Cost Plus pulls out of deal to open in Hawaii
The national retailer had planned to open a store in Lahaina, and was looking at a location in Kona, too
Cost Plus World Market, a large national retailer offering imported goods, has pulled out of an agreement to open its first store in Hawaii.
The company wouldn't disclose the reasons why it has decided not to open the multiple stores it had planned throughout the islands.
However, local brokers say the high costs of land and construction, higher shipping expenses and difficulties in hiring in Hawaii are giving pause to many expansion-minded national retailers.
Despite those issues, developers say the retail market is still strong and that gross sales in Hawaii are among the highest in the nation.
Cost Plus World Market, a national retailer offering imported goods, has pulled out of a deal to open its first store at the Lahaina Gateway shopping center on Maui.
The 287-store California-based Cost Plus Inc., which recorded $1 billion in sales last year, also was negotiating to open a store at Kona Commons, a planned 630,000-square-foot retail center on the Big Island, but says it no longer is looking to expand to Hawaii.
STILL COMING:
Target Corp.
Whole Foods Market
Walgreens
NO PLANS FOR HAWAII:
Ikea
Trader Joe's
Victoria's Secret
CALLED OFF HAWAII EXPANSION:
Cost Plus World Market
|
Greg Endom, Cost Plus vice president of real estate, wouldn't identify the reasons why the company pulled out of the Hawaii market, but said that the decision was based on strategic growth plans that might be revisited in the future.
However, local brokers say that the high costs of land and construction, higher shipping expenses and difficulties in securing workers are among reasons leading retailers to reconsider expansion to the islands.
"That all conspires to make it difficult for retailers to move forward on plans to consider expanding," said Mike Hamasu, Colliers Monroe Friedlander Inc. director of consulting and research.
The problem is affecting both small and large national chains that have considered opening stores on Oahu and the neighbor islands, which pose a greater business challenge in some cases, said Mark Bratton, Colliers vice president.
"On the neighbor islands, the shipping expenses are even greater and you certainly don't do anymore sales," said Bratton, who represents retailers such as Best Buy, Barnes & Noble and Lowe's. "I had a small retailer (recently) pull out of a deal here on Oahu because of the employee shortage -- it is starting to affect us."
Hawaii's low unemployment rate has resulted in a severe shortage of workers while overall operating costs, including land prices, continue to escalate.
Meanwhile, retailers can't sell products for more than what it sells for on the mainland, Bratton added.
"Larger chains are reconsidering expanding primarily on the neighbor islands because of these issues," he said. "Typically these stores are above average and are one of the best gross sales stores in their chains. There's a lot of money coming in, but if you're spending too much the bottom line is not there."
Opening in a market like Hawaii doesn't make economic sense for Sweden-based Ikea, a popular home furnishings retailer on the mainland.
The retailer said it can't offer affordable prices without maximizing economies of scale through distribution, which is contingent upon clustering stores in certain regions with distribution centers nearby that can feed the stores, said Joseph Roth, company spokesman.
Hawaii doesn't have the population base to sustain a cluster of stores. Ikea typically requires its locations to have a population base of between 1.5 to 2 million within 40 to 60 miles.
"So in terms of population density you don't have that going for you either," Roth said. "Distribution in general could be very expensive to a store in Hawaii. It essentially comes down to numbers -- we require a larger population base in a smaller area than what currently exists in Hawaii.
Despite those issues, developers say the retail market is still strong and that gross sales in Hawaii are among the highest in the nation.
"No one likes to see an anchor decide not to come, however, with the market as strong as it is and our ability to replace them with another strong national anchor it didn't hurt the center," said Larry Caster, principal of Bilarjo LLC, developer of Maui's Lahaina Gateway. He declined to disclose the name of the new anchor tenant to replace Cost Plus, but expects to have a signed lease agreement soon.
