Oahu office The vacancy rate in office space on Oahu has increased, according to Colliers Consulting, the research arm of the commercial real estate firm Colliers Monroe Friedlander.
vacancies on the rise
The overall trend is likely
List by submarket
to get better, a researcher saysBy Russ Lynch
rlynch@starbulletin.comBut aside from a couple of major tenants closing shop, the overall trend is positive, said Colliers chief researcher Mike Hamasu.
At the end of 2001, Oahu's total office vacancy was at 12.67 percent. By the end of June 2002, it had risen to 12.96 percent.
But rents are edging up and the fact that some businesses moved from one building to another kept the equation of available space to occupancy relatively even, Hamasu said.
Hamasu's research indicates a slightly lower vacancy rate of 12.93 percent by year-end and then a continuing buildup of occupancy.
He took state economists' projections of various factors in the economy, such as employment, and came up with a best-case estimate of Oahu office vacancy dipping to 11.04 percent by the end of next year, 9.29 percent by the end of 2004 and 7.5 percent by late 2005.
"Realizing that this appears to be an overly optimistic forecast," he said, his firm trimmed some of the state estimates, deciding that job growth, among others, would not be as high as the projection by the state Department of Business, Economic Development and Tourism.
The change means the office vacancy rate by 2005 would look more like it was in 2000, around 10.65 percent.
"Honolulu's office market is mature and is not prone to dramatic fluctuations in vacancy rates," Hamasu said in his report. "Even with a U.S. recession, a Japanese recession and terrorist attacks occurring concurrently, Honolulu's vacancy rate rose by less 2 percent" in the past 12 months, he said.
"Unlike other markets that tripled and quadrupled over the past year, Honolulu's office vacancy remained fairly stable," he said.
"Locally, Hawaii's office market appears to have weathered the downturn in the economy and is poised to regain lost ground," Hamasu's report said.
Major tenants have vacated office space, but most of them moved to other space in the city, evening out the equation, the report said.
The main factor in the increase in office vacancy was the departure of Japan-owned digital media creation firm Square USA from more than 40,000 square feet in Harbor Court earlier this year.
Rental asking rates island-wide rose 3 cents a square foot in the last six months, compared to a rise of 8 cents over the past four years, Colliers Consulting said.
Another Honolulu expert on office space thinks Colliers might be underestimating the turnaround.
"I don't have a crystal ball, but I don't think that's a very aggressive approach," said Matthew Bittick, managing director of the office services group within Grubb & Ellis/CBI Inc.
He expects a turnaround in vacancy rates by the first quarter of next year, Bittick said.
But Bittick agrees with Hamasu that a lot of movement is from one building to another, rather than out of state.
He sees it as "you have three cups of water shared out between five glasses and you pour them in different ways but you still have three cups of water."
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Vacancies in Oahu submarkets through June
Area Bldgs Rate Airport 5 14.47% Dwntwn 58 12.04% East 14 7.89% Kakaako 42 14.27% Kalihi 9 14.60% Leeward 12 11.02% Waikiki 11 17.61% Wndwd 10 9.27% Total 161 12.95% Source: Colliers Consulting