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The Honolulu Advertiser
Posted on: Saturday, July 5, 2003

O'ahu warehouse space tight

By Andrew Gomes
Advertiser Staff Writer

O'ahu businesses looking for warehouse space are facing increasing challenges, as rents have spiked and inventory has fallen recently to a low not seen in more than a decade.

The island's tight industrial real estate market likely will continue its contraction, with rising rents and little new warehouse construction planned, according to a report by local real estate firm Colliers Monroe Friedlander.

The weighted average asking base rent per square foot rose 19.4 percent, from 67 cents at the end of last year, to 80 cents at the end of June, according to the report, which gives more weight to bigger spaces that rent for less than smaller spaces.

Colliers said businesses expanded their use of industrial property on O'ahu by 271,819 square feet in the past six months, sending the vacancy rate down to 2.6 percent, which Colliers predicts will drop to 1.9 percent by the end of the year as another 150,000 square feet of space is occupied.

"O'ahu's industrial tenants are facing a severe shortage," Colliers said in the report. "Prospective tenants will continue to be hard-pressed to find available industrial space for their needs."

Mark Ambard, a longtime local industrial real estate broker, said there is an overabundance of obsolete and poorly located inventory, and that the greatest need for many businesses is for well-located spaces under 3,000 square feet.

"Finding warehouse space under 1,500 square feet in greater Honolulu — it's almost like finding a unicorn," he said. "It's that rare."

The market tightening is primarily being driven by the boom in construction, led by home building, according to Colliers. Other primary industrial users include food processors and distribution companies.

In the past two years, the number of industrial properties for lease on O'ahu has dropped 25 percent, according to Colliers. The weighted average asking base rent, at 80 cents per square foot, was the highest since 1997, according to the report.

Industrial property vacancies at the end of June ranged from zero in Kailua and Kapalama Military Reserve, to 4.5 percent at Gentry Business Park and 5.76 percent in Iwilei, the report said.

Weighted average rent prices per square foot ranged from 54 cents at Campbell Industrial Park and Kapolei Business Park, to $1 in the Kalihi and Sand Island areas.

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.