Available retail space hits 15-year low
Oahu's retail vacancy is down to 2.2 percent, a new report says
The Oahu retail vacancy rate has declined to 2.2 percent, the lowest level in more than 15 years, according to Colliers Monroe Friedlander's year-end retail market report.
OAHU RETAIL SPACE IS GETTING SCARCE
2006 vacancy rate: 2.2 percent
Average low asking rent: $2.97 per square foot per month.
Average high asking rent: $4.04 psf/mo.
Source: Colliers Consulting
A year ago, the retail vacancy rate was at 3.4 percent, and the year before at 5.8 percent.
"The market has gotten to the point where tenants are facing very difficult times finding space, and expansion opportunities are limited," said Colliers' research director, Mike Hamasu.
The islandwide average asking rent, not including Waikiki and Ala Moana Center, has risen by 19.5 percent over the last two years. Average base asking rents are now between $2.97 to $4.04 per square foot per month.
The lowest average base asking rents remain on the North Shore, at an average of $1.75 per square foot per month, according to the report, while the highest rates remain in Waikiki, at a high of $14.83 per square foot per month.
Rental rates in Waikiki are reportedly more than $30 per square foot per month in prime spots on central Kalakaua Avenue.
The market is showing several signs of strength.
Both Windward Mall and Pearlridge Center gained new tenants, resulting in more than 120,000 square feet of space leased out over the past year.
National chains like Walgreens and Target are searching for multiple sites to enter the Hawaii market.
And while Oahu's retail rental rates are attractive to commercial developers, available land is in short supply.
Several large-scale retail projects are in the pipeline, including the Department of Hawaiian Home Land's anticipated mall in east Kapolei in partnership with DeBartolo Development.
But land prices have also escalated over the last few years, with redevelopment sites along Kapiolani Boulevard priced between $175 and $200 per square foot, according to Colliers.
The higher land prices and construction costs have prompted some developers to put their sites back on the market.
The MW Group recently put a 10-acre lot in Kapolei, originally slated for a 147,000-square-foot retail center, on the market.
The developers of Laulani Village, a mixed-use retail center on 20 acres in Ewa Beach, have sold it to a mainland buyer. Bristol Group Inc. of San Francisco and Hawaiian Asset Management and Investment Corp. bought the lot in 2004 for $12 million to develop the retail center.
Art Howard, president and CEO of HAMICO, said the partners received several unsolicited offers, one of which they could not refuse. He said the potential buyers are now doing their due diligence.
He declined to disclose the buyers or sales price.
Laulani Village, at Fort Weaver Road and Keaunui Drive, is expected to offer about 250,000 square feet. It is expected to be anchored by Safeway, and would possibly be a site for Target, though no leases have been officially signed.
The downside to the hopping retail real estate market is that it will eventually have to slow down. Limitations of land, along with the low unemployment rate and inflationary pressures, will keep retailers from expanding.
"We can anticipate some increase in vacancy in the first part of next year," Hamasu said. "The realities will begin the first quarter of 2007."