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Economy slows retail development


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POSTED: Friday, February 27, 2009

The virtual dry-up of capital and consumer wealth has affected retail projects statewide.

               

     

 

State of construction

        Some of the state's retail projects that have been either delayed or canceled since the start of 2008:
       

» Laulani Village in Ewa Beach

       

» Whole Foods Market Hawaii projects

       

» Lanihau Center in Kailua-Kona

       

» MW Group's Kapolei Town Square

       

» Kapolei Commons additional phase

       

Some projects still on track:

       

» Aina Haina Shopping Center

       

» American Commercial Equities Waikiki retail complex

       

» DeBartolo Development's retail project in Kapolei

       

» Pearl City Gateway

       

In some cases, construction time lines have been delayed, while other projects have been shelved altogether.

The nation's severe credit crunch and subsequent plunge in consumer spending have developers reeling as retailers pull back or abandon plans to enter the Hawaii market.

“;There's really no reason to build something when you're not going to see the expected traffic,”; said Aaron Eberhardt, Hawaii director of development for Westwood Development Group, whose proposed $100 million Laulani Village in Ewa Beach is on hold indefinitely until the market improves. “;People have limited discretionary income to spend at the shopping centers.”;

The center was scheduled to open at the end of 2010.

Westwood also abandoned plans for a rapid expansion of Lanihau Center in Kailua-Kona.

Even if the economy turns around, the bigger problem is that no one knows when financial institutions will begin significantly lending again, according to real estate experts.

“;Corporate America is hunkering down,”; said Steve Sofos, president and chief executive officer of Sofos Realty Corp. “;It all comes down to money, and they are all having a hard time financing.”;

Work has yet to resume at the Whole Foods Market site at Ward Village Shops since construction abruptly stopped in recent months, though the Texas-based food chain says it will open there in 2010 “;subject to fluctuating construction time lines,”; according to Claire Sullivan, community and vendor relations coordinator.

The impact of the national recession is unclear for a $400 million Kapolei retail project that is slated to be Hawaii's second-largest shopping center, according to Lloyd Yonenaka, spokesman for the Department of Hawaiian Home Lands, which owns 67 acres beneath the proposed DeBartolo Development LLC project, expected to break ground next year.

“;Obviously the economy is going to have an impact somewhere down the line, maybe not necessarily with the construction schedule, but more with filling the mall with tenants,”; he said. “;We've seen it before when people are hesitant to expand. The construction schedule all will be dependent on the overall economy and business sentiment of people going into the mall.”;

Steve Metter, CEO of MW Group Ltd., which shelved plans a year ago to build a 112,000-square-foot Kapolei shopping center, said, “;We don't think it's a prudent time to develop retail. For us it's the solvency of the tenants. We don't want to take on any unnecessary risk.”;

Others developers that have secured financing are cautiously forging ahead despite the dismal retail outlook.

Robertson Properties Group, which is developing the 150,000-square-foot Pearl City Gateway, is on track to open by midyear, according to Jane Hope, vice president of leasing.

“;It's all about timing and, frankly, the stability of the developer,”; she said. “;Some of the local tenants - a lot of them - are reluctant to expand right now. I can't say that tenants are flocking to the center.”;

American Commercial Equities LLC, which is redeveloping Aina Haina Shopping Center and building a two-story retail complex in Waikiki, has not slowed its construction timetable in the tough economy, according to President Marvin Lotz.

However, “;for every retailer, landlord and developer, (the retail market is) a significant concern,”; he said.

Developers of Kapolei Commons - the MacNaughton Group and Kobayashi Group - have become more cautious in building out spaces at their regional mall and are holding off construction of one phase of the project until signing more leases, according to Jeff Arce, a partner in the MacNaughton Group.

“;Retailers are struggling because consumers are hurting so bad,”; he said. “;Just like consumers, retailers are cutting back. They've just gotten much more cautious about how they proceed.”;