Rents for office space down 3.5%
by Andrew Gomes
Advertiser Staff Writer
Three years of rising O'ahu office space vacancies finally pushed landlords to lower what they ask for rent on average — the first such decline in seven years, according to a new survey.
Last year, the average asking full-service monthly rent for office space on the island decreased 3.5 percent to $2.74 a square foot, the report by local commercial real estate firm Colliers Monroe Friedlander said.
The reduction came amid a transition away from what for several years had been a landlords' market — a shift that is expected to advance further if there is no job growth and vacancies keep rising this year.
"The lack of job growth will place prospective tenants in a more favorable light among landlords," Colliers said in the report.
The industry generally regards a vacancy rate of 10 percent as the point at which negotiating positions of landlords and tenants are even.
O'ahu's office vacancy rate at the end of last year reached a six-year high of 10.3 percent, up from 8.6 percent at the end of 2008, Colliers said.
The increase resulted from 184,780 square feet of empty space, or the rough equivalent of an 18-story building, being returned to the market. That brought total empty space to 1.6 million square feet out of nearly 15.8 million square feet of inventory.
Vacancy last year still was lower than in 2003, when the rate was 11.8 percent. The peak during the past decade was 13.6 percent in 2002, according to Colliers figures.
Colliers in its report said it expects office space vacancies will head toward 12 percent by 2011 as job growth lags behind any small improvement in Hawai'i's economy forecast this year.
Rival commercial real estate firm CB Richard Ellis has a more optimistic forecast for 2010 to be a flat year for office occupancy.
CB Richard Ellis, which surveys the market differently than Colliers, put the vacancy rate at 10.5 percent at the end of last year, or 11.7 percent including space that tenants are trying to sublease.
"Hopefully, companies begin hiring again (this year)," CB Richard Ellis said in its report.