Isle industrial rent to rise

Signs of a softening market aren't enough to stop a continued climb in rental rates

Despite signs of a softening market, Honolulu office and statewide industrial rents are expected to continue to increase this year, according to a new report.

Hawaii landlords continue to have the upper hand on rents, which have increased more than 25 percent over the last five years in both markets, said Jeffrey Hall, senior director of research for the local office of CB Richard Ellis Inc., which yesterday released its first-quarter reports for the Honolulu office and statewide industrial markets.

"Nobody's backing off on their rents, asking rents are still increasing," he said. "I don't think there's going to be enough softening in vacancy for landlords to let go."

Honolulu's office vacancy rate was 8.2 percent in this year's first quarter, up from 7.9 percent in the year-earlier period, but down slightly from 8.5 percent in the fourth quarter of 2007.

Office vacancy rates had been dropping steadily for the past seven to eight years, reaching a bottom of 6.9 percent in mid-2007, but are now inching upwards, mostly due to mortgage company closures or consolidations, Hall said.

Meanwhile, the statewide industrial vacancy rate was 1.2 percent in the first quarter, down from 1.3 percent in the previous quarter and 1.4 percent in the first quarter of 2007.

The average asking rent in the office sector increased 18 cents per square foot per month over the last year to $2.95, while industrial base asking rents statewide rose 16 cents per square foot per month over the year to $1.28, the report said.

Many businesses are waiting for the economy to sort itself out, and it is unlikely that the market is going to reverse itself this year, Hall said.

The office market saw occupancy increase by 31,975 square feet in the quarter, while occupancy in the industrial market rose by 112,867 square feet.