Isle office expenses rise
A surge in energy costs is driving a dramatic increase in operating expenses in Honolulu's office market.
In turn, the sector is planning unprecedented mid-year increases in estimated operating budgets, according to the latest market report released yesterday by CB Richard Ellis Inc.
A survey of nine large Honolulu buildings showed operating costs have increased an average 22 cents per square foot per month since last year, and 14 cents in the last six months.
"I don't see any relief in sight," said Jeffrey Hall, CBRE senior research director. "This will affect virtually all tenants. It's just the state of the economy, where things are getting tight and prices are going up."
For instance, a tenant with a 12,000-square-foot space downtown is seeing about a $2,600 increase in monthly expenses.
In addition, economic uncertainty and rising inflation has resulted in flat demand as businesses remain cautious about expansion, the report said.
Available space fell to 9.1 percent to 1.056 million square feet, including 952,821 square feet, or 8.2 percent, of vacant space. Gross monthly lease rents rose 9 cents per square foot year-over-year to $2.93 in the quarter, including operating costs of $1.21.
Oahu's office market posted 10,758 square feet of increased occupancy in the quarter.
The industry expects about 35,000 square feet of Class-A office space to come to market in the next quarter due to the closure of Aloha Airlines. Vacancy rose in the downtown, Waikiki and the West Honolulu submarkets, while occupancy increased in the Kapiolani, East Honolulu, Leeward, West Oahu and Windward districts.
The survey encompasses a total of 11.6 million square feet, or about 60 percent of Hawaii's office market.