A Hawaii shopping center sells for 20 million dollars in profit after only 8 years! This article demonstrates that despite the recession that investment properties in Hawaii are still are great place to invest your money. Hawaii shopping centers though range in price prove their worth in long term value. Alexander & Baldwin Inc. has proven this with their real-estate strategy and with the huge profit margin experienced from the Mililani Shopping Center.
Posted in Hawaii Shopping Centers With the release of the Investment Market Report from Colliers Hawaii, both the Honolulu Star Bulletin and the Honolulu Advertiser have posted articles with a brief summary and overview of the Report.
A year of transition: They believe multifamily and retail sectors will recover this year, industrial by the beginning of the next year, office won’t see an improvement until 2011 and it could be as late as 2012 before problems in the hotel sector abate.
Hawaii Hotels: There are currently four Hawaii hotels for sale, and 11 that are distressed or in foreclosure, including the Ilikai, the former W Honolulu Diamond Head, Maui Prince, Fairmont Orchid, ResortQuest Kauai and the Hilton Kauai.
Commercial property sales: Sales have been consistently falling since the market’s peak in 2005, at $4.3 Billion. Last year, it slowed to almost a trickle at $627 million.
To view the full articles, please visit:
Honolulu Advertiser – Commercial property sales fall 20%
Honolulu Star Bulletin – Isle’s real estate is still in distress
If you would like to receive a copy of the various market reports as they become available, please send an email with your contact information here.
In January, I presented a 2009 summary and 2010 forecast presentation on the Hawaii Retail Market for CCIM. This video is the first of three parts of the presentation (the powerpoint slides used in the presentation are available for download here).
Outlined below are the main points of the video:
Retail sales: by watching the gross sales of retailers, you can predict if they’ll be able to pay rent, and how the property as a whole will perform. In 4th quarter 2009, sales began to go up again, and that could be the saving factor for rental rates and occupancy rates in Hawaii.
Retailers expanding and contracting: The biggest surprise is that Luxury retailers, along with best sellers, discount retailers and apparel and department stores, showed an increase in sales. Stores such as Neiman Marcus and Nordstrom had about a 4.5% increase in sales.
Shopping Center statistics: We’ve been seeing a drop in tenant sales that increases as you get further away from the core of Honolulu, and interestingly enough, Landlord revenues have gone up slightly. We’ve also been seeing Landlord expenses go down as owners buckle down to get through the year.
Vacancy Rates: Compared to the West Coast, Hawaii is in good shape, but when we look at the neighbor islands, you see rates jump to as high as 11.53%. It is definitely a Tenant’s market, as we’ve seen rental rates drop from $5 to $2-3 in a short period of time.
2010: Expect a slight increase in vacancy, we’re predicting 4.5%, as well as a 5% increase in sales. Not quite up to 2008 sales yet, but we’re getting close.
The next two videos will go over expanding and contracting retailers, retail investment properties in Hawaii, and proposed projects coming online in the next 10 years.
If you have any questions, or would like further information, please feel free to contact me, or leave a comment.
Today at the Hawaii Convention Center, I presented our thoughts on the retail marketplace to 750 clients, colleagues and managers of real estate properties. At the end of my presentation, I received several questions all similar to “Do you expect vacancies to continue to increase due to potential State furloughs and economic stagnation?” In preparing for the presentation we discovered that overall sales of consumer goods are back on a positive trend starting in Q4 of 2009. We believe that the consumer wants to spend money wherever possible.
How This Recession is Different
This great recession is not like others that we have experienced here in Hawaii. In past recessions, we have been hit with a decline in consumer sales and a surplus of available shopping center and retail properties. At the end of 2009, the vacancy rate for retail properties in Hawaii was at 3.47% which is probably the lowest vacancy rate of any major city in the United States. There are virtually no new developments under construction that will be delivered, ready for occupancy and leasing in the year 2010. A few projects are planned to start construction in the beginning of 2011/2012 with other projects being scrapped all together.
The Worst is Over
With no new threat of supply, we believe many retailers have hung on throughout the worst part of the down cycle by using their savings, credit lines where applicable, and hoping for a better tomorrow. With an up-tick in sales, and a projected increase in sales 2010 over 2009, many of these retailers will be back to profitability during 2010 and 2011. Due to the lack of supply of available space, we believe that we will actually miss any decline in rents in retail and shopping center properties here in the State of Hawaii.
A few weeks ago, I had an opportunity to play golf with the President of an International Hotel chain here in Hawaii. He reminded me that, although times are very tough at the moment in the hotel business, he is excited for the future.
Hotels in Hawaii
The majority of hotels in Hawaii were able to achieve major investments and upgrades over the past five years because of the good economic times. With their physical plant and furniture fixtures and equipment in such good condition, these hoteliers know that they will have quality product to offer for the next 10 years.
Hawaii Hotel Construction
In addition, this hotelier told me that he does not believe we will see a major hotel under construction in the state for the next 10 years, so that leaves their inventory of rooms and real estate a very valuable commodity.
He expects that in 2011 better hotels across the state will be able to start raising rates fairly dramatically because of the quality of their physical products.
While visiting clients in New York City, we noticed the beginning of a trend. Several of the large borrowers have been able to extend the due date deadlines for their Hawaii commercial real estate loans. We noted that the terms for these loans were exceptional, with very low interest rates. The lenders, rather than foreclose or take the Hawaii property back at this point, have agreed to extend the low interest rates in hopes that the situation gets better. Taking back a property in today’s environment is an expensive and time-consuming business. This allows these owners to continue being able to keep their mortgages current and retain the low interest rates that were achieved three and four years ago. In most cases, the properties are still throwing off positive cash flow to the borrowers.
Hawaii Commercial Real Estate Loans
We noted that these borrowers, being in New York City, and being actively involved in the financial markets, seemed to have better access to the different tranches or levels of lenders within each of the loans.
Many Hawaii borrowers have tried to communicate and work with the different tranches of lenders without much success. The larger borrowers in the money city centers seem to be having better results at negotiating first the riskiest pieces of the loans, and then second the main body or first position of the loan to achieve these extensions.
While I was in New York City for a conference, I was able to visit clients and customers to take their temperature on our Hawaii real estate market place. I did get somewhat of a consensus from the major players. The first half of 2009 was spent taking care of their problems. In only one case did that result in a property potentially going back to the lender. Many of the loans on the larger Hawaii properties were renegotiated and extended during the first half of 2009. It was clear that these entities are not going to throw good money after bad. However, with the extension of the loans, they seem to be willing to ride out the storm and plan to get back to similar values in 5-8 years.
Hawaii Commercial Real Estate
Another similar circumstance amongst these owners is that they are ready to dive back in and invest. Several have funds left over from pools that they raised publicly in 2006 and 2007, which have not yet been spent. Others have new money that they have raised targeting “distressed assets”. They are studying the problem assets in Hawaii, primarily hotels, and already deciding amongst themselves which ones are they interested in and which ones they won’t waste their time on. Wall Street still has a strong appetite for Hawaii real estate.
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