State industrial market tightest in U.S.


POSTED: Wednesday, October 01, 2008

Hawaii's industrial real estate market continued to remain the tightest in the nation despite increased vacancies at places to store and make goods, according to a third-quarter report released yesterday from real estate firm CB Richard Ellis Hawaii.





Third-quarter highlights

        » Rent increased 12 cents, on average, to $1.26


» Kapolei and Kapolei lease rents remained the highest on Oahu


» Industrial land sale transactions slowed down and prices varied widely


Source: CBRE



Vacancies in the industrial market have increased during the third quarter to 2.8 percent, largely due to the additional space now being offered for lease, especially in Kalihi, Halawa, Waipio and Kapolei.

“;After a five-year growth period in the industrial markets, we have now had six quarters of negative space absorption causing vacancy to increase,”; said Jeff W. Hall, Hawaii senior director of research for CBRE Inc. in the report.

  While industrial users are still buying fee warehouse-industrial properties in an attempt to avoid future rent increases, investment activity has slowed. Increasingly, new industrial condominium properties - especially those in West Oahu that were originally built to sell - are being offered for lease.

Although Oahu is not now overbuilt in industrial, it is likely that the current financial storm eventually will impact the commercial real estate market, Hall said.

“;With events changing daily in the capital markets and the banking sectors driven by national real estate foreclosures and mortgage defaults, the future remains very uncertain,”; he said.

Employment in the industrial sector reached an all-time high of 107,100 people last December, but has since tapered off to 103,000 workers, Hall said.

Still, premium space is tight and base average asking rents have increased 12 cents to $1.26 per square foot per month. The highest average asking rents were in Kapolei and Waipio with several other submarkets showing declines.

CBRE does not expect to see much change in industrial market conditions through the end of the year, said Joe Haas, senior managing director for CBRE.

“;Occupancy is tight and we don't anticipate any change,”; Haas said.