals and companies sought to expand on the East End due to the increased population.
- New York City retailers and art galleries took every site available as their customers were either living here full time or spending an increased amount of time here. This drove up retail rates to levels we have not seen since before the 2008 recession. This also brought new investors to this arena as retail buildings with AAA tenants attracted qualified buyer groups from Manhattan.
- The office sector has also seen stronger than normal demand as many different professionals have evolved towards a working remote concept. Smaller office units have a waiting list of individuals looking for a space while they spend increased time in the Hamptons. Larger office spaces have leased as well but usually have more of a vacancy factor.
The report continues to note that increased new construction and renovation of both residential and commercial properties on the East End increased the building trade substantially. “A massive number of general contracting and subcontracting companies sought our commercial/industrial sites to lease or buy — a zoning category that is under-represented in the Hamptons. This raised lease rates and sales prices for any C/I sites,” it says.
“Many property or business owners realized that we are at the height of the market and decided to sell,” the report continued. “However, they wanted their intentions to remain confidential — hence about a third of the commercial marketplace went ‘underground.’ With candor, the commercial marketplace has seen a banner year on the East End. New ventures, concepts, and opportunities are arising as the way business is conducted is changing now faster than ever from Manhattan to Montauk.”