HONOLULU-In the first quarter of 2013, Honolulu's office market registered its third straight quarter of occupancy growth with gains in five of the 10 sub-markets tracked by our survey. So says a recent report from Hawaii Commercial Real Estate LLC.
According to the firm, the island-wide vacancy rate decreased from 13.3 % to 12.8%, with a range of 5.4% (East Oahu) to 22.6% (Waikiki). Average asking base rents increased by $0.02/sf/mth while operating expenses decreased by $0.02/sf/mth. The resulting Full Service Gross (FSG) rent (base rent plus full service operating expenses) was unchanged at $2.98/sf/month. Hawaii Commercial Real Estate's index of available spaces increased 1.4 % from 657 to 666 spaces across the island.
The company saw increased office demand in the first quarter primarily in the CBD class A office buildings while the rest of the market remained flat, according to the report. Office growth came from tenants who moved from suburban markets to downtown's high rises, including Associa and Lanai Resorts who moved to Pacific Guardian Center, and Bureau Veritas who moved to Davies Pacific Center. KPMG expanded to staff up for an Obama-care related contract.
Looking forward, the firm expects “increased demand from Obama-care related ventures, mortgage and service companies benefitting from the rebound in tourism, construction and housing.”
While the occupancy statistics paint a rosy picture, the firm says that they do not account for about 60,000 square feet of impending downsizing including: Goodsill Anderson Quinn & Stifel and Bays Lung Rose & Holma who are moving from Alii Place to First Hawaiian Center and Topa respectively; Deloitte who is downsizing in place at Bishop Place; and Tetra Tech downsizing at Pacific Guardian Center. “The statistics also hide the fact that tenants continue their relentless drive to lease fewer square feet per person by using more open space, smaller offices, flexible work schedules and telecommuting,” says the firm.
In addition, federal government spending is directly and indirectly responsible for a significant amount of Honolulu's office occupancy, says the firm. “We are concerned about the potential negative impact of sequestration, the loss of Senator Inouye along with the potential negative effects of Congressional spending cuts, especially defense related reductions. Additionally, there is well over 100,000 square feet of federal tenancy in downtown's high rises that eventually will move back to federally owned facilities. These agencies include NOAA, Department of Agriculture, IRS and Immigration.”
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
