Vacant industrial space
vanishing on Oahu
Oahu's industrial real estate market has reached record levels in mid-year as vacancies continued to decline, prices kept rising and deal makers continued to get busy, according to a report released yesterday by Colliers Monroe Friedlander.
Low interest rates, strong personal income growth and increased federal expenditures all converged to exacerbate an already tight warehouse market, said Mike Hamasu, Colliers' director of consulting research.
Strong market conditions have prompted investors to consider speculative construction for first time in nearly two decades, but suitable sites are limited and competition is fierce, Hamasu said.
"Tight market conditions continue to exist and although speculative construction is starting to appear, it is not enough to stem the strong demand," he said. "It should be interesting to see what will happen at year-end."
Speculative construction is occurring in Kapolei Business Park, James Campbell Industrial Park, Halawa Industrial Park and Waipahu, and some investors are even considering building multi-tenant industrial condominium units, he said.
At mid-year, the Oahu industrial market posted 151,570 square-feet of net absorption, causing companies to scramble to find warehouse space. At mid-year, the Oahu industrial vacancy rate was 2.3 percent, down from 2.7 percent six months ago.
"The supply of available space will soon rival those conditions faced in the late 1980s when vacancy rates fell below two percent," he said.
Increasing demand coupled with a limited inventory saw tenants paying higher rents and leasing previously vacant properties. At mid-year, Oahu recorded an $.89-per-square-foot asking rent for warehouse space. Although slightly down from the $.91 average posted at year-end, current rents still exceed the levels posted during the height of the Japanese bubble of the early 1990s.
Market conditions have also caused land values to rise. In the last six months, land prices have escalated up to 15 percent for locations in Kalihi/Sand Island, Iwilei, Pearl City, Kaneohe and Waipahu, Hamasu said.