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Maui retail vacancies rise to 7.4%


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POSTED: Friday, June 12, 2009

The economic downturn caused midyear retail vacancies on Maui to rise to 7.74 percent, the highest since 2001, and created a 12.2 percent vacancy rate - the most in six years - for Maui's office sector, according to market reports released today by commercial real estate firm Colliers Monroe Friedlander.

“;We anticipate that the current economic environment will persist throughout the year and into 2010,”; said Mike Hamasu, consulting and research director for Colliers Monroe Friedlander. “;Maui's retail marketplace will continue to post a steady rise in vacancy. Rental rates will reflect the softening in the marketplace as an increase in bankruptcies and business closures claim marginal retailers over the near term.”;

Over the past year, Maui has lost 40,000 square feet of retail tenancy as the island grappled with falling visitor counts, dropping home prices and rising unemployment, according to the report.

As a result of reduced demand, the average asking rent at shopping centers declined 10.5 percent to $3.90 a square foot versus $4.36 a year ago, the report said. Overall, the average asking rent is $3.79 a square foot.

New development on Maui has stalled in the wake of the Wall Street financial crisis, so only three projects - the South Maui Center, the Wailea Gateway Center and the Mercedes Center - are moving forward.

Maui Lani, owned by Mills Group, moved from building a shopping center to selling commercial lots in what is now called the Maui Lani Village Center, according to the report. Alexander & Baldwin's mixed-use commercial and residential Kahului Town Center has been postponed, and the delivery date for Stanford Carr's Kehalani Village retail development is uncertain, the report said.

Still, Maui's vacancy rate remains less severe than those in Las Vegas, Phoenix and Sacramento, Calif., and leasing activity has begun to rise in the second quarter of 2009, according to the report.

The downturn also slowed Maui's office sector, which had lost 22,350 square feet of tenancy at midyear as jobs decreased 12 percent over last April's employment count.

“;Many of the industries that form the foundation of Maui's economy are under siege, with reductions in air passenger arrivals, decline in retail sales, establishment of huge government budget deficits and rising unemployment,”; Hamasu said.

Despite softening demand, Maui's net rents rose by 6.35 percent to $2.87 a square foot, and average operating expenses increased by 3.35 percent to 80 cents per square foot, the report said.