Vacancy rates up

More office space is available in
Honolulu, reversing recent trend

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By Tim Ruel
truel@starbulletin.com

Downtown offices have emptied slightly in the past quarter, countering a two-year trend and leaving some brokers to wonder whether the weakness will continue in the aftermath of the Sept. 11 attacks.

Vacancy in the central Honolulu district rose to 11.9 percent in the third quarter from 11 percent in the second quarter, according to figures from broker CB Richard Ellis, which surveys a select set of office buildings. Five years ago, Honolulu's vacancy was as high as 18.8 percent, largely the result of Hawaii's struggling economy and the large number of new buildings that were constructed in the first half of the 1990s.

Since 1996, however, no office buildings have been built, and vacancy in Honolulu's 5.4 million-square-foot central district has dropped, prompting speculation last year that there was enough demand for space to add another building. But now the vacancy trend has abruptly halted.

Tenants have been shopping around for better deals, playing "musical chairs" with office space, said local broker Steve Sofos. His firm, Sofos Realty Corp., sees downtown vacancy at 14.3 percent for the third quarter, compared with 12 percent in the second quarter, a figure that relies on a wider variety of downtown properties, Sofos said.

He predicts that vacancy will remain flat for now, depending on the impact that the U.S. counterattack in Afghanistan has on Hawaii's tourism businesses.

Joe Haas, senior vice president of CB Richard Ellis, said it is too early to predict if the rise in vacancy will continue as a trend. Haas noted that CB Richard Ellis' vacancy figures were skewed upward by new, more accurate office information released by 1100 Alakea St., which added a small amount of space to the survey. Haas said the increase in vacancy was mainly caused by the closure of several high-tech offices in Honolulu this year, which is part of a national trend. Uniden Corp., a Tokyo-based wireless device manufacturer that was trumpeted when it landed in the state four years ago, quietly closed its office at 1132 Bishop St. In the same building, e-business consultant WorldPoint Interactive Inc. shut down its penthouse suite after it was hit by a lawsuit by the state over a government loan. Also at 1132 Bishop St., Sprint PCS closed its Honolulu call center.