Retail vacancies to rise

By Andrew Gomes
Advertiser Staff Writer

Hawai'i's retail industry should expect a rise in retail vacancies as more stores close than open this year, according to a new report released by a local real estate firm.

Colliers Monroe Friedlander projects that 71,137 square feet of empty O'ahu retail space will be added to the market this year as effects of the war in Iraq, fear of sudden acute respiratory syndrome, changes in Japanese visitor spending and weak consumer confidence continue to drag down retail business.

The net increase of vacant retail space on the island is the first in at least three years.

The projected vacancy is largely because of J.C. Penney pulling out of the Hawai'i market in January. Little of the former J.C. Penney space at what were its two biggest stores, in Ala Moana and Pearlridge centers, is expected to be filled by the end of the year.

At Ala Moana, contractors are doing interior demolition work on the former J.C. Penney store, which will also undergo major exterior renovations, and new retailers, none of which have committed to leases yet, aren't expected to open until late next year, according to the center.

At Pearlridge, the owner of the former J.C. Penney space is talking with Linens 'N Things and Cost Plus World Market, a retailer of unique items imported from far-away countries, according to Colliers.

By year end, 7.5 percent of all O'ahu retail space will be vacant, up from about 5.5 percent last year.

There have been some recent bright spots, such as reduced vacancy in Waikiki during the six months ending in March, with a net filling of 5,525 square feet of retail space, Colliers said. West O'ahu filled 106,106 square feet of space during the same period.

But overall, O'ahu still had a net emptying of 246,137 square feet of space during the six-month period, boosting the vacancy rate from 5.3 percent at the end of September, to 9 percent at the end of March, Colliers reported.

The islandwide average rent per square foot fell from $2.61 last year, to $2.36 in the first quarter of this year, Colliers reported.

Mike Hamasu, Colliers research and consulting director, said he didn't expect much of a shopping rebound now that President Bush has declared an end to major military combat in Iraq, because the war's short duration left little time for consumers to generate pent-up demand.