Sunday, May 12, 2002

Nimitz Business Center is undergoing renovations.

Re-inventing Iwilei

By Tim Ruel

After nearly a year in Strawberry Connection's new digs at Dole Cannery in Iwilei, co-owner Becky Choy said she feels at home.

The gourmet grocer and wholesaler has started hosting food-tasting sessions during lunch hour for employees of neighboring tenants. "We didn't expect to have other business that would bring walk-in traffic," said Choy. "I really like it here. We know the people in the area, vice versa."

More employee-driven business could be on the way. On June 12, Costco Wholesale is scheduled to open a 149,000-square-foot store on Alakawa Street near the Cannery, and close its smaller store four miles away in Salt Lake. Costco employees have already been good customers for lunch, Choy said.

Other changes are in store as Iwilei gradually continues its transformation from an industrial zone into a bustling mix of big-box retailers, offices, warehouses and wholesale/retailers. It's a change that has been quietly going on since the 1980s, but the movement has accelerated, particularly with the opening of Costco and a host of efforts to spruce up pockets of the neighborhood.

The new Costco on Alakawa Street, next to Home Depot.

Unlike Victoria Ward Ltd.'s deliberate move toward its 65-acre shopping arena in Kakaako, Iwilei's evolution has been created by the individual plans of several property owners and interests.

"It's developing as they go," said Bernadette Young, chairwoman of the Kalihi-Palama Neighborhood Board.

Castle & Cooke, a major landowner in Iwilei with 30 acres, is planning to build on its last undeveloped holding, a four-acre spot on the Ewa corner of Alakawa and Nimitz. The only question is whether to go with office space or "mini big-box" retail space, said Harry Saunders, president of Castle & Cooke Homes Hawaii. "We want to make sure we do it right."

There may even be a residential component on its way to the area. A private developer is looking at building a 156-unit senior living center on the downtown edge of Iwilei, on the site of the former Oahu Railway & Land Co. The state owns the 5.7-acre property and has been cleaning up ground contamination from previous uses. On the same plot, the state is in the early stages of designing a 100,000-square-foot government office building.

"Someone has to invest in something nice and good," said Ron Lim, special assistant for housing to Gov. Ben Cayetano. "Otherwise, it'll just stay blighted."

All over Iwilei, sprucing up has been underway for the past several years. Scenic Hawaii, along with the state, city and businesses, has been adding trees and shrubs to the middle sections of major thoroughfares, depending on the room that is available.

Next on the list is a section in front of wholesaler/retailer Watanabe Floral Inc. on Nimitz Highway. Each plot takes about 40 hours of labor, said Randy Fujimoto, a landscape architect who has been coordinating the work.

"There's little pockets and that's what we've been trying to do," he said.

Property owners have been doing their own cleaning up, as well. A block from Weyerhaeuser, toward the airport on Nimitz Highway, the former Nimitz Business Center is being transformed into a more modern complex with fewer bars and more security. Gone are the red awnings from the main building, which is now adorned by groups of bright yellow-green arches. And gone from the building in back is the Sweet Lady Lounge. A year and a half ago, the center was purchased by principals of real state firm MW Group Ltd., after former owner Tom Enomoto turned the then-struggling center over to lender GE Capital. The project's new name is Nimitz Center.

Not all in the area has changed, however. Another block Ewa of the center is the former Xerox Building at 1200 Nimitz Highway, the site of seven murders in November 1999. Xerox employees have since moved to Kakaako, and the two-story white Nimitz building remains empty.

The cleaning and change in the mix of occupants in Iwilei has led to a significant improvement in land values in Iwilei, some observers said.

When Costco bought its new site, it paid just more than $60 a square foot, said Steve Sofos, a broker who represented Costco.

The company is still thinking of putting gas pumps next to the Iwilei store, and had considered delaying the opening for another six months to open everything at once. But Costco would rather not sit on a piece of land it bought for $31 million, Greenwood said.

"It's expensive property, and we're anxious to get open," said Bruce Greenwood, regional manager for Costco in Southern California.

"In regards to other properties in the area, most of the land deals are in the $50 range, or less," said Mike Hamasu, researcher at Colliers Monroe Friedlander.

According to Sofos, that is up from about $40 to $45 a square foot.

The increase in property value will continue to push heavy industrial tenants out of Iwilei and into cheaper neighborhoods -- Mapunapuna, Kapolei and Waipahu -- to seek $40 a square foot, Sofos said.

The change in Iwilei started in the mid-1980s when developers began building warehouses and office space. Gentry Pacific turned the former American Can Co. factory into the Gentry Pacific Design Center. In 1983, Hilo Hattie opened an 80,000-square-foot headquarters at 700 N. Nimitz Highway.

In 1986, the city formally reclassified the area's zoning industrial mixed-use from industrial.

The value in the area was always there, but it is just starting to become evident in the prices, said Ron Teves, president and chief executive of real estate firm Chaney Brooks & Co. Retailers can pay the rent.

Much of the recent change in the area has been driven by Castle & Cooke, which has successfully found a new tenant mix for the Cannery after several years of trouble.

Michigan retail developer Horizon Group Inc. invested tens of millions in the mid-1990s to turn the Dole Cannery into a factory outlet center, which didn't work, and Horizon pulled out in 1998. Castle & Cooke has since attracted myriad tenants, including Kaiser Permanente, Strawberry Connection, several radio stations and Signature Theatres.

Home improvement retailer Home Depot leased nine acres in 1999, near the future home of Costco.

The Cannery makes sense for business tenants, Saunders said. For one, there's ample parking. Sprint Hawaii, located at 925 Dillingham, has 200 parking stalls, he said. And the location is still close to downtown.

"There's a savings in just travel time and servicing your client," Teves said. "What you're seeing is something coming together that someone envisioned a while ago.

"The big coup was getting Home Depot in there."

The next big move for the area could be the proposed "Iwilei Comprehensive Senior Residential and Adult Care Center," or Iwilei Senior Center for short.

The center, which could break ground in August, would be on a triangular block bordered by North King Street, Iwilei Road and commercial buildings on the Ewa side. Unlike other Oahu senior living residences, the idea is to provide a full range of care to occupants as they age, while allowing residents to stay in one unit, without having to move to different units as they need more care, Lim said.

"The buzzword is aging in place," he said.

The center would be a public-private partnership, with the development handled by the nonprofit Pacific Housing Assistance Corp., and money coming from the Rental Housing Trust Fund, Lim said. The developer is seeing state and federal low-income housing tax credits, with an overall development cost estimated from $25 to $30 million, Lim said.

The hitch is that the city administration must approve a waiver of a zone change for the property. On Tuesday, the City Council's zoning committee is scheduled to discuss a resolution to urge the administration to service the application before time runs out.

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