Bullish retailers fuel new building
Commercial developers are bullish on Maui, adding more than 173,000 square feet of retail space in the past year at three major Central Maui developments and increasing occupied retail space by 92,674 square feet compared to 2013, according to a Colliers International retail market report.
The Maui Lani Shopping Center, Kehalani Village Center and Maui Lani Village Center have generated a “significant amount of retail expansion” and secured anchor tenants such as Safeway at Maui Lani Shopping Center, Foodland and Longs Drugs at Kehalani Village Center, and Marmac Ace Hardware and Walgreens in the Maui Lani Village Center, the midyear report released Tuesday said.
“Much of this growth is being fueled by retailers that are bullish on Maui’s retail environment and are willing to develop new store locations,” the report said.
Despite the growth, vacancy rates rose to 10.03 percent, up from 8.35 percent at this time in 2013. The report cited the mostly unleased space at the Maui Lani Village Center for the increase in vacancies.
“Overall, the report reflects a positive message in the market,” Charles J. Buckingham, vice president of Colliers International, told The Maui News on Tuesday. “You have new product coming to the market and new opportunities for the community in terms of shopping and retail.”
He added that “good properties are seeing appreciation in rental rates.” Average asking rents posted a 6.8 percent increase over 2013 levels and are anticipated to continue to grow at a marginal 3 to 5 percent range for the next year, the report said.
“It’s a sign of a strengthening market, another barometer of what is happening in our economy,” Buckingham said of the rental rates, comparing them to rising hotel room rates in the strong Maui tourism market.
The report cited the visitor industry as a key component in the growing Maui market. Other signs of a strengthening economy are declines in unemployment and rising single-family median home prices.
Construction and sales data were mixed.
In the construction sector, residential projects declined and commercial projects grew, but year-end construction permit volume declined by 11.4 percent to $325 million in 2013 from $366.7 million in 2012, the report said. Permits for residential projects declined by 13 percent, while commercial project permits rose 46 percent.
The report predicts continued “subdued” residential construction, which is hampered by affordable housing requirements and water access issues. Commercial construction activity has increased with master planned communities Maui Lani and Kehalani building retail centers to serve their residents.
Sales activity declined in 2013 compared to 2012, down $80 million and 4 percent, the report said. From 2009 to 2012, retail sales volume grew 6.5 percent to nearly $2 billion at the end of 2012.
“While Maui’s economy has recovered from the recession, the projected slowdown in air passenger arrivals coupled with a muted construction sector is likely to dampen sales growth for retailers,” the news release said.
Retail vacancy rates are projected to decline as newly built space gets absorbed. By year-end 2015, Colliers anticipates vacancy rates to fall to 8 to 8.5 percent, “nearing the market equilibrium point where landlords and tenants have equal negotiating power.”
“With Maui’s recent economic growth and increased interest by new retailers, 2014 and 2015 will see increased occupancy in Maui’s retail sector,” said Buckingham.
He lauded The Outlets of Maui in Lahaina at the old Lahaina Center site, which opened in November. The 10-building, 147,000-square-foot center on 12 acres in Lahaina town includes tenants such as Brooks Brothers, Calvin Klein, Coach, Tommy Hilfiger, Adidas, Guess and Gap.
Buckingham said that reinventing the Lahaina Center with a new and better concept and attracting new tenants to Maui is positive.
“You’re reusing an older, not performing well, center and turning it around to a great project,” he said.
Expansion of retail commercial space will continue in the future years with the additions of Target, which is slated for completion in March 2015 in the Puunene Shopping Center and will add 275,000 square feet of retail space, and T.J. Maxx and another retail building at the Maui Mall, which is expected to add nearly 32,000 square feet of retail space.
“You’ll see continued growth, ongoing and in the pipeline,” he said.
* Lee Imada can be reached at email@example.com.