Market Reports

Tag Archives: Hawaii Economy

Safeway and the drug stores continue aggressive purchase of property

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walgreens

Last week, Walgreens closed on the purchase of the existing Safeway store in the heart of Honolulu.  This is subsequent to Safeway purchasing a larger site two blocks away within the past 60 days.  Walgreens elected to partner with Etco[?] on the site and will sublease part of the site to them.
As outlined at the beginning of the year, the top half dozen retailers in the state of Hawaii are becoming the biggest buyers of real estate and the most active developers of sites within the state.  With a success record and sales topping their list of stores throughout the country, Hawaii is a very attractive market to these retailers.

Last week, Walgreens closed on the purchase of the existing Safeway store in the heart of Honolulu.  This is subsequent to Safeway purchasing a larger site two blocks away within the past 60 days.  Walgreens elected to partner with Petco on the site and will sublease part of the site to them.

As outlined at the beginning of the year, the top half dozen retailers in the state of Hawaii are becoming the biggest buyers of real estate and the most active developers of sites within the state.

With a success record and sales topping their list of stores throughout the country, Hawaii is a very attractive market to these retailers.

Click on the link below to view the original article in the Star Advertiser:

Walgreen buys Safeway land

Apartment Buildings in Hawaii 2010

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The apartment building market is very slowly picking up momentum.  Halfway through the year, there were three properties on Oahu that sold.  This is about double the pace of last year.  These mixed-unit projects from 8-16 units have been selling in a range from $156,000/unit up to $194,000/unit, depending on location, current rents, and amenities.

Activity is being driven by investor confidence that rents have leveled off and will not be dropping in the future.

Currently, there are 24 apartment buildings available for sale on Oahu.  Of these 24 properties, 14 of them have been on the market for over 1 year.

Where are we in the Hawaii Commercial Real Estate investment cycle?

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Many seasoned investors know that the commercial real estate market is difficult.  We did almost forget that over the last extended period of prosperity.  If you think of the cycle as either a side wave with crests and valleys or as a clock, peaking at noon and hitting the bottom at 6 p.m., you are likely to do well with your investments in commercial real estate.  Key to making money over the past five cycles has been to predict the upswing.  It doesn’t need to be an exact science.  One of our clients says that anywhere in the bottom third of the cycle is a good time to invest.  That same client also stops investing when they believe we are in the top third of the cycle.  Many clients today feel that some of the best buys that we’ve seen in the bottom of the cycle may be defined as a period during 2009.  If you remember back to the uncertainty in the market and how people were holding onto cash, you will note that the few that spent equity dollars actually received very strong returns.  I believe we are still in the bottom third of the cycle, but probably on the way up.
If you are looking to invest in Hawaii commercial real estate, pick the time when you believe we are 12 to 24 months from a strong market, meaning increase in occupancies and strong capital availability, and invest at that point in time on the upswing.

Many seasoned investors know that the commercial real estate market is cyclical.  Although, we almost forgot this fact over the last extended period of prosperity.

If you think of the real estate cycle as either a side wave with crests and valleys, or as a clock, peaking at noon and hitting the bottom at 6 p.m., you are likely to do well with your investments in commercial real estate.

They key to making money over the past five cycles has been to predict the upswing.  It doesn’t need to be an exact science.  One of our clients says that anywhere in the bottom third of the cycle is a good time to invest.  That same client also stops investing when they believe we are in the top third of the cycle.

Many clients today feel that some of the best buys that we’ve seen in the bottom of the cycle may be defined as a period during 2009.  If you remember back to the uncertainty in the market, and how people were holding onto cash, you will note that the few that spent equity dollars actually received very strong returns.  I believe we are still in the bottom third of the cycle, but probably on the way up.

If you are looking to invest in Hawaii commercial real estate, pick the time when you believe we are 12 to 24 months from a strong market, meaning increase in occupancies and strong capital availability, and invest at that point in time on the upswing.

Commercial real estate financing in Hawaii – take a look at your property

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Recently, we’ve been assisting clients with refinancing their Hawaii investment properties.  As lenders are getting tougher on their underwriting criteria, they’re also getting tougher on property conditions.  If you are contemplating refinancing or selling your property, you should take a good, hard look at and around the property, just as a buyer, appraiser or an inspector would do.

