LIHU‘E — Negative trends in the state’s industrial real estate market have persisted 10 of the last 12 quarters, states a CB Richard Ellis’ fourth-quarter 2011 “Market View” report for Hawai‘i. The “new normal” for Hawai‘i leasing, says CBRE, may
LIHU‘E — Negative trends in the state’s industrial real estate market have persisted 10 of the last 12 quarters, states a CB Richard Ellis’ fourth-quarter 2011 “Market View” report for Hawai‘i.
The “new normal” for Hawai‘i leasing, says CBRE, may be the ongoing trend of landlords asking higher rental rates in a market with high vacancy levels and tenants with an abundance of alternatives, thereby creating a flattening in the industrial market in 2012.
“Landlords can be expected to exert every effort to retain existing tenants,” while tenants evaluate alternatives and “take advantage of the ‘space available’ market,” the report states.
CBRE says the continuing expansion of Hawai‘i retail property development and growing consumer optimism have yet to impact the industrial market, which means large tenants will still be looking to reduce overhead in the coming year. Without significant job creation and only a few major construction projects in the works, this trend is expected to continue through 2012.
Current asking rent is even with the average cost of occupancy in mid-2005, says CBRE.
The statewide Q4 weighted average for asking base lease rates is 95 cents per square foot, down from the Q4 2010 average of $1.01 and a high of $1.28 in Q1 2008. On Kaua‘i, the average is 74 cents per sq. ft., the cheapest among the islands, a CBRE chart shows, and down from approximately 85 cents last year. Average base asking rents are 92 cents on the Big Island, 94 cents on O‘ahu and $1.08 on Mauai.
Statewide Q4 industrial vacancy levels are holding steady at 4.8 percent and Kaua‘i is recording 3.1 percent. Big Island vacancy levels are 1.6 percent, Maui 2 percent in Maui and 6.7 percent in O‘ahu.
State transaction activity and total volume “is still very low,” says CBRE, but the average dollars per square foot has begun to increase.
Industrial real estate experienced negative absorption in the fourth quarter of 2011 but was “markedly less severe” than previous quarters with only a slight increase in vacant space of 2,000 square feet.
“This may be a sign we have reached the bottom of the recession and that healthy market fundamentals may return in 2012,” the report states. “This optimism is not shared by all,” the report adds.
Nationwide, modest economic growth continued to spur demand for industrial space in Q4, according to CBRE. Fort Worth, Miami, St. Louis, Chicago, Detroit and Dallas are showing signs of improvement in availability, while Oakland, Philadelphia, Cincinnati and Seattle markets are reporting notable weakness.
