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The Honolulu Advertiser
Posted on: Monday, August 12, 2002

Salt Lake businesses suffer after Costco closing

By Dan Nakaso
Advertiser Staff Writer

The parking stalls were empty outside the mom-and-pop Korean restaurant. Inside, the only sound was the chop, chop, chop of a kitchen knife slicing vegetables for customers who might never come back.

Tommy Silva says his business, T&T Tinting Specialists, is among the businesses that have suffered since the Costco store moved from Salt Lake to Iwilei.

Bruce Asato • The Honolulu Advertiser

Mona Nakamura, the owner of Camellia Jr., stood up from her lunch last week and swept her eyes across a room of empty tables.

"It's slow," she said, as if the point still hadn't sunk in. "It is a struggle."

Two months have passed since Costco closed its Salt Lake store after 14 years and moved to a bigger location in Iwilei. Left behind is an economic crater that a half-dozen or so small businesses have fallen into.

For them, the hard times that have been so easy to find in Hawai'i have only gotten worse. And if the shops and businesses that ring the now-vacant Costco location haven't quite turned into a retail ghost town, they're close.

Sales have fallen 50 percent or more at places such as Camellia Jr., where the kim chee fried rice special of the day was going for $5.75. Other businesses, such as One Fas Lube, have gone from 20 employees to 10.

The suffering businesses have formed an unusual bond as survivors.

"Every meal we can, we eat Korean," said Tommy Silva, owner of T & T Tinting Specialists Inc. "We've got to stick together as much as we can. We've had a tough enough time recovering from 9/11 and the general economic condition of our state. Then this."

The departure of an anchor tenant that drew customers from all over O'ahu is "very, very rare for Hawai'i," said Eric Tema, director of real estate for the MacNaughton Group, which owns the former Costco site and is trying to find a new anchor tenant.

Retailers in the 25,000-square-foot range move relatively frequently, Tema said. But in Hawai'i, enormous anchor tenants such as Costco — which took up 130,000 square feet — don't just pick up and move, because there isn't much land left to accommodate them someplace else.

When business was booming at Costco — and it almost always seemed to be — drivers trolled for parking spots in a jammed lot.

These days, parking is the least of John McLaughlin's problems at One Fas Lube.

"Occasionally I still do get some drive-by business, which surprises me," McLaughlin said. "I have to wonder, what are they driving by?"

When Costco was the anchor tenant, customers jockeyed for parking. Finding a spot is no problem today.

Bruce Asato • The Honolulu Advertiser

Two of his technicians sat in the garage bay recently, the only sound the whir of a leaf blower more than 300 yards away.

The nearby Ba-Le Vietnamese sandwich shop let two employees go recently, and said sales had fallen by half. The shop is empty most evenings and the owners are thinking of closing two hours early.

"Back when Costco was here, we'd have at least 100 people or more come through here," said waitress Macy Khounkeo. "Look at this place — sometimes we're lucky if we get 10. At night, no one comes in at all."

Fuel sales are off 12 percent at the nearby Tesoro gas station. Sales at the Blimpie sandwich shop and Baskin-Robbins at Tesoro's convenience store are down 5 percent, said Nathan Hokama, communications manager for Tesoro Hawai'i.

Pet's Discount Warehouse managers declined to be interviewed. But the store has been running ads offering 10 percent discounts every day.

"Costco is gone," the ads read, "but we're still here."

Sleepland USA's division manager, Ron Ishizu, would not say what impact Costco's departure had on sales. He said he's seeing 60 to 75 percent of the former foot traffic, but those who come tend to be in a buying mood.

"When Costco was open, we got a lot of lookers," Ishizu said. "Now we've noticed that the customers are now bona fide buyers. We have a better opportunity to close a sale."

Not every business has felt the change. Next door to One Fas Lube, workers still answer the phone, "Papa John's at Costco." But the pizza place never relied on walk-in customers, said assistant general manager Lea Dominici. Ninety-five percent of its business is home delivery, mostly to Pearl Harbor or Hickam Air Force Base.

"For us, Costco leaving didn't affect us much," Dominici said. "We still call ourselves 'Papa John's at Costco' because that's how people know us."

The one thing that keeps struggling businesses going is hope.

The MacNaughton Group is "in the negotiations stage" with a potential tenant, Tema said. But even if a deal is reached soon, Tema said, a store big enough to take over a 130,000-square-foot operation will need time to get organized.

"I would say it's going to take 16 months," Tema said.

Still, he knows that some of the businesses may not have 16 months to wait. For personal as well as business reasons, he feels pressure to bring in a tenant that would boost business for everyone.

"No question I feel it's my responsibility," he said. "We're also in the same boat as everyone else. It's just as important to us financially to fill that space as it is to everyone else."

For McLaughlin, too, hope involves a mixture of personal and business goals. His father-in-law, Don Fasone Sr. — the "Fas" in One Fas Lube — had big dreams 10 years ago when he set up shop to catch spillover business from Costco.

He planned to open four more stores, one for each of his five children. Instead, Fasone died six months later during heart surgery.

McLaughlin is trying to keep his father-in-law's dream alive.

"We're surviving month to month," he said. "I'm hanging on. I just don't how much longer I can do it."

Reach Dan Nakaso at dnakaso@honoluluadvertiser.com or 525-8085.