Hawaii's commercial real estate sales are expected to plummet this year to levels similar to the fallout following the collapse of the Japanese market in the mid-1990s.

About $525 million in commercial real estate sales are projected for 2009 - a 33 percent drop from last year, excluding transactions due to defaults, foreclosures or a transfer of financing, according to the latest investment report by Colliers Monroe Friedlander Inc.

The lack of capital in the record-tight credit markets and declining consumer confidence in the economic recession is expected to take its toll on 2009 transaction volume.

“;Vulture funds are circling as defaults and foreclosures rise,”; said Mike Hamasu, Colliers' director of consulting and research.

In the aftermath of Wall Street's implosion, Hawaii's total commercial real estate transaction volume for 2008 plunged 74.1 percent to $788 million from $3 billion in 2007, according to the report.

The number of transactions fell 38 percent to 166 from 264 over the past year, while the average sales price fell to $4.8 million from $11.5 million.

Big property sales of more than $20 million disappeared from the market due to the virtual dry-up in financing from banks and large institutional investors.

Only three hotels were sold last year, compared to 2007 when hotel sales made up more than half of the total sales volume. In addition, shopping center transactions also plunged over the past year to $162 million from $603 million.

On a brighter note, some investors and sellers who took a wait-and-see approach last year have begun to look at buying new properties at a “;cautious pace,”; the report said.

Nonetheless, real estate experts believe the continual decline in property values coupled with a lack of financial and sales volume could lead to catastrophic losses in the commercial marketplace.

“;Without a meaningful program to inject funds into the commercial marketplace, a complete commercial meltdown will be far worse than any subprime crisis,”; said attorney Morris Missry, chairman of real estate with New York-based Wachtel & Masyr LLP.