Wailuku, Hawaii/USA

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.

About Colliers International

Colliers International is a global affiliation of independently owned commercial real estate firms. The organization's 10,092 employees span the world in 267 offices in 57 countries. On a worldwide basis, Colliers manages 672,945,918 square feet, and has revenue of $US 1,620,958,349.

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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