Office vacancies
on Oahu declineA third-quarter report
attributes the 13.1% rate
to more jobs, tourism strength
and higher employment
Oahu office space is becoming slightly harder to find while rents, so far, are remaining stable, according to a new research report by the local office of CB Richard Ellis, a national commercial real estate firm.
The islandwide measure of available space went to 13.1 percent in the third quarter, a dip from 13.9 percent a year earlier. Overall Oahu asking rents for office space are running as low as $2.08 per square foot per month, exactly where they were a year ago, the firm said.
Economic conditions are looking good, said Jeffery Hall, senior director of research at CBRE, outpacing the rest of the nation with a 5 percent increase in personal income over the 2002 level.
More jobs, new strength in the tourist industry and higher employment are all translating into a higher level of economic activity, Hall said in the quarterly report.
In the high-profile downtown business district, the amount of available office space rose to 14 percent from 13.6 percent a year ago. That figure refers to space that is on the market but may or may not be occupied by tenants. Hall said.
The vacancy level of downtown properties that are empty and ready for new tenants was 8 percent. A comparable figure for last year was not available.
Some downtown changes, such as the move this month of high-technology firm Science & Technology International out of some of its space in the old City Bank building on Richards Street into bigger space in First Hawaiian Center, were not shown in the third-quarter report.
The report showed that office occupancy was increasing in the Kapiolani business district.
Researcher Hall identified a change in the office business, a shift to owning an office rather than leasing it. The trend could be pursued by more businesses looking for stable costs over the long run, he said.
Hall cited Queen's Court, a six-floor building on the Honolulu waterfront that was recently converted into leasehold commercial condominiums and sold out almost immediately.
More significant was Alexander & Baldwin Inc.'s purchase of the 1100 Alakea Building in March and its conversion of the rental office building into fee-simple office condominiums of half or whole floors.
Existing tenants, who were given first choice, grabbed some of the units in the half-occupied building and investor-landlords bought some, but other units were acquired by businesses that wanted to know they could control their own office-space costs for years to come, without worrying about the end of leases.
It has worked very well for A&B, said Michael Wright, vice president of the company's commercial real estate subsidiary A&B Properties.
"Number one, we have the only fee-simple Class A building in downtown Honolulu. What we're selling is fee-simple office condos with parking included. You can own your own office space for less than the cost of renting the space, even at today's depressed rents," Wright said.
The overall picture for Oahu commercial real estate is looking better, said Linda Gee, vice president of investment sales and investing in the Honolulu office of PM Realty Group.
"We feel that there are certain indicators that are totally separate from the real estate industry that are giving us a comfortable feeling," she said. Gee and other observers have said that the Norwegian Cruise Line build-up of its Hawaii tourist operations, a general improvement in tourism and a coming military-based residential construction boom will all help the economy and generate need for office space.
Gee said she doesn't see any of the renewed real estate activity as a one-time spike but more as a longer-term growth.
