Commercial
office vacancy rates on Maui have doubled over the previous year, according to
a study by Colliers Monroe Friedlander Inc. the report says retailers are
anxious about their futures, because higher airline ticket prices and other
factors are likely to slow growth in shopping by visitors.
reprinted courtesy Maui News 6/20/08
Commercial
office vacancy rates on Maui have doubled over the previous year, according to
a study by Colliers Monroe Friedlander Inc.
A net 35,000 square feet of commercial office space has been vacated.
In a different category, retail space leased out grew by 74,449 square feet but
was offset by a significant increase in retail space.
However, the report says retailers are anxious about their futures, because
higher airline ticket prices and other factors are likely to slow growth in
shopping by visitors.
While negative, the situation is as yet comparatively mild. Office vacancy
rates jumped to 10.65 percent.
“This bounce in the vacancy trend line follows five solid years of positive
absorption,” says the Office Report Maui.
“It is only a vague memory that vacancy rates in the late 1990s exceeded 20
percent.”
Asking rents have declined by only pennies, to $2.04 per square foot per month,
which means that they are still far higher than they were in 2000. They had
risen by 59 percent in six years before leveling off and then dropping 2 cents
over the past year.
Kahului vacancies remain low, only 2.48 percent, and average asking rents have
risen 31 cents a square foot to $2.38. That makes Kahului slightly more
expensive than Kihei, a reversal of past rates.
Kihei showed the biggest retreat, with vacancies tripling to 15.7 percent and
asking rents plunging from $2.68 last year to $2.20.
Wailuku is much cheaper — $1.68 asked — and accounted for about half the
“negative absorption,” or loss of tenants. Its vacancy rate doubled to 12.7
percent.
Marty Kenney, senior manager of leasing and brokerage on Maui for Colliers
Monroe Friedlander, says some condominium commercial units that sold in 2006-07
are now up for resale and two proposed projects are on hold.
“Proposed projects are being shelved throughout Maui,” he wrote in an
introduction to the report.
A year ago, there was 400,000 square feet of projects being talked about. Now
it looks as if no more than about 50,000 square feet of new construction is
likely to be finished through next year.
The Retail Report is, so far, not quite as bad. Vacancies have risen around 50
percent over the past year to 6.3 percent. But “there is a noticeable change in
the real estate development environment.”
Just a year ago, developers were dreaming of 2 million square feet of new
retail space. “Many of these projects have either been delayed or put on hold
indefinitely.”
Lahaina Gateway, a 137,000-square-foot lifestyle center, is filling up this
year, but no other large expansion is in prospect until Kahului Town Center,
which is expected in 2010.
With tourism numbers expected to decline and discretionary money being
diverted, directly or indirectly, into purchases of petroleum, shoppers, local
and visitors, are likely to spend less.
Also, as the residential real estate market cools off, the “wealth factor” erodes,
and consumer spending based on home equity borrowing declines.
In 2007, Maui retailers sold nearly $2 billion worth of goods, a record. But in
January and February, sales dropped 13.2 percent over the year-ago period. “If
this trend continues, retailers will be agonizing over 2008 business plans.”
Nevertheless, employers are still looking for help. Retail jobs are the biggest
single job category on Maui, accounting for nearly 20,000 positions.
Average asking retail rents per foot range from $3.60 to $5.14 (not including
operating expenses), but Kenney says that for the first time in four years,
landlords are offering incentives to get existing tenants to expand or new
tenants to come in.
• Harry Eagar can be reached at heagar@mauinews.com
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reprinted courtesy Maui News 6/20/08
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