Chinatown bedeviled by stagnant properties

Quirky economic and cultural conditions are stifling business growth

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While Chinatown is well on its way to emerging as an arts district, one major hurdle remains: Stagnant real estate.

Space is limited in the historic Chinatown district, which encompasses a dozen or so blocks between River and Bethel streets, and from Nimitz Highway to Beretania Street, even as demand is growing.

But many spaces continue to remain empty, dilapidated and derelict.

Merchants say that stubborn landowners hang onto their properties, without efforts to renovate them or fill them with tenants. Some renovate their buildings, but leave them empty.

Though the city eased rules to allow live-work lofts in Chinatown three years ago -- the concept never took off.

At the same time, some of the artists who helped launch the arts district don't want efforts to promote the neighborhood to go too far -- to the extent that it loses its grittiness. They fear that an arts district that becomes too upscale may push out some of Chinatown's oldest mom-and-pop tenants.

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The growing Chinatown arts district has become a magnet for art galleries, fashion businesses, cafes and restaurants. The Marks Garage is now fully occupied on all sides, marking a sign of the times.

That, in turn, has created a new boost in demand for retail space in the neighborhood, which stretches from River to Bethel streets, and from the Nimitz Highway up to Beretania Street. But there isn't much available.

Restaurateur Dave Stewart says his latest venture, La Rhumba, likely will be his last in the neighborhood. Why?

"We've run out of space," he said.

Space that is available is subject to the whims and fancies of the landowners, who may sometimes decide to let the spaces go empty.

The Stack Building, owned by Allen Stack Jr., an heir to the McCandless fortune, for instance, was rebuilt from scratch after the roof and walls at the circa 1905 building collapsed six years ago. Mason Architects restored the building, creating a large, retail space with a small courtyard and garden in the back.

It sits on a prime corner of Pauahi Street and Nuuanu Avenue, across from the Arts at Marks Garage, but has remained empty for three years, despite interest from prominent restaurateurs.

Robert Gerell of Gerell Management, a mover and shaker in Chinatown real estate, says the lack of movement is nothing new at all. Many Chinatown families hang on to their properties, he said, passing them from generation to generation, with few improvements.

Some older landowners may be relying on the property for income, but don't have the means or motivation to fix them up.

"It's been a continual problem for 35 years," he said.

Gerell regards the stretch between River and Smith streets as the traditional Chinatown, which is beginning to blend and merge with the emerging arts district stretching toward downtown Honolulu.

Traditional Chinatown properties are always full, he said, thriving with immigrant communities, most of whom are now coming from Southeast Asia.

The state Legislature grant-ed, but has not yet released, $250,000 for the restoration of the facade along N. Hotel Street, from Nuuanu Avenue to Smith Street, which would include the now boarded-up Club Hubba Hubba, dating back to the 1940s.

The only hitch: landowners must agree to a contract in which they are to renovate the interior, in order to get the funds. Elizabeth Stack, one of the building's owners, says she plans to rehabilitate it and lease it out, but she does not know when.

No lofts in sight

A county zone change which lifted restrictions for residential loft developments in second-floor spaces three years ago never took off.

Gerell called the zone change meaningless.

"What they passed didn't do anything," he said, citing the high costs and challenges of meeting current code requirements.

Chris Smith, of CJS Architects, greeted the zone change with creative enthusiasm back in 2004, but that eventually petered out.

"Nothing came together," he said. "We just couldn't find the right building and right client to make the economics work."

Efforts are under way to create a live-work loft at the Mendonca Building at 1109 Maunakea St.

At the same time, the National Trust for Historic Preservation is conducting a feasibility study to identify what's holding them up, with results expected by the end of November.

Gerell said given the finite amount space, gross rents have gone up over the years, as have operating costs and property taxes.

In 2004, average rent ranged from $1 to $2.50 per square foot. Artist Roy Venters remembers when some spaces went for as little as 50 cents per square foot -- 20 years ago.

Base rent for retail space in the area is now anywhere between $2.50 and $3.50 per square foot per month.

At the newly renovated King's Court at 12 S. King St., where Jungle Gems has just become a new tenant, base rent for street-front retail is at $3.50 per square foot per month.

Courtyard retail space in the same building is still at a base rent of $1.50 per square foot per month.

Various art gallery owners and retail owners are seeking space in the neighborhood, according to Joey Wolpert of the rRed Elephant Cafe, which he believes will convince landowners to renovate their spaces.

"Clearly, if landlords see they can get a client willing to spend more, there will probably be more efforts to bring in tenants," Wolpert said.