The Hamptons, The Millennials, The Future

Years back in 2008, when the east end real estate bubble burst, the CEO of Bridgehamption National Bank, Kevin O’Connor, pointed out towards the ocean from his second floor boardroom and said to me in an interview, “As long as there is that ocean out there, Hamptons real estate will be OK!” I believed him, I still sort of do, except there is one new variable, that being the “Millennials!”

Slowly their imprint on America as a whole, and the east end as a specific seems to be defining a future very unlike the past. There is no talk today of “manifest destiny,” of enormous growth of opportunity, tremendous job opportunities.There is no demand for young educated raw talent.Instead the world has tipped over to “downsizing,” reduced pay and benefits, hiring freezes, and outsourcing to other countries to save money. Who can say if it is greed that has made the growing list of billionaires so zealous to decimate the ability of their corporate employees to live a middle class life. However for their children there is no real future. Many millennials still live at home, weekly borrow money and indulge in weekend binging, whether it is alcohol, drugs or both.

On the east end some companies are struggling with rising costs, and higher expectations. Some businesses by abusing the work force, see a path of controlling costs and increasing profits. Now many companies use interns instead of full time paid employees to skirt around growing labor cost. Many companies nationally are asking less people to do more, so the owners can go home with more money even with stagnant sales. No wonder Bernie Sanders had the ear of so many angry young folks and their parents.

So how does this affect the Hamptons?

1- The Montauk experience. The first major change in the Hamptons is in the “unHampton” hamlet of Montauk. Young people are flocking there on weekends, not to rent homes, but to get by on as little money as possible. Overloading motel rooms once filled with families, many millennials borrowed some money from their folks and will spend it as if it can never be replenished. They need to save for carfare home. They are shoplifting, running out on bar tabs, sneaking alcohol “into” establishments, urinating in public and crashing into homes, sometimes with people at home. Is this a moment in time or a window into the future?

2- The East Hampton Village experience. While Montauk is overcrowded with millennials, East Hampton Village is extremely quiet, during the weeknights. The limited numbers of restaurants with bar service are not having a robust season. The management paying always-increasing rents is worried. Where are the upper middle class folks to pay $250 for dinner for 4? Perhaps no new upper middle class is forming, and perhaps the older upper middle class is slipping in “buying power?”

3- The Real Estate Renting and Buying Slump. Ok it’s this simple, without huge growth of folks with increasing income, higher summer rentals income and regular home prices will at least stagnate. Not because of a bubble bursting and over zealous loans, but because there are less and less buyers with money for a $1.5M summer home or to rent one for $80,000 for a season. Does anyone see the number of people doing either growing in the future given the present state of the millennial?

4- The Atlantic City Effect. This is not what anyone wants to happen on the east end; a situation with cratering bankruptcies, failing casino’s that were brought in to revitalize the area, and other horrors. I only included this to insure casinos never are thought of as a savior like perhaps the Shinnecocks were hoping over in Southampton.

Change is coming as the result of a generation of downsizing, wage freezes and increase expensive education that has left millions of millennials, living at home, unemployed, and in heavy debt. Is there a positive way out of this scenario? I hope so.