Tourism seen more at risk than housing
National economic woes are not expected to keep retail chains from expanding in the state
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Sluggish growth in the visitor industry poses more of a problem for the state's economy than the subprime mortgage crisis, according to Bank of Hawaii chief economist Paul Brewbaker.
As the national economy struggles, Brewbaker said Hawaii still has one of the lowest foreclosure rates in the nation. He's more concerned with how lower visitor numbers will impact consumer spending in the isles.
Brewbaker, who was speaking at the CB Richard Ellis Hawaii Retail Symposium yesterday morning, forecasts negative growth in construction for this year, along with less than 2 percent growth in jobs and total visitor arrivals.
Nevertheless, Brewbaker expects Hawaii to climb out of its zero-growth state by the end of this year.
National retailers, including Walgreens, Target and Office Depot, meanwhile, continue to factor Hawaii into their expansion plans.
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The goods news is that the state should receive minimal impact from the mainland's subprime mortgage woes, according to Paul Brewbaker, Bank of Hawaii's chief economist. The bad news is that Hawaii is as close to a recession as it can get, with little to no growth in sight for most of 2008.
Brewbaker presented these findings before the CB Richard Ellis Hawaii Retail Symposium yesterday morning.
Brewbaker's forecast for this year is a 2.2 percent growth in real personal income over the prior year, along with a 3.8 percent growth in the consumer price index. Visitor arrivals, however, will only grow 1.6 percent to balance out the loss last year. He predicts construction will decline 6 percent from the prior year.
Barring any other major world crisis or natural disasters, Brewbaker, however, said the state should emerge from its zero-growth status by the end of this year.
Past economic busts happened during the Gulf War in 1990-1991, according to Brewbaker, as well as the dot-com recession in 2001, shortly after the 9/11 terrorist attacks.
Brewbaker said Hawaii should not have to worry so much about the subprime mortgage crisis's impact on personal consumption as the slowdown in visitor growth.
"I'd be keeping my eyes on tourism numbers," he said.
Growth in arrivals is predicted at below 2 percent, according to Brewbaker's forecast, which will be reflected in retail sales.
Inflation isn't going to help either, with the consumer price index forecast to grow by 3.8 percent this year.
Although the dollar has grown weaker abroad, it hasn't brought more international visitors to Hawaii -- which may be due to the lack of direct flights, said Brewbaker. But clearly, the visitors are also going to competing destinations.
The economic downturn, however, will not keep national retailers from making their entry in the Aloha state, nor slow down their expansion plans.
Real estate executives from Target Corp., Office Depot and Walgreen Co. elaborated on their plans for Hawaii at a panel yesterday afternoon.
Target and Walgreens will continue on their path to growth in Hawaii as part of long-term strategies. Office Depot plans to open another store -- its fourth on Oahu -- next month at Waipahu Town Center.
Target breaks ground on its store in Kapolei this morning, with the second one to follow at Salt Lake tomorrow. The two stores, and a third in Kona, are expected to open in March 2009.
Brian Treber, Target's senior regional real estate manager, said the big box store typically prefers about 15 acres of vacant land near residential areas.
Treber said Target has done its homework and already knows where it wants to be in Hawaii -- and is eyeing Kailua.
Bob Roscoe, director of asset development for Walgreens, said the drug store chain seeks locations that provide consumer traffic and about 12,000 square feet of retail space, minimum.
With more than 6,000 stores in the U.S. and Puerto Rico, Walgreens aims to open 550 new drugstores in fiscal 2008.
Office Depot originally was aiming to open another 150 stores last year, but has scaled that down to 75 for this year, said Ana Rimkus, senior director of real estate.
Target has a growth strategy of 120 new net stores per year, and plans to continue growing, although some openings may be pushed back a few more years.