What do you get when you combine a Manhattan advertising veteran who owned some of the most iconic businesses in the Hamptons with an economics-educated local surfer who has a successful building and development background? You get the Compass commercial real estate power-duo, Hal Zwick and Jeff Sztorc. One can count on one hand the people who bring the local hamlets’ Main Streets to life, and Hal Zwick has been one of those titans for decades. He recently added Sztorc to create the most powerful team on the East End that specializes exclusively on commercial and investment properties.
We sat down with them to find out how the gears of business works in the Hamptons and how the pandemic affected their business and methodologies.
Hal, how did you and Jeff come together to head up the commercial division for East End real estate?
Hal Zwick: We had worked together at a prior brokerage. I have been a commercial specialist since 2003 and Jeff was involved in development projects and residential activity. The commercial marketplace increased each year and became more detail oriented and complex. I needed to start to build a team to handle the future environment. We would speak about the listings and work I was involved with and it became clear that Jeff had the diversified background and work ethic to partner with me in growing the business to meet the challenges of the marketplace on the East End. Coming from different backgrounds has been beneficial in that we each bring a unique approach and we’re able to bring a more in-depth perspective to each client’s challenges. Sometimes we disagree, but we have a mutual respect and always develop tailored strategies that bring success on behalf of our clients and customers.
Do you handle distinct commercial sectors with separate listings or do you both cover the whole gamut?
Jeff Sztorc: We both cover the whole gamut. Hal has the most experience across all asset classes in the community so throughout the course of our deals he will bring that to the table. However, we both have certain strong suits. I grew up working for builders and developers, so I tend to focus on commercial and industrial properties, storage facilities along with projects that are looking at future build outs and planning processes. Hal takes the helm on most retail, restaurant, and resort deals especially when the transaction hits a certain dollar level and/or level of complexity. I’ve seen commercial deals close that have taken years to bring to fruition. Personally, I’ve also been able to be focus on other specialized assets such as marinas, multi-family and mixed-use sites. We both do everything related to commercial on the East End.
How did you both get into real estate on the East End?
Hal Zwick: I moved to the East End in 1998 after an eighteen year career in advertising. I began to purchase both businesses and commercial properties including BookHampton, The Snowflake Cafe, and The Paradise Restaurant. After I decided that I did not want to be involved in the day-to-day activities of running restaurants, I sold the businesses and focused on the real estate component. I was approached by individuals to consult on their commercial activity and I quickly obtained my real estate license and the rest is history. I always focused exclusively on commercial activity — referring other projects from my customers to residential sales specialists.
Jeff Sztorc: I graduated from college in 2014 then worked for a commercial real estate group in New York City for one year. After deciding I wanted to change geography, I moved full time to East Hampton in 2015. My family has roots in the area and I spent every summer out East since the ’90s so I already had a basic network which has expanded these past few years. In 2015 I began working in residential sales, sold oceanfront properties in my first couple of years and it was off to a strong start. I focused on development and ended up investing in some building projects and had a successful few years. In 2019, Hal made it clear he needed to expand his commercial team and the decision for me was easy to shift to commercial. It’s been an amazing learning experience getting to work with Hal. I’m grateful to have a mentor and look forward to the years to come.
What are the advantages for commercial real estate at Compass?
Jeff Sztorc: We have always been attracted to the Compass brand. It’s a forward-looking company which has been able to assemble a high-quality group of agents conducting a great deal of business on the East End, especially if you look at a dollar volume per agent figure. The technology that the company offers truly makes our lives easier and more organized. The support staff and internal platforms are the most advanced we have seen. The marketing and branding is wide reaching, and we get to work with some amazing, creative people. Along with the fact that there is a commercial department in New York City and great referring relationships within Compass throughout the entire country.
Was there a devastation to the commercial real estate sector on the East End because of the pandemic and subsequent lockdown?
Hal Zwick: There was a temporary pause. We had four deals that were about to go into contract, restaurant, fitness and retail sales, that were cancelled. Retail leasing stopped until the state announced in June that stores could reopen that month at which point every available site was leased to galleries and retail entities who realized that Manhattan was going to remain in a diminished state for an indefinite time period. Commercial activity started to increase each month after that.
How did it affect your business personally?
Hal Zwick: Commercial and industrial activity was the first to open up around Labor Day resulting from the increase in home renovations necessitating the trade category to require new or larger sites.
Other customers were very cautious about entering into either sales or lease deals until they had confidence of when life would start to evolve back to normal. This occurred when the vaccines were approved in November when the public felt confident that we would be back to normal by the late Spring. We therefore had an increased year round population with the anticipation of the busiest season ever. We were off to the races!
We have been involved with 40 transactions year-to-date and more to come including four resorts, multiple food entities, additional commercial and industrial sites, retail and gallery leasing and most important the return of the investor community who have renewed confidence in the strength of the commercial marketplace on the East End.
