About 300,000 square feet of retail space is expected to open on Oahu this year, led by Walmart in Kapolei, the Foodland-anchored Kapolei Village Center, Target and Whole Foods in Kailua and a few tenants at Kaoplei Commons.
And there’s more in the pipeline.
Sources say most of the other major retail projects across the state — at least their first phases — should be finished by 2014-15. “At this point, we are on the upswing, in terms of the confidence that investors and consumers have,” said Kim Scoggins , vice president of Colliers International retail division in Hawaii. He attributes the surge in retail investment mainly to the increase in visitor traffic — the visitor industry had its best year in 2011 since 2007 in terms of arrivals and spending.
Also, retailers want to be in a position to capture the market when major residential projects such as Hoopili in Ewa and Koa Ridge in Central Oahu take shape. “Obviously, the retailers would like to have enough residential in,” Scoggins said. “It’s difficult for them [retailers] to build if there’s no residential around.” West Oahu currently seems to be the best bet for retail centers, according to Mike Hamasu, director of consulting and research at Colliers International Hawaii.
“They [West Oahu retail centers] usually are anchored by a major grocery store,” he said. “It’s a little safer with an anchor tenant in place, and as long as residential growth is projected, retail usually builds out first and that’s what we’re seeing. They’re [retail centers] looking at establishing an employment base and then industrial follows and then office — you don’t see an office building built all out of nowhere.”
Hamasu said the strength of grocery store-anchored shopping centers is in their ability to finance development.“Those are the entities that have the funding,” he said. “They don’t have to borrow the money from capital sources, which have been very difficult to get for others in these tough economic times. An example is a Safeway that has the money to build and they’re their own anchor.”
Ronald Adachi, vice president of business development for NAI ChaneyBrooks, is cautiously optimistic about the retail market in Hawaii. “By all means it’s coming back,” he told PBN. “We’re definitely seeing the Japanese business coming back, and as tourism goes, Hawaii’s retail sector goes as well.” Adachi said the Mainland big-box stores still see Hawaii as a big retail center. “There aren’t many brands that aren’t here,” he said. “So that shows the strength of Hawaii as a retail destination.”
Commercial real estate experts aren’t sure how long the retail boom will last. Scoggins thinks the retail market will plateau in the next two to three years. But that doesn’t mean development will stop — rather, it will move in different directions, such as closer to the city.
“What you’ll see is lots of redevelopments like the Safeway on Beretania,” he said. “Consumers want something different, so you’ll see this infill in town, instead of going out and building something on the West Side or Windward Side. You’ll see additional density in town because that’s where the consumer is.”
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