Maui's commercial buildings have little space

Vacancy on the Valley Isle has fallen in the past several years to 4.2 percent from more than 20 percent

Quarters are tight and digs are expensive for office and retail tenants on Maui, as development has not kept pace with the island's phenomenal growth, according to a midyear report released yesterday by commercial real estate firm Colliers Monroe Friedlander Inc.

Vacancy rates for Maui's rental office market have fallen from a high of more than 20 percent in 2001 to 4.2 percent in 2006. At the same time, rental rates have skyrocketed with net rents rising 18 percent over the past year, said Mike Hamasu, director of consulting and research at Colliers Monroe Friedlander.

Maui's office tenants, who are experiencing their sixth consecutive year of rent increases, are paying an average net asking rent of $1.93 per square foot a month, Hamasu said.

The 29-cent increase over the previous year represents the largest annual increase in rents since the early 1990s, he said.

"Contributing to this solid office market performance was the strong job growth experienced among Maui's office sector," Hamasu said. "Over the past three year, more than 1,100 new office jobs were added to payrolls."

A 17.8 percent increase in jobs on Maui has added more than 200,000 square feet of occupancy since December 2002, he said.

Increased residential development and strong tourism on Maui also strengthened the retail market, Hamasu said.

"The tremendous amount of residential development is attracting many U.S. mainland buyers with a high level of affluence that Maui retailers are now becoming accustomed to," he said.

Many national retailers are beginning to eye Maui for its growing affluence and rising personal incomes, Hamasu said.

Maui's retail vacancy rates dropped to 4.9 percent, the lowest in a decade, and asking rents jumped 14.2 percent to an average of $3.79 per square foot a month.

Maui's office and retail markets are expected to continue strengthening, but eventually could run out of room, Hamasu said.

"The biggest issue to future growth is the shortage of labor, the cost of construction and the lengthy entitlement process," he said. "All of these things could impair development."