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AVALON GROUP in the Media

December 23, 2005

New warehouses will help relieve Oahu shortages


Honolulu remains short of warehouse space, with a vacancy rate of 1.8 percent, but construction should bring new inventory into the market next year.


More than 900,000 square feet of new industrial developments should be added to the market in 2006, according to the year-end Industrial Market Report by Colliers Monroe Friedlander. But that's still not enough to meet the level of demand.


"It can be anticipated that rents for markets outside the urban core will continue to rise," said Colliers research director Mike Hamasu. "The tight market conditions will continue at a sub-2 percent vacancy rate and tenants will continue to be hard-pressed to find space."


With land prices outpacing the growth of rental rates, developers are building two-thirds of the new inventory as speculative industrial condominiums. Among the projects:


         Kapolei Industrial LLC is building Kapolei Industrial Court, offering a 45,000-square-foot warehouse condominium on 2.2 acres.


         Low & Archibald Real Estate Group, a Southern California company, is building Kapolei Spectrum Business Park, an industrial complex on 18 acres. Phase I and II should bring in about 320,000 square feet of industrial condominium space.


         Avalon Development Co. is building about 200,000 square feet of space with its Sugar Mill Glen Center project on 15 acres at Mill Town.


Typical sales prices for the condos range from $225 to $285 per square foot, and will offer units ranging from 2,000 to 25,000 square feet. Another 275,000 square feet of space is expected to enter the market, as users purchase land to build their own projects.


Rents steady

The average asking base rent, meanwhile, remains steady at 99 cents per square foot per month, according to Colliers, 3 cents higher than the previous year.


At midyear 2005, average asking rents had breached the $1 mark, the highest in 20 years.

Hamasu said rents will probably remain steady and increase in outlying areas until a significant amount of new industrial construction comes into the market.


"As long as we have shortages, we will continue at this level," he said.


The vacancy rate will most likely remain somewhere between 1.7 percent and 2 percent until the end of next year, according to Colliers.


Demand for industrial space, meanwhile, continues to go up as retail and hospitality businesses expand, coupled with an active housing market.


Some 100 tenants currently housed in low-priced industrial space near Honolulu Harbor may also be displaced as the state moves forward with plans to redevelop the old Kapalama military warehouses.

The highest base rents were recorded in Kaneohe, at $1.31 per square foot per month, and Bougainville and Halawa, at $1.19 per square foot per month.


Lowest base rents were recorded at Campbell Industrial Park, where the average rate was 82 cents per square foot per month, and Iwilei, at 87 cents per square foot per month.


Pacific Business News - December 23, 2005


2006 American City Business Journals, Inc. and its licensors.  All rights reserved.




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