KAHULUI - Maui Lani Partners is beginning construction of a central commercial-residential district that will be the commercial core of the huge project, The Maui News reported today.

Lots are expected to be ready by September, and Grant Howe of Commercial Properties of Maui, which is sharing the brokerage along with CB Richard Ellis, said 25 percent of the 57 acres is under contract. Despite the overall economic slowdown, he said he expects many of the buyers to begin construction on their properties promptly.

"I think most of these guys would like to begin. They have needs. . . . I don't see too many speculative deals," he said.

Although no purchasers have been identified, Howe said they include a neighborhood hardware store, a drug store, wholesale distribution services and various health care professionals.

Maui Lani Village has its own village mixed-use zoning, and several of the occupants are planning to include a residential component with their commercial facility in order to provide live-work opportunities for themselves or their employees.

Mixed-use villages have been more talked about than built, but developers are turning to the concept from Kapalua to Kahului to Kihei. The argument is that they reduce traffic by having people live close to their jobs; they create 24-hour communities instead of commercial zones that are deserted at night; and they improve affordability of housing by almost eliminating the most expensive single segment of cost, land.

Mixed use has a long history on Maui, in the form of mom-and-pop stores with dwellings above or behind. That is allowed for by the zoning, but it may not work out that way in practice.

Some buyers are contractors or similar businesses that send specialists to Maui for particular jobs. They need a warehouse or baseyard, and some are looking at including housing in order to avoid hotel bills.

Howe said other professionals may choose to live steps from their offices.

The zoning also allows for apartment developments within the district, similar to the way the Fairgrounds was developed in Kahului.

With its individual, flexible zoning drafted as part of the master plan for Maui Lani, buyers can use their lots for light industrial, retail, office or multifamily projects.

"Despite current economic conditions, we believe this project is driving strong interest because it has a number of solid advantages," Howe said.

Among them: a chance to own fee-simple commercial property, a central location that will have 70,000 residents within a 10-mile radius by the time it gets well under way and a wide range of lot sizes.

There will be 79 of them, from 7,500 square feet to almost 7 acres, although the biggest lot has some steep terrain. The largest mostly flat lot is about 5 acres.

Asking prices vary from $50 to $60 per square foot - all utilities in place - or about half a million to $10.2 million. Six of the seven most expensive lots are listed as pending sales, so the cheapest remaining offering is a 62,000-square-foot lot priced at $3.1 million.

Howe said he does not believe economic conditions had much effect on the timing of this project. "It's part of a master plan. Bill Mills has a lot of foresight," he said.

Mills is the publicity-shy developer of Maui Lani, and he has had to be patient. Alexander & Baldwin subdivided the 1,500 acres but was unsuccessful for years in getting it zoned. A&B sold to Mills, who spent a good part of a decade obtaining zoning before he was able to start building.

Maui Lani, which includes a golf course that also serves as the main area for drainage, will just about double the size of Kahului when completed. It will include schools, parks, church lots and other commercial segments, including the one across from Baldwin High School that has attracted medical clinics because of its close proximity to the hospital.

There has been a pent-up demand for certain types of uses, Howe said, and a year ago the complaint of Central Maui businesses was that they had no place to expand.

The pressure to expand has diminished lately, and Howe said it is a tenant's market and will be for some time.

Nevertheless, the purchasers already signing up have been local businesses with their own motivations. "Certain companies are still strong and weathering the storm," said Howe, and Maui Lani Village allows a chance for positioning those businesses to take advantage of a return to lively business conditions.

On the Mainland, small businesses are generally advised to put their capital into their own operations and renting. That advice is not so relevant in Hawaii where ownership of land in fee can help businesses survive at both peaks and troughs of the business cycle, Howe said.

The difficulty is that many small businesses on Maui get by with small offices, frequently as little as 1,000 to 1,500 square feet, he said. Even if a very small lot is available, the pressures of land costs usually mandate maximizing the buildable footprint. That means it is difficult to develop a commercial building smaller than around 5,000 square feet.

That leaves an opportunity for developers to offer smallish buildings to a number of tenants.

For a while, commercial condominium offices were popular. Now the developers are hoping that the mixed-use concept will prove attractive.

"There are lot of benefits, definitely, (from owning your own land) if you are here for the long term," Howe said.

Maui Lani is imposing design guidelines. "We want a quality project," he said.

Goodfellow Brothers has begun constructing the lots and infrastructure and the work should be completed by September.

* Harry Eagar can be reached at heagar@mauinews.com.