Signs of life: More Hawaii commercial real estate deals

Published: Feb. 22, 2013 at 1:14 PM HST
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HONOLULU (HawaiiNewsNow) - Economic recovery is under way in earnest in the Hawaii commercial real estate market. There are a lot more deals, and the price tags are bigger.

The total value of such deals in 2012 was $2.21 billion, up 81 percent from 2011, Colliers Hawaii said Friday. In the last peak year, 2005, transaction value reached $4.3 billion.

There were 182 deals over $1 million in value in 2012, up 34 percent from the previous year. Hotel deals accounted for only about 10 percent of the sales activity. Retail deals made up 42 percent of the total.

"Since the depths of the recession in 2009," the report said, "Hawaii commercial real estate sales volume has more than tripled."

For the first time in six years, all major commercial property types rose - office, retail, industrial, hotel. Investors bought 56 apartment buildings in Hawaii in 2012.

Major deals of 2012 included the sale of Pearlridge Center for $289 million, the move by Ala Moana Center owner General Growth Properties to buy back the Sears lease for $250 million, and several headline deals for less than $100 million including Lahaina Cannery, Lahaina Gateway, First Insurance Center and the former St. Francis Hospital in Ewa.

All of those deals except the hospital sale came before October, but more than half of the annual transaction value came in the fourth quarter, when Colliers marked more than $1.15 billion in investment sales transactions across Hawaii.

While distressed sales - where the seller was financially obliged to sell - made up 45 percent of transaction volume in 2011, in 2012 it accounted for only $100 million.

Colliers thinks the recovery has been driven in part by low interest rates, both because it is cheaper to finance a commercial real estate loan and also because investors are looking for higher returns than they can get from money market funds and the like.

Another factor is the desire to move before Congress changes the tax code, possibly unfavorably, as it seeks to reduce the growth in the federal debt.