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WESTERN SNAPSHOT, DECEMBER 2004
Honolulu Office Market
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Hamasu
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Honolulu’s office market activity is more about deal
making than groundbreaking, according to Mike Hamasu, consulting
and research director for Colliers Monroe Friedlander in Hawaii’s
capital city. “Currently, office development is not financially
feasible [in this market],” he says. “Office rents
would have to increase from roughly $2.35 gross per square
foot per month to between $3.50 and $4 gross per square foot.”
However, there is a “tremendous” amount of investment
activity in high-rise office buildings in Honolulu. “Over
the course of the past 18 months, more than 12 major properties
have traded hands for a total of nearly $500 million,”
says Hamasu. This includes Harbor Court, bought by Douglas
Emmett for $27 million; Waterfront Plaza, acquired by The
Shidler Group; 677 Ala Moana Boulevard; 1221 Kapiolani Boulevard;
1132 Bishop (in escrow); and the Pan-Am Building and Davies
Pacific Center, which were purchased by Shidler for a combined
$90 million at the end of 2003. Hamasu forecasts that new
ownership of a significant portion of the market will likely
drive an increase in asking rents. Landlord concessions are
still being offered but are on the decline.
Honolulu’s job growth is forecasted at a healthy 2 to
3 percent clip during the next few years. “Office jobs
will likely benefit from healthy federal government spending,
a jump in construction activity, a rebounding tourism sector
and a strengthening economy,” says Hamasu, noting that
suburban high-rise office vacancy rates have dipped below
10 percent. As of third quarter, Honolulu’s office vacancy
stood at 14.63 percent for Class A product. Class A rental
rates in the market range from $1.20 to $2.50 per square foot
per month.
Hamasu says that the Leeward Oahu submarket is one to keep
an eye on due to the shortage of office space there, which
should result in a spike in rents and possibly new development.
“The Kapiolani corridor continues to post healthy absorption
with vacancy rates falling below 10 percent by year’s
end,” he adds.
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