Isle retail rent falls for first time in 6 years


POSTED: Friday, May 15, 2009

Oahu's retail market has been hit by the recession, resulting in a higher vacancy rate as well as a dip in the islandwide average asking rent, which fell for the first time in more than six years.

The retail vacancy rate for Oahu climbed to 3.98 percent in the middle of this year, compared with 3.35 percent a year ago, according to the Colliers Monroe Friedlander retail market report released today.




For rent


        Oahu's retail market has been hit by the recession

» Vacancy rate: 3.98%


» Average asking rent range: $3.04 to $4.00 per square foot/month


» Average asking net: $3.52 per square foot/month


» Average operating expense: $1.10 per square foot/month


Source: Colliers Hawaii


“;Despite the apparent relative calm, increasing uneasiness is being felt throughout the retail marketplace,”; said the Colliers report. “;Economic indicators point to a negative change in the business environment as job losses, bankruptcies, and home foreclosures mount.”;

Average base asking rents fell to $3.52 a square foot per month this year, compared with $3.72 a square foot per month in 2008.

Waikiki, which once benefited from high traffic from visitors, is also feeling the pain.

The base asking rent for Waikiki fell nearly 10 percent from its peak at year-end 2007 to an average low of $4.57 and average high of $16.45 a square foot a month. Waikiki's retail vacancy rate was 6.6 percent.

More shopping center landlords are fielding requests from retailers for concessions, including reduced, percentage-only or deferred rent.

Hilo Hattie, which is in Chapter 11 reorganization, has worked out a deferral of its rent with its landlord, the Weinberg Foundation, according to U.S. Bankruptcy Court documents.

General Growth Properties, the nation's second-largest retail real estate investment trust, which owns Ala Moana Center and Ward Centers, is also in Chapter 11 bankruptcy.

At the same time, General Growth has received approval from the Hawaii Community Development Authority for its Ward Neighborhood Master Plan, which would redevelop the 60 acres it owns in Kakaako.

“;The Ward Redevelopment Plan requiring millions of dollars to build will ultimately be delayed, scrapped or sold,”; says the Colliers report.

Honolulu's retail market appeared relatively unscathed through the end of 2008, but it was not immune.

Many retailers are reconsidering expansion plans or shutting down their underperforming locations due to current conditions.

Several restaurants have become casualties, including Aaron's atop the Ala Moana, Nick's Fishmarket, Brew Moon and E&O Trading Co.

Overall retail development also has slowed dramatically, with only 1.1 million square feet of the 5.3 million square feet of planned retail development in West and Leeward Oahu still proceeding, according to a recent Colliers study.

The silver lining is that surviving retailers might be able to find more desirable locations than in boom times.

Developers face the challenges of securing credit-worthy anchor tenants as well as obtaining construction financing in these times.

Colliers forecasts that the retail vacancy will climb higher, to between 6.0 and 6.5 percent, by year's end.