This article will help anyone looking for information pertaining to a commercial real estate and commercial lending in the State of
Hawaii looks like paradise, to be sure, and it is paradise
to the thousands of people who vacation there each year, but residents know
that the high cost of living and often poor employment opportunities make Hawaii
something a little less than paradise. How are commercial real estate
investors faring in the tropical paradise of Hawaii?
The Hawaiian industrial market is so tight that vacancies in Oahu have dropped
to below 2%, and forecasters don't expect the market to loosen up for
the next couple of years. Even the 9.6 million square foot Kalihi-Sand Island
District has a vacancy rate of .75% - three quarters of one per cent.
Over the past few quarters, the market has absorbed more than 100,000 square
feet of industrial space and is crying for more. Rents are at all time highs
and are expected to stay high even though several more large industrial properties
are slated to come online in the near future. Even so, speculative industrial
construction is unlikely because of the high cost of land and construction.
Instead, developers are turning to industrial condos. Average asking rents are
at about $1.14 per square foot, up from about $1.10 this time last year. As
rents have risen, so have operating costs, from about 24 cents per square foot
to 27 cents.
Hawaiian retail and office spaces are just as hot, with vacancies
for retail and office space both at about 4.5% - the lowest they've ever been.
As in the industrial market, the retail and office markets aren't expected to
loosen up any time soon on account of Hawaii's construction labor shortages
and the high cost of land. Currently, construction costs for low-rise commercial
buildings (typical in Hawaii) are running $300 per square foot, not including
land. It takes about 10 years to move land from agricultural to office or retail
uses. To cover the costs, operators would have to ask in excess of $4 per square
foot. Those developers bold enough to take the risk are finding that they are
getting those rents and more.
Hawaii's housing market seems to run countercyclical to that of the rest of
the nation. The market collapsed about a decade ago and slept through the real
estate boom sweeping the continental U.S. Only recently, as the continental
market slowed down, has Hawaii's housing market picked up. The previous Hawaiian
housing boom was driven by Japanese investors and speculators, but the new upswing
seems driven by retiring baby-boomers - refugees from the continent with the
intention of staying in the residences they purchase. The price range for these
boomers seems to be about $500,000 to $2 million, and the purchases are spread
across all the main Hawaiian islands. There is some concern that local Hawaiian's
will be priced out of the housing market, but, as of yet, there are no real
calls for affordable housing developments.