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Expert: 13%
of isle homes sold
topped asking price

Office-space inventory
in 2000 also is said to
have declined

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By Russ Lynch
Star-Bulletin

Oahu's residential real estate market is so strong that as many as 13 percent of single-family homes sold recently went for prices higher than the sellers originally sought, a home-sales expert said today.

Inventory of previously owned homes is dwindling and prices are likely to continue to rise, Herbert Conley told a breakfast seminar organized by the Hawaii chapter of the Institute of Real Estate Management.

Another speaker at the seminar, commercial real estate expert Joseph T. Haas, said the office-space inventory is also falling, particularly in downtown Honolulu, where vacancy levels are dropping and lease rents are rising.

Office owners last year were seeking rent of $2.21 a month per square foot, Haas said. By 2003, the average rent demanded downtown will go to $3.29 a square foot and landlords will no longer be offering incentive deals to attract renters.

On the residential side, Conley said that in normal times only about 2 percent of the Oahu homes listed in the Multiple Listing Service sell for more than the asking price.

The increase, along with a greater number of sales of million-dollar-plus properties, are indicators of confidence in the economy, said Conley, managing director of Coldwell Banker Pacific Properties.

The only area of the island where prices are holding is Leeward Oahu because that's where developers are producing new homes, which compete with previously owned homes on the market.

Developers can give away cars or appliances and offer low interest rates and other incentives but the only way private owners can compete is by lowering prices, which they don't want to do, he said.

Haas, senior vice president for office properties at CB Richard Ellis Hawaii, detailed Honolulu's changing office market over the past decade.

In 1990, downtown had the tightest office market in the United States and offices away from downtown were snapped up, he said. Then five major downtown office projects were opened: Alii Place and First Hawaiian Tower (now 1132 Bishop) in 1992, 1100 Alakea in 1993, Harbor Court in 1994 and First Hawaiian Center in 1996.

The rent that owners were asking tenants to pay peaked in 1994 and hit bottom in 1998, Haas said. Last year the downtown vacancy rate fell two points to 12 percent and it is still on the way down.

Demand should remain high as tenants with expiring leases look for better deals or more-desirable locations, Haas said. He said leases for 2 million square feet of Oahu office space will need to be renewed over the next four years.

Meanwhile, no construction has started downtown and even if something was to begin, it would be at least three years before tenants could move in, he said.

Also at today's seminar, retailing expert Stephany Sofos, president of SL Sofos & Co., said that while some big retailers on the mainland are closing stores or even going bankrupt, Hawaii will continue to attract new retailers. As an island gateway to Asia, Hawaii has a captive market of residents and a floating new market in the tourists, she said.

But Hawaii's retail market has changed markedly in recent years thanks to big-name discount stores and merchandise clubs. "Today, Hawaii retailing is about extra value. Bargain hunting is a passion," she said.

The more-traditional retailers are working on razor-thin profit margins because they have had to lower prices, Sofos said.