Tuesday, September 24, 2002

Waikiki lost
in space

Vacancy rates on the rest
of the island are improving

By Russ Lynch

Empty retail space in Waikiki has soared to 15.14 percent of the district's total space for shops, eating places and other retail operations, according to a new report.

That is nearly three times the district's vacancy level of 5.22 percent at the end of last year, according to the half-yearly retail market overview being issued this week by local commercial real estate firm Colliers Monroe Friedlander Inc.

Although a part of the shift was due to the closing of the two McInerny stores in the Royal Hawaiian Shopping Center, leaving about 60,000 square feet empty, the Waikiki vacancy level increased by an additional 37,000 square feet.

Art "I think the dynamics of Waikiki have shifted and there is a dramatic change in the retail marketplace" because of the decline in tourist spending since Sept. 11, said Mike Hamasu, Colliers consulting and research director.

However, retailing for all of Oahu is not nearly as bleak, the report says. The islandwide retail vacancy rate decreased to 5.3 percent this month from 6.33 percent a year ago.

So far this year, Oahu's shopping centers have reduced their total empty space by 65,816 square feet, with Leeward Oahu showing the most improvement.

"In contrast to the Waikiki trade area, shopping centers serving the rest of the island actually encountered tightened market conditions," with nearly 163,000 square feet of space being absorbed by tenants this year, according to the report.

"Although vacancy rates rose in Waikiki and even among the smaller trade areas such as the North Shore, the remaining trade areas experienced an increase in occupancy over the past year," the report says. Leeward Oahu saw its retail vacancy level drop about 3 percentage points to 4.75 percent.

The difference between Waikiki and the rest of Oahu was "directly contingent upon the consumers that they served," Colliers' report says. "Resort retailers, especially those focused on Japanese tourists, suffered significant declines in sales, while shopping centers that primarily serve the island's residents proved to be resilient and actually posted solid sales and occupancy improvements.

"Healthy consumer spending by island residents kept local shopping centers from facing the dilemma encountered in Waikiki."

In Waikiki, a year after Sept. 11, a number of struggling retailers have closed. "For those that remain in business, many are refocusing their marketing and merchandising strategies towards the growing westbound tourist market," the report says.

A number of leading retailers and shopping areas in Waikiki have already begun to shift focus away from the Japanese, who spend more per capita but are dwindling in numbers, and toward the U.S. West tourists, who from sheer numbers make up by far the largest segment in total visitor expenditures, visitor days and visitor arrivals, Colliers says.

"Retailers need to begin tackling the huge psychosis among residents that Waikiki is 'just for tourists,'" says a part of the report called "Special Focus: Waikiki One Year Later."

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