Industrial vacancy rate rises to 3.34%

Oahu’s vacancy rate reaches its highest in at least five years

Oahu's industrial vacancy rate has jumped to 3.34 percent in the wake of the closure of hardware supplier Kilgo's and the construction of a new Kapolei building, according to a new report by Colliers Monroe Friedlander Inc.

The market's vacancy rate had been hovering near 2 percent for years, but the closure of Kilgo's has opened up more than 250,000 square feet in the Kalihi-Sand Island area, while Kapolei Spectrum Phase II is bringing nearly 200,000 square feet of new industrial condominiums.

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The closure of Kilgo's and the construction of a new Kapolei building has boosted the vacancy rate for industrial property on Oahu to the highest in at least five years.

After four years of maintaining the tightest market in the country with vacancy rates near 2 percent, Honolulu's industrial market vacancy has jumped to 3.34 percent, according to a new report by Colliers Monroe Friedlander Inc.

The closure of retailer Kilgo's added more than 250,000 square feet of space to the Kalihi-Sand Island marketplace, while developers of Kapolei Spectrum Phase II have begun marketing nearly 200,000 square feet of newly built industrial condominiums.

New Jersey-based Allied Building Products Corp., which is purchasing the stock of A.L. Kilgo Co. Inc. and the leasehold rights to five parcels totaling nearly seven acres on Sand Island, hasn't determined what it will do with the Kilgo's building, said David Pavlicek, manager of Allied subsidiary RSI Roofing & Building Supply.

The company is considering redeveloping the property, which includes 300,000 square feet of land and 200,000 square feet of building.

Kilgo's is expected to be leased by year's end, helping to stabilize the market and push vacancy rates to between 3 percent and 3.5 percent, the report said.

Industrial rents, however, have reached a new record of $1.24 per square foot per month, 13 percent higher than rents at the end of 2006.

Meanwhile, nearly 600,000 square feet of industrial space is planned for Leeward Oahu, with developers targeting small industrial tenants desperate for space.