07.25.2013 LIBN | In the Hamptons, saying no to seasonal leases
By Bernadette Starzee
When the economy tanked back in 2008, retailers found that Hamptons landlords were suddenly more amenable to offering short-term leases for the summer season. This year, not so much.
“Tons of retailers want to make money when everyone’s out here, and then take off afterward,” said Lee Minetree, a licensed associate broker with Saunders & Associates in Bridgehampton. “But now that the market’s gotten stronger, many landlords won’t consider it.”
Minetree was only able to secure a seasonal lease for one retailer from a long list of those that wanted one this year.
From a retailer’s point of view, the so-called pop-up store model has plenty of appeal, particularly in the Hamptons.
“There’s a strong demand from Manhattan or international retailers that want to test the market and don’t want to commit to a long-term lease,” said Jayson Siano, managing principal of Garden City-based Sabre Real Estate Group, who noted the model is particularly appealing to apparel and accessories retailers, which do not have elaborate build-outs and therefore can set up a store relatively easily and cost-effectively.
Over the past few years, several retailers have taken repeat pop-up Hamptons leases, including Ralph Lauren, C Wonder, Joe Fresh and Jack Rogers, according to Faith Hope Consolo, chairman of the retail group at Manhattan-based Douglas Elliman Real Estate, who noted that Manhattan boutiques like to follow their customers to the Hamptons when the weather turns warm.
“The retailers can remain near their shoppers and maintain a cool cachet,” she said.
Up-and-coming designers that can’t afford a year-round lease plus electricity and maintenance charges see Hamptons pop-ups as an opportunity to “be seen by people with a lot of discretionary income,” said Michelle Marie Zere, executive vice president at Ronkonkoma-based Zere Real Estate Services. “In the summer, Hamptons storefronts are like the windows on Fifth Avenue during the holidays.”
But this year, many retailers are willing to take a longer lease, which could spell the end of the pop-up era.
“I feel like a bakery – take a number,” said Consolo, of retailers’ demand to be in the Hamptons, whether for the season or year-round. “Stores that couldn’t get a pop-up deal or that were pop-ups in the past went permanent, and landlords are seeing this.”
According to Siano, landlords are banding together to try to stop tenants from coming in just for the season.
“In a lot of cases, landlords are offering one-year leases with a five-year option,” he said, noting this is a step toward market correction. Prior to 2008, seasonal and short-term leases were virtually unheard of in the Hamptons.
“Five- and 10-year leases were typical,” Siano said.
Last month, Pottery Barn and Pottery Barn Kids opened a store in the grand 8,100-square-foot Southampton village building that formerly housed Southampton Town Hall and, more recently, Saks Fifth Avenue. The retailer signed a 10-year lease with three five-year options. The Pottery Barn lease symbolizes both a trend toward long-term leases and “a distinct shift toward home fashion” in the Hamptons retail marketplace, according to Consolo.
“There has been a lot of renovating and trading of homes, and renters are also buying a lot of accessories for their summer home, and taking it with them when they leave,” she said.
Increased demand from home accessory retailers and others has led to high occupancy rates all across Montauk Highway this year.
“In East Hampton, only one store on Main Street, and a couple off, are vacant,” said Minetree, noting that East Hampton has the highest retail prices, ranging from $125 to $175 per square foot. In Southampton, the second highest rental market – where Minetree estimates typical retail rents at $60 to $100 per square foot – only a couple of stores, in less-than-stellar locations, remain vacant.
Lower-rent markets like Sag Harbor, Bridgehampton and Montauk – where Consolo said typical rents range from $50 to $75 per square foot – are also near full occupancy. Consolo noted that Montauk’s retail scene has become more upscale in recent years.
“It has gone from a fishing village to a fashion village,” she said.