A local development firm is moving ahead with construction of a 56-lot industrial subdivision in Kapolei for fee-simple sale, at an expected cost of more than $20 million over the next year.

Lokahi Ventures LLC has begun some grading work, and plans to hold a ceremonial groundbreaking and blessing Tuesday for Kapolei Business Park Phase 2A.

The company, led by local resident Paul Lambert, expects to complete the project by the end of next year after investing at least $20 million to develop the 54-acre property with roads, sewers, water, streetlights and landscaping.

Lokahi Ventures has been marketing the lots for sale for about two months, and has nonbinding purchase commitments for 12 lots, according to Scott Mitchell, an agent with local commercial real estate firm Colliers Monroe Friedlander handling project sales.

Mitchell said that despite the financial crisis battering the national and local economies, many companies are looking to improve or expand their business in ways that involve investing money in operations.

However, as Hawai'i's economy has slowed, demand for industrial property has softened as business slows in construction and other industries that need warehouse space.

Colliers recently reported that vacant warehouse space on O'ahu grew by 372,563 square feet — a little more than the equivalent of two Wal-Mart stores — in the first half of this year, as tenants vacated space or new available space was added to the market.

Still, the vacancy rate, which rose from 3 percent at the end of last year to 4 percent at the end of June, remained relatively low. A 6 percent to 8 percent range is considered to be a balance of supply and demand.

"I think the interest is good," Mitchell said of the Kapolei project, adding that nearly all of the tentative land purchases involve companies planning to get out of industrial property leases in urban Honolulu in favor of owning property farther from the urban core.

Asking prices for the lots, which range from about a half acre to 1.8 acres, vary from $42 to $44 a square foot, or roughly $915,000 to $3.4 million.

The project is adjacent to an earlier phase of Kapolei Business Park, which features larger lots occupied by such tenants as Hoku Scientific, Longs Drug Stores, Goodwill Industries of Hawai'i and the Hawai'i Carpenters Union.

Lokahi Ventures bought the 54-acre Phase 2A parcel in 2005 for $22 million, two months after another developer, California-based Jupiter Holdings LLC, purchased the parcel for $10 million from the Campbell Estate (now known as the James Campbell Co.). Lokahi Ventures was formed about eight years ago, and also developed Wailea Beach Villas, a 98-unit luxury vacation condominium project on Maui where units initially went for roughly $1 million to $5 million about five years ago.