Businesses needing warehouse space on Oahu have incredibly slim options, according to a new report that says demand has overwhelmed supply to a record degree.
Commercial real estate firm Colliers International produced the report for publication today. It says the amount of industrial space available for lease on the island dipped to an all-time low of 1.3 percent at the end of June.
The decline in available inventory is in its fifth consecutive year and compares with a roughly 4 percent vacancy in 2011, 2 percent in 2013 and 1.7 percent at the end of last year.
“The industrial market continues to get squeezed tighter and tighter,” the report says.
Colliers says tenants filled 129,093 square feet of available space in the last six months, which represents about 20,000 square feet less than a Costco store in Iwilei or Waipio.
The 1.3 percent vacancy rate equates to 528,024 square feet available out of 39.8 million square feet in the market.
Colliers says much of the available space represents the “bottom of the barrel” — meaning spaces that are functionally obsolete or have maintenance problems.
Demand for warehouse space has been driven by wholesalers stockpiling more inventory for retailers, the booming construction industry and the loss of some major harbor and airport industrial properties owned by the state and taken off the market as well as some conversion of industrial space in urban Honolulu for other uses, the report says.
To illustrate how limited choices are, Colliers says businesses needing a warehouse 4,000 square feet or larger had 34 properties to choose from in the second quarter. That compared with 111 properties six years ago.
“Warehouse tenants struggled to find expansion or relocation space in an exceedingly challenging marketplace,” the report says.
Colliers says the market is expected to remain undersupplied in the near term because high land and construction costs make it financially difficult to develop new warehouse projects for rent.
“There does not appear to be any near-term solutions for the lack of available industrial space,” the report says.