What are some of the key differences when purchasing a space for a commercial purpose than for a residential property?
Jeff Sztorc: Usually a commercial sale takes longer than a residential transaction. There are more hurdles to cross for specific business uses and it must make sense from a zoning and investment basis. A home is usually purchased out of a personal necessity and/or a desire, whereas a commercial transaction is viewed from a profitability and viability standpoint. There are more complex issues that can come up and halt a transaction. We noticed during the first year of the pandemic as the residential market was on fire our business was on standby. Then in fall 2021, the commercial marketplace exploded. Usually, there are less comps with commercial. It’s very granular and for certain operators, decisions are made immediately based on the fact they can easily see a certain site as their best option. On the other hand, for investors looking for a long-term holding plan, the process could take years to find what makes sense for them.
Are the commercial spaces usually for sale or lease? What’s more popular on the East End?
How do leases work? Where does the broker come in for the signing of the lease?
Hal Zwick: The broker is involved from the beginning from a business perspective. We guide the landlord in determining legal zoning for the site which is the most important factor. Each community has its own zoning code. Sag Harbor and Greenport are currently the only communities out East that have sewer systems permitting increased food and exercise business. Each town has their own rules concerning the type of businesses allowed whether it be dry retail, office, personal service, etc. We need to understand the precise use permitted prior to marketing the site.
We have heard of properties accepting tenants that were not permitted to operate within the town and health department codes resulting in severe consequences for both the landlord and tenant. Then of course we determine the appropriate asking price for each individual site based on market comparables, size, location, etc. We find the prospective tenants and negotiate the business terms for the lease prior to turning it over to the attorneys to write the lease.
What do new business owners need to have in place before signing a lease?
Hal Zwick: After they find the appropriate site to operate, they need to take multiple factors into consideration. First is financial because landlords require sufficient funds upfront for rent and security. They also need to have the funds for utility deposits, their build out and opening product. They need to apply for the permits required for their individual category and need to arrange for their staffing needs and sometimes housing for their employees, especially if they come from outside the area. Most important they need to have the capital for the first two years, especially taking into account our seasonality.
Any advice for someone looking to open a business in the Hamptons?
Jeff Sztorc: Staffing and housing is key. Affordable housing is an issue out here and it’s best to be proactive and have some options. It’s also a good idea to have a targeted plan with who you will staff. Furthermore, it’s best to start the process in the fall prior to the upcoming summer during which you would like your business to be open.
We get a lot of last minute calls in April and May for new businesses that would like to open up shop and, simply put, a lot of the best options are taken by then. New inventory always becomes available in the fall. The seasonality of the Hamptons is a factor so you have to consider which community and location makes sense for your business along with how you can get creative and drive traffic during shoulder season months. It’s also important to work with a good local zoning attorney to find out exactly if your business can operate within the town codes.
How do you think the rest of 2021 will play out for commercial real estate on the East End?
Hal Zwick: The economy is strong now, but many from the financial sector anticipate a downturn in 2022 which remains to be seen. Also, people are concerned about the increase in the capital gains tax. Consequently some property owners have contacted us to sell their properties this year, therefore we are signing new listings as we speak and will continue to be very active. Prospective buyers are very interested in resort and multi-unit housing as consumers are seeking both second and alternative types of housing. And we have increased interest in new food categories, like take-out, ghost kitchens, and hybrid entities.
Wow, sounds like you’re both hustling. How do you spend your downtime?
Hal Zwick: I moved from the city 23 years ago for a reason, the outdoor lifestyle. I visit the beach even if it’s only to see the ocean in the winter. Taking my dogs on long walks every day through the different villages and lanes. Once again visiting all my favorite restaurants and take-out food entities — almost every day. Exploring the hidden treasures from Montauk to Orient, like the the parks and unique shops. And I used to and will once again start my Manhattan visits again, two to three days every six weeks or so, just enough to get my fill of everything New York City has to offer. It’s from these visits that I see how special the East End is and realize how much I love living here.
Jeff Sztorc: I moved out East full time for the nature of the Hamptons. Every day I feel grateful for the beaches and protected wilderness around us. My grandfather has been a Montauk charter captain since the 1960’s so I grew up fishing and working on boats. I had a variety of other summer jobs as a kid in the Hamptons from which I still have connections to this day. For years I was instructing surfing and junior lifeguarding in East Hampton. Downtime these days, when found, usually consists of relaxing beach time, surfing year round, fishing and boating, golf, or other outdoor activities. Of course, we have our favorite spots, local restaurants, and shops that I’m always happy to patronize. We enjoy traveling all over the world to find new exciting places. Recently, I joined the volunteer ocean rescue in Amagansett and am excited to get further involved in the community.
To learn more about Zwick and Sztorc, or to view their active listings, click here.
