How strong is the Island's commercial real estate market?

CARA LORIZ PHOTO | Empty Island storefronts are starting to fill, but some businesses are more likely to succeed than others, commercial real estate brokers told the Reporter.

In February, Hannah Dinkel, owner and principal broker of Dinkel Real Estate, saw too many empty storefronts on Shelter Island to fill before the summer season arrived.
Things are starting to turn around, she said last week. But she also said that Shelter Island has unique infrastructure and market challenges that must be overcome to bring successful businesses into the Island’s storefronts.
So the Reporter asked local brokers: What is the state of the commercial real estate market on Shelter Island?

“There appears to be a ‘look-the-other-way’ attitude/approach to the current condition of the zoned business districts here,” Ms. Dinkel said in a report on the state of Shelter Island’s commercial real estate she titled “Who’s minding the store?”
While she noted some activity — specifically the relocation of Daniel Gale/Sotheby’s International Realty office to the former Wish Rock Studio shop on Grand Avenue and the sale of Manhanset Chapel — she questioned whether untended business properties and those not moving on the market indicate that the Island has too many business properties and whether the businesses we have are meeting Islanders’ needs.
“It’s a touchy subject, as built into the ‘mix’ is the reluctance of interviewed tenant prospects to compete against current shop owners, and others whose view of Shelter Island retail is at best a three-month opportunity,” she said. “For those of us who live here and believe we should be showing off our main roads to tourist traffic as a busy/happening place, the empty storefronts tell a different story.”
She suggested establishing staged parking and a trolley to avoid the parking hassles associated with time-limited parking on Bridge Street and in the Heights. “Then what we need to do is gussy up the circuit,” she said.
On a brighter note, she added that she was preparing to sign a lease with a new retail shop to be located in her Bridge Street commercial building. “Shelter Ego” will be selling home goods, ceramics, art and small gifts.

There are more commercial sites for sale or lease now than in the recent past, according to Janalyn Travis-Messer, a principal broker at Griffing & Collins. But one reason is that there are simply more of these properties.
“I think there are actually more very interesting businesses on the Island than when I first arrived in 1985,” she said, “retail and restaurants.”
But Ms. Travis-Messer would not describe the market as soft, and she thinks that some businesses, such as restaurants, would be easier to sell or lease for the season than others.

Georgiana B. Ketcham, chief broker of the real estate company that bears her name, made these comments:
“Of course the market is soft throughout the country, but Shelter Island always seems to march to a different drummer and is always steady.
“We have a 10- to 12-week window to fully take advantage of the tourist industry from Memorial Day to Labor Day. We see some empty storefronts, some because of the soft market and some because of a lifestyle change. There are maybe 10 commercial properties for sale, including the Chequit Inn,” she said, adding, “If the price is right the property will sell.”
“However, we do have several commercial listings that are priced right but there does not seem to be buyer in sight!”
“There are several options open. There does not appear to be more for sale or to lease than in other years, just a shifting here and there.”

“Running a business is difficult anywhere,” said principal broker Melina Wein. Her company, M. Wein Realty, recently relocated to the former Center coffee shop.
“It’s not easy for an Island business,” she said, due to the short season, the dicey economy and, this year, the horrible winter weather that made it difficult for people to visit the Island.
She thinks the biggest issue is that “Islanders need to support Island businesses. You can keep this money on the Island if you want. That’s not stressed enough. When you do business with an Island owned company all the money stays on the island and helps support our Island economy.  A dollar spent on the Island can go around the Island several times,” she said.
“We’re doing fine,” she added, “due in part to our strong local advertising and being tech savvy.  But for some Island-owned businesses of all types, it can be very daunting to compete with large corporate designed promotional campaigns.”

Elizabeth Gilpin, an associate broker at Daniel Gale/Sotheby’s, said that inventory is accumulating.
“The number of empty storefronts and the length of time they have been on the market for rent and for sale are certainly indicative of a soft market. In this market, the properties to be leased or sold first have to do with location and price. Movement in this market is price dependent. It can be a terrific location, but if the price doesn’t support the buyer’s expectations in terms of price, the property will linger on the market.
Financing is an issue as well, she said. “Lenders are hesitant to lend on a commercial property. Typically lenders want to see between a 30-percent and 50-percent down payment. Buyers then must have a substantial amount of cash available to purchase a property, make the renovations suitable for their usage and a cushion to support them during the startup phase. It is most inspiring to see new businesses opening their doors.
“All that said, it is an opportune time for someone who wants to own a commercial property to be searching and investing in one as interest rates continue to be low and prices are reaching their bottom.”

“It is very difficult to run a business on this Island,” said Marika Kaasik of MVM Island Realty. While the Island commerce is seasonal, leases are not.  “One must still pay good rent in the off-season which is much longer than the on-season. The business must make enough in that short season to carry them thru the long off-season — not easy to do,” she commented.
“I am not aware of many commercial properties for sale,” she said,  except the gas station and Pat and Steve’s. The Heights is more desirable to rent than the Center, where there is more available space.
“I do not see the [commercial] market being any softer than it was in the past and there is not more for sale now than there was in the past,” she added.
“The businesses that seem to last are ones that are owned and not leased; ones that were purchased for a realistic price,” she concluded.

Some business properties are more easily leased or sold than others, Peter McCracken, senior vice president and associate broker at Corcoran said. “Usually the storefronts in the Heights are much easier to rent then the storefronts in the Center for the ‘special B1’ zoning really affects what one can do with the space. On another note, foot traffic in the Heights is much heavier than in the center’s ‘special B1’ zoning which makes for a lot of window shopping.”
Penelope Moore, also a senior vice-president and associate broker at Corcoran, does not see the number of commercial vacancies is increasing but a different problem.
“Much of the space that has become available has been as a result of ‘musical stores’ business models that may not have fit the seasonal market that Shelter Island is and its character, which can take some business owners over a year to figure out.”
“Businesses that open on Shelter Island often do not have an accurate picture of the community as a retail base,” she added. “While the summer brings the bulk of the traffic and business, year-around community support is crucial, whether selling sandwiches and soup or dresses.”
“That being said, there are many businesses that have thrived on Shelter Island” — businesses “that have done well for generations and relatively newer ones, one of which is a storefront that was left vacant for over a decade, that have succeeded with the right formula.”