Signs indicate the commercial real estate market is beginning to get healthier, according to some Big Island real estate agents and brokers. They say 2013 is shaping up to be a better year.
“The leasing market has already improved in the last 18 months. However, there’s still caution in the air about starting anything new or signing any long-term leases,” said Glennon Gingo, Hawaii & Pacific Commercial Properties broker and owner. “Most of the focus I’ve had and most of the interest I’ve had in the market is to renew short-term leases, and anybody entering the market is looking to sign two- or three-year leases.”
Gingo said he receives daily calls from interested business owners inquiring about leases or clamoring for best locations. Last year, he typically secured one to two new leases a month, and most people were asking for one-year, even six-month renewals, because they were uncertain about the future. Now he’s averaging about three or four new leases.
“It’s been a lot better than it has been in the past 12 to 18 months. Overall, the climate is much more positive, especially with the renewed interest,” he said. “I believe 2013 will be much better if the economics will stabilize and the government will send out good news rather than caution flags for the 2013 outlook.”
Rents in Kona have remained relatively flat. On average, the leasing base rents are $1 a square foot or slightly above for industrial space and approximately $1.45 a square foot for hybrid retail space, depending upon the location and the quality of the properties, Gingo said.
It’s still a tenants’ market in some sectors, and those looking for new office space are benefiting, Gingo said. The large blocks of office space now available are the result of companies downsizing and their cost-cutting efforts during the depths of the recession. He estimated the total vacancy rate is 30 to 35 percent for the office market while the vacancy rates are 10 to 22 percent for industrial and 5 to 10 percent for retail.
In order to avoid potential vacancy or eager to fill empty spaces, landlords are still giving moving-in and leasing incentives to tenants. For example, it’s not uncommon for there to be a free rent bonus for those who make tenant improvements themselves, Gingo said.
From his perspective, there haven’t been a lot of commercial property sales and the few sales made were “nothing significant.”
Based on the cycles he’s witnessed over the past six or seven years, Big Island Land Co. real estate agent Jared Gates also thinks commercial real estate is recovering and looking up in 2013. He attributed the positive movement to investors, including international cash-based buyers, no longer standing on the sidelines and the overall lower inventory of properties. He also mentioned the success of Hilo’s newest shopping center, Manono Street Marketplace.
Gates said sales have been going well in Hilo, Mountain View and Hamakua, some of which have been larger acreage properties. For instance, he listed a 25 acre parcel, and a contract was signed in three days.