A construction veteran will
build three small-bay warehouses
totaling 35,000 square feet
After a nearly decade-long standstill in speculative industrial construction on Oahu, increasing rents and high demand for space have prompted a retired developer to build a warehouse complex in Halawa.
Sanford "Sandy" Granger, owner of GRAPAC Properties and former chief executive officer of Granger Pacific Inc., said he plans to spend about $3 million to build three small-bay warehouses, for a combined 35,000 square feet, on two acres of land outside the entrance to Halawa Correctional Facility.
Granger, who has owned the Queen Emma leasehold property for about 12 years and has about 40 years left on his lease, said he was waiting for favorable real estate conditions to build.
The construction industry veteran started Granger Pacific, once the state's largest glass contractor, in 1958 and by the 1970s had grown it to a 120-employee firm capable of bidding for multimillion-dollar contracts.
When the company closed in 1996 after mainland competition squeezed profit margins, Granger retired and began focusing his efforts on commercial warehouse development.
His latest project, which will break ground next month, is about eight months out, Granger said. Sofos Realty will handle the leasing.
"We've already had a number of inquiries," Granger said, adding he's seeking environmentally clean tenants who are interested in small warehouses.
If conditions remain favorable, Granger said a similar project in Kona will not be far behind.
"And then, I'm probably really going to retire," he said.
Granger's Halawa project is attracting attention from real estate professionals, since there isn't a lot of available industrial space near the downtown area, said Jeffrey W. Hall, Senior Director of Research for CB Richard Ellis Hawaii.
Vacancy in CBRE Hawaii's inventory of buildings was flat in 2003: It didn't move more than 10,000 square feet during the year, Hall said.
Small-bay warehouses near town, like Granger's Halawa project, remained the tightest market and showed the most significant rent increases.
However, older, less functional buildings that had lagged in the vacancy recovery are now leasing as tenants find fewer selections, Hall said.
Oahu's industrial real estate market is tight, agreed retail analyst Stephany Sofos, with most of the desirable inventory leased and the remainder obsolete by mainland standards.
"Sixty-five percent of all the industrial real estate was built prior to 1970, so any new stuff is exciting," Sofos said. A healthy economy and low-interest rates are continuing to add muscle to a strong market, she added.
Mike Hamasu, research consultant for Colliers Monroe Friedlander, said it's not surprising that Granger is moving forward with a project at this time.
After a lengthy depression in the industrial real estate market, conditions are getting more favorable, Hamasu said.
There also are signs that the industrial real estate market is preparing for more activity, he said, adding Oahu's expected construction boom is likely to trigger a need for more industrial warehouse space to store building materials.
During the past few years, there also have been a number of owner/user facilities built in industrial mixed neighborhoods such as Kalihi and Sand Island, where homes have been demolished to put up new warehouses, he said.
"This often precedes speculative construction," Hamasu said. "There are only so many of these properties that can be redeveloped. When there's a shortage, the only other alternative is to buy land in other areas and build a new warehouse from scratch."
However, Hamasu doesn't think Granger's project will be the norm.
Seeing that kind of development in Halawa is rare, Hamasu said, since most of the land is leasehold and owners need a long lease life to get the best return on their investment.
As market conditions continue to improve, most industrial real estate development is going to take place in the West Oahu area, such as Kapolei, Campbell Industrial Park, Mililani and Waipahu, Hamasu said.
"There's more land available there and prices are lower," he said.
New communities from Pearl City to Kapolei have spawned demand for activity in those areas, Hamasu said.