Honolulu has nation's biggest shortage of industrial space
The state's continued robust economy made Honolulu's year-end industrial real estate market the tightest in the nation, according to a report released yesterday by commercial real estate firm Colliers Monroe Friedlander.
That's no small distinction, considering that the U.S. industrial market just posted its greatest absorption since the dot-com days, and the next-tightest market -- Los Angeles -- is separated from Honolulu by almost a full percentage point. According to the report, other places to watch include Milwaukee, Houston, Chicago, Philadelphia, Dallas/Fort Worth, Atlanta and Detroit.
Despite more industrial condominium development, Honolulu's tight market conditions mean higher rents are on the horizon for Honolulu's industrial space users -- who have been forced in some cases to such extremes as renting public storage space and bunker space.
More than 600,000 square feet of new industrial condominium space in West Oahu is scheduled to become available next year, but it won't be enough to satisfy demand from the expanding labor market, said Mike Hamasu, director of research and consulting at Colliers.
"Even with new development, we're still expecting the vacancy rates to stay below 2 percent throughout next year," Hamasu said.
Right now, Honolulu's 1.8 percent vacancy rate is creating difficulties for industrial tenants who want to lease warehouse or industrial space, said Scott Mitchell, executive vice president at Colliers.
The strength of Hawaii's real estate market as well as demand for industrial space is likely to drive rents 8 percent to 12 percent higher in 2006.
"Market conditions are such that many tenants will soon have to pay higher rents or move to Kapolei," Hamasu said.
For some businesses, the appeal of purchasing industrial condominium space to stabilize costs will be attractive, Hamasu said. However, others could prefer paying higher rents to moving farther from town, he said.
"Either way they are paying premiums," he said.
While Honolulu -- with market conditions exacerbated by an island economy -- might lead the nation in demand for industrial market space, the entire nation experienced a benchmark year, according to a report by Colliers International.
The fourth-quarter U.S. vacancy rate dropped to 8.4 percent from the year-ago 9.5 percent, Colliers reported. For the full year, a total of 214.7 million square feet was newly occupied.
Despite slower economic growth during the fourth quarter, industrial production, imports, exports and manufacturing all registered solid increases -- bolstering demand for warehouse space, said Ross Moore, a senior vice president for Colliers International.