In Conversation with Hal Zwick: Why Hamptons Commercial Properties Remain Resilient

Written by:

Rudi Davis

Date:

16 Dec 2024

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The Hamptons commercial real estate market is witnessing a strategic shift in tenant mix as luxury retailers capitalize on changing consumer patterns, with high-end brands pursuing spring 2024 openings, according to Hal Zwick, Director of Commercial Real Estate at Compass Hamptons.

Following Gucci and Louis Vuitton’s success, a new wave of luxury brands is targeting the region. The trend reflects retailers adapting to affluent customers’ extended stays, particularly among boutique brands with 10-15 store portfolios looking to complement their SoHo flagships. Home furnishing has emerged as a surprising growth segment, with multiple operators actively pursuing prime locations.

Restaurant dynamics present a more complex picture. While retail vacancies are quickly absorbed, restaurant spaces face unique challenges. “Success in the Hamptons restaurant market requires substantial financial runway,” Zwick notes, emphasizing that operators need resources to weather multiple seasons while building brand recognition. Location preferences have shifted, with restaurants increasingly seeking spaces offering both highway visibility and downtown presence to maximize year-round viability.

Investment property values have shown remarkable stability despite higher interest rates, buoyed by strong tenant cash flows. Recent market signals suggest a potential upturn, with investor interest rekindling following the latest rate cut. “We’re seeing sophisticated buyers positioning for early 2025 acquisitions, anticipating two to three more rate reductions by spring,” Zwick reveals.

Municipal restrictions on new development continue to shape market dynamics, particularly in the hotel sector. While most hospitality assets concentrate in Montauk, the limited supply in prime downtown districts has created unique opportunities for strategic property repositioning. These constraints have effectively turned existing commercial properties into premium assets, especially those with flexible-use potential.

Looking ahead, Zwick anticipates a robust 2025, driven by pent-up demand from both tenants and investors. Success will increasingly depend on timing and positioning, with early movers likely to secure the most advantageous terms as rates moderate. The market’s evolution reflects a broader transformation of the Hamptons from a pure seasonal destination to a more complex, year-round commercial environment, though one that still maintains distinct seasonal peaks.

The strength in premium retail locations across East Hampton, Southampton, and Sag Harbor highlights a crucial market dynamic: while the Hamptons maintains its seasonal character, the expanding shoulder seasons and growing year-round population have created new opportunities for businesses capable of adapting to these distinct market rhythms.