It was another sluggish year for part of Oahu’s commercial real estate market where legions of workers toil behind desks in tall buildings.
A new report shows that there wasn’t much change in the amount of vacant office space on the island in 2015, marking a fifth straight year of lackluster movement amid economic growth.
The report by commercial real estate firm Colliers International released for publication Friday said companies hired 4,100 more office workers last year, continuing a trend that has produced 11,450 office jobs over the last six years.
Yet the vacancy rate for office space has been stuck between 12 and 13 percent since 2010 after rising from 7 percent in 2007. Last year the vacancy rate was 12.7 percent, down a little from 13.2 percent.
“It has become apparent that while Oahu’s economy has generated new jobs and boosted state domestic product, the current economic growth has yet to manifest itself in the office market,” Colliers said in the report.
The amount of vacant office space decreased last year by 37,935 square feet, which is roughly the equivalent of four floors in a high-rise office building.
Colliers noted that the improvement was driven by the owner of the Waikiki Trade Center moving to convert the 22-story office tower at 2255 Kuhio Ave. to a hotel-condominium. The planned change led Colliers to remove 93,000 square feet of vacant office space in the building from available inventory on the island.
Last year’s 12.7 percent vacancy rate represented about 1.9 million square feet of empty space out of
14.6 million square feet, compared with 2 million square feet of empty space out of 14.9 million square feet in 2014.
Brandon Bera, vice president of office services for Colliers in Hawaii, said in the report that Oahu’s office market isn’t exhibiting the strong demand seen in the residential real estate market, the growth in retail space and historic low vacancy of industrial property on the island.
“For what seems like a decade, the office sector seems to have been living in the shadow of the retail, industrial, multifamily and residential sectors,” he said. “If you note the feedback from most economists, the office sector remains unchanged as it sits idle in recovery mode.”
Bera, however, also said Oahu’s office market isn’t bad, given that its vacancy rate is equal to the national average.
Colliers said the average monthly base rent sought by landlords rose a bit last year — to $1.67 per square foot from $1.64 per square foot the year before — in part because of competition for higher-priced, more limited office space in East and Leeward Oahu.
In downtown Honolulu, where the vacancy rate last year was 15 percent compared with 14 percent in the prior year, asking rent has been flat, and Colliers said brokers report that landlord concessions were available for tenants wanting more than 10,000 square feet of space.
Colliers said there are
24 spaces over 10,000 square feet available downtown, which is twice as many as there were in 2012. “Competition for large tenants by office landlords remains fierce,” the report said.
For 2016, Colliers said it expects vacancy rates to stabilize and hover near
12 percent.