Honolulu, Hawaii/USA

The dollar volume for commercial real estate investment in Hawaii for the first six months of 2009 dropped by nearly half from the first half of 2008, according to a new report.

There were 57 transactions valued at $1 million or more that closed between Jan. 1 and June 30, for a total of $302 million, according to the mid-year investment report from Colliers Monroe Friedlander.

That was down 44 percent from $536 million during the same period last year, and down a staggering 88 percent from the market’s peak during the first half of 2006, when the sales volume reached $2.5 billion.

And the commercial real estate market is not likely to improve before 2012, according to the report’s forecast.

The reason for the market’s decline is a combination of two things — rents and property values — said Mike Hamasu, Colliers’ consulting and research director and author of the report.

“It’s the slowing economy, which is impacting rents, and when rents start to sag it impacts the value of the property,” he said.

Also, financing has become more difficult since the financial markets collapsed last year. The consolidation of investment banks and other lending sources has severely limited financing capacity for commercial real estate, the report said.

Beyond that, there’s a lack of financing in general, Hamasu said.

“Even if you wanted to develop something, you couldn’t get the money in the future,” he said.

Of the transactions that did close during the first six months of the year, the average transaction size was $5.3 million.

Industrial properties recorded the most sales during the first half of the year, as 21 properties changed hands for a total of $115.9 million, or an average price of $5.5 million. Retail properties saw 15 sales for a total volume of $64.5 million.

There were four sales in the hotel category, but that included one multifamily apartment building on hotel-zoned land and two golf courses.

The largest sale occurred in March, when Kapalua Golf Course on Maui was sold to Ty Management Corp. for $49.8 million.

In May, the former Weyerhaueser building on Nimitz Highway was sold for $20 million to Ba-Le Restaurants and Island Flooring Co., which both plan to occupy the former box plant.

Four other transactions were more than $10 million. Everything else was less than that.

“You don’t see too many transactions over $10 million in this market,” Hamasu said.

The report noted that commercial real estate tends to lag other sectors of the economy. That means that it is unlikely to improve before other factors — such as the stock market, residential home sales, retail sales, manufacturing and jobs — start seeing growth.

However, investors with cash may see opportunities to pick up heavily discounted properties in the near term, as some holders of about $1 trillion in loans backed by commercial mortgage-backed securities are unable to refinance and face defaults and foreclosures.

About Colliers International

Colliers International is a global affiliation of independently owned commercial real estate firms. The organization's 12,700 employees span the world in 294 offices in 61 countries. On a worldwide basis, Colliers manages 1.1 billion square feet, and has revenue of $US 1.6 billion.

Contact Information

For further information please contact Andrew D. Friedlander at 808.523.9797 or via email at andrew@colliershawaii.com or Mike Y. Hamasu at 808.523.9792 or via email at mike@colliershawaii.com.

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