Recently, we had a situation where a lender sent a team out from the mainland.  After offering a term sheet on the property, the lender rescinded the offer to loan because of deferred maintenance on the property.

The elements are very tough on our properties here.  We need to constantly maintain them, but probably take an even tougher look at the properties and their conditions at sale or financing times, so they can present in the best possible light.

Commercial real estate sales in Hawaii up 256% in April 2010

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The market is showing signs of a very distinctive pick-up in activity in the spring of 2010.
In the first quarter of 2010, there were 17 sales of commercial and investment properties in the State of Hawaii.  In the month of April 2010, there were 15 recorded sales.  In addition, the volume of sales seems to be picking up, topped off by a $32MM sale in April of this year.
We are seeing investor sentiments improving toward commercial real estate, particularly, when measured against reproduction costs.  Investors for this one month are voting with their checkbooks that commercial real estate in Hawaii is a good investment and not as susceptible to the ups and downs of other equity markets across the globe.
Mark D. Bratton
Vice President
Colliers International
220 S. King Street 18th Floor
Honolulu HI 96813
Tel 808.523.9708
email mark@colliershawaii.com
www.markbratton.com
www.colliershawaii.com

The market is showing signs of a very distinctive pick-up in activity in the spring of 2010.

In the first quarter of 2010, there were 17 sales of commercial and investment properties in the State of Hawaii.  In the month of April 2010, there were 15 recorded sales.  In addition, the dollar volume of sales seems to be picking up, topped off by a $32MM sale in April of this year.

We are seeing investor sentiments improving toward commercial real estate, particularly, when measured against reproduction costs.  Investors for this one month are voting with their checkbooks that commercial real estate in Hawaii is a good investment and not as susceptible to the ups and downs of other equity markets across the globe.

There are several “Call for Offers” this week so we expect to see continued interest in good quality Hawaii Investment Properties.

Commercial Real Estate Loans in Hawaii with 75% to 80% loan to values

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Recently, we have seen the beginning signs of a more rational market in the commercial real estate industry.  In the past four weeks, we have seen loan-to-value ratios and debt coverage ratios return to a more fair and balanced level.  While these loans are available for better income-producing properties, at this point in the cycle, it signals to us a return to a more level playing field and a point in the cycle which we may see increased transactions activity.

Specifically, we are seeing loans done on improved property with strong income in place with loans at value ratios of 75% and debt coverage ratios back down to 1.25% on the mainland US.  With reports of these deals now starting to close and coming in for the past few weeks, we are looking for signs of similar availability with our local banks.

At this point in time, we are aware through our relationships of loans what will be offered for Hawaii properties.  Last week, I even received a quote of up to 80% loan-to-value ratio.  This will make a major difference in the numbers of potential buyers in the market place.

With lenders obtaining 25% equity investment before their debt investment, this seems like a safe bet for these lenders. Todays overall values are under written to tighter guidlines and will protect lenders adequately.

Hawaii Real Estate Forecast – Part 2

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In January, I presented a 2009 summary and 2010 forecast presentation on the Hawaii Retail Market for CCIM.  This video is the second of three parts of the presentation (the powerpoint slides used in the presentation are available or download here).

This video focuses on Shopping center vacancy, new tenants and sales ideas. Outlined below are the main points of the video:

Recent Vacancies:
For Circuit City, most of their vacated space has not been released. About two-thirds of their stores are still vacant, which means there are 45,000 SF concrete boxes that are sitting vacant.

For Hawaii, we’re keeping our eye on Blockbuster, as they occupy approximately 120,000 SF  here.  Should they decide to  pull out of the market, we’d be losing 20+ stores at about 5,000 SF a piece, many located in shopping centers.

Expanding Retailers:
Slides 11 and 12 list Tenants who have opened in 2009, spent money, made the investment, and took the risk. These are very few and far between.

Ideas for Landlords:
The key is to create momentum, and increase advertising. Hire merchandising consultants because most Tenants are not capable of producing great storefronts.  They could gain a lot from a professional consultant. Twitter campaigns are working for impulse daily specials, such as a restaurant tweeting a daily special.

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