Neighborhood shopping is going strong with the hot residential real estate market fueling spending at places like the new Home Depot in Kapolei.
Regional spending
supports retailers
Hawaii's white-hot residential housing market is in the driver's seat with the strength of this sector fueling the retail growth of neighborhood shopping centers.
At the same time, the turbulence of the state's tourism industry over the last several years has pushed vacancy rates at resort centers to the top of the charts, according to the latest research from CB Richard Ellis Hawaii and Colliers Monroe Friedlander Inc.
Neighborhood centers had the tightest market with 3.7 percent vacancy rates, while resort centers posted vacancy rates of 17.3 during the first quarter of 2004, said Jeff Hall, Senior Director of Research at CBRE.
"The strength of the residential real estate market has really made the retail market pop," said Stephany Sofos, retail analyst. "It's a situation where people are getting on the band wagon. New residential construction has created a need for neighborhood and community shopping centers where people can stop to get their juice and coffee and drop off their dry-cleaning."
For the past two years, the state's tourist-driven economy plunged as SARS, terrorist attacks and the War on Iraq took their toll on the business sector. But the residential real estate market, which grew 12.8 percent last month, proved remarkably resilient even reaching record highs during that time.
Retail sales at neighborhood centers have historically been strong, but it's been more of a challenge for the state's resorts, said Mike Hamasu, director of consulting research at Colliers Monroe Friedlander."When nobody is coming to visit, nobody is spending money there," Hamasu said.
It's really a no-brainer, that the residential side of the house is going to drive retail's recovery, he said.
"If someone buys a new house, they want to fill it," Hamasu said.
But growth is cyclical, Hamasu said, adding that as the state's visitor industry continues to improve so will the resort retail market.
"The hotel industry is in the middle of a boom for Hawaii and there are positive changes that will occur in this marketplace," he said.
According to market reports, Waikiki has high retail vacancies, but going forward three to four years, Hall forecasts a much more bullish outlook for the state's resort retail sector.
"The Royal Hawaiian shopping center is rapidly changing. The Beach Walk and the International Marketplace projects are just getting under way. Expect that in a few years Waikiki will be an entirely different place," Hall said.
But building better shopping centers is only half the battle, Sofos said.
Resort retailers need to find the right tenant and merchandise mix to cater to the changing face of Hawaii's visitor industry, she said.
"If you can find the right mix they will come," Sofos said. "If it's not the right mix, they will come once and never come again."
