Report says Maui shopping mall vacancies up in 2014
Overall vacancy rates at shopping centers and malls in Central, South and West Maui were running, on average, at 10.24 percent in 2014, with a loss of tenant occupancy of 5,133 square feet compared to 2013, according to a report released Wednesday by Colliers International Hawaii.
The 2014 vacancy rate is up 1.89 percentage points from last year’s rate of 8.35 percent.
Nevertheless, “we’re cautiously optimistic moving forward. The (year-over-year) numbers don’t reflect the performance of the market,” said Colliers Vice President Charles Buckingham, a commercial real estate broker with expertise in Maui’s market.
Because Maui is such a small commercial real estate market (actually a number of submarkets that may or may not affect each other, depending on circumstances), an addition of vacant square footage from one or two projects “has an immediate impact” on a given area, he said.
The Colliers report says Central Maui “faced some volatility” last year, even though there was 7,057 square feet more space occupied last year than in 2013.
For example, when the Maui Lani Shopping Center opened with 102,500 square feet and its Safeway anchor tenant in September 2013, there remained 43,500 square feet of vacant space well into 2014.
“It had a negative impact on the overall market,” Buckingham said. “If that hadn’t been brought into the market, there would be better performance statistically in the market.”
Also, the Colliers report notes, there was a 20,000-square-foot downsizing of the Old Navy store at the Maui Marketplace in Kahului. The combination of the Old Navy downsizing and vacant space at the Maui Lani Center helped drive up Central Maui’s vacancy rate from 6.25 percent in 2013 to 9.87 percent last year, the report says.
Buckingham said developers of shopping centers normally pre-lease most of a project’s retail space before building, but that didn’t happen with the Maui Lani Center.
Central Maui was not alone in showing signs of instability.
South Maui’s vacancy rate rose from 7.67 percent in 2013 to 9.5 percent last year, the report says.
“Kukui Mall, which recently went into receivership, faced increased hardship with the closure of Consolidated Theaters and the Ocean’s Beach Bar & Grill restaurant, which resulted in an additional 7,000 square feet of available space,” the report said.
The Shops of Wailea reported an additional 9,300 square feet of vacant space, Colliers said.
Of shopping areas surveyed on Maui, West Maui posted the highest vacancy rate, 11.45 percent, although that was lower than the 11.66 percent rate in 2013, Colliers said. In West Maui, 2,366 more square feet of space was occupied last year than the year before.
“Old Lahaina Center reported an increase in vacancy of 10,500 square feet over the past year,” the report says. “The property recently changed leasing brokers with the intent to remedy the issue in vacancy.”
The Colliers report notes that retail property vacancy rates occurred while Maui retail sales, as measured by retail sales taxes collected, showed a 3.4 percent decline from $1.94 billion at 2013 fiscal year-end, compared with $1.88 billion in 2014 fiscal year-end.
“Despite gains in employment and rising real personal incomes, it appears that spending among island residents still remains soft,” the report says.
However, the report points out that both state and University of Hawaii economists have forecast steady improvement for Maui’s economy.
“Several new developments should spur additional occupancy growth with Maui Lani and Kehalani projects moving forward,” the report says. “Projections for visitor arrival counts and healthy hotel room occupancy rates should help to maintain elevated tourism spending throughout 2015.”
Buckingham said the opening of the 141,200-square-foot Target at Puunene Shopping Center will have a positive impact on the amount of occupied retail space in Central Maui this year. The Puunene center is in its pre-leasing phase, which is why construction of other portions of the center hasn’t started yet, he said.
Meanwhile, American Savings is opening a new branch in a new building in Alexander & Baldwin’s Maui Business Park, he said.
The Colliers report says that A&B has been actively marketing its Kahului lots for sale and has already generated a $7.1 million sale of 4.1 acres to Maui County for the relocation of its Central Maui service center. More than 24 acres has been either sold to or reserved by potential buyers, the report says.
At the Maui Mall in Kahului, a new TJ Maxx is under construction, Buckingham pointed out. And there’s a new 5,000-square-foot retail building going up as well.
Last year, A&B Properties sold the mall to W-ADP Maui VII LLC.
Buckingham said there are caveats in analyzing Maui’s commercial property market. For example, there’s a “barrier of entry” to some highly prized properties, like Whalers Village, Lahaina’s Front Street, sections of Paia town and the Shops at Wailea, where there isn’t much available space and therefore not a lot of opportunities to lease space, he said.
“You can’t throw a blanket comment over the market,” he said, explaining that market conditions vary from area to area and even from property to property.
Vacancy rates can be attributed to factors such as an oversupply of inventory, poor-performing properties and a property owner consolidating two properties into a larger one, he said.
The Colliers report also looked at investment sales activity on Maui, saying it continued to “remain strong” in 2014.
It notes the acquisitions of the Wailea Beach Marriott Resort & Spa by Sunstone Hawaii 3.0 LLC, the Maui Lu Hotel by Capbridge Group and the Maui Beach Hotel (along with its Eleair Golf Course in Kihei) by Peter Savio boosted sales volume by more than $400 million in the first 10 months of last year.
“Maui hotels continue to post healthy occupancy rates with rising average daily room rates and revenue per available room,” the report says. “As market conditions continue to strengthen, Maui’s hotel market is drawing serious attention from U.S. and international investors for highly prized Maui resort properties to add to their burgeoning real estate portfolios.”
* Brian Perry can be reached at firstname.lastname@example.org.