Today at the Hawaii Convention Center, I presented our thoughts on the retail marketplace to 750 clients, colleagues and managers of real estate properties. At the end of my presentation, I received several questions all similar to “Do you expect vacancies to continue to increase due to potential State furloughs and economic stagnation?” In preparing for the presentation we discovered that overall sales of consumer goods are back on a positive trend starting in Q4 of 2009. We believe that the consumer wants to spend money wherever possible.
How This Recession is Different
This great recession is not like others that we have experienced here in Hawaii. In past recessions, we have been hit with a decline in consumer sales and a surplus of available shopping center and retail properties. At the end of 2009, the vacancy rate for retail properties in Hawaii was at 3.47% which is probably the lowest vacancy rate of any major city in the United States. There are virtually no new developments under construction that will be delivered, ready for occupancy and leasing in the year 2010. A few projects are planned to start construction in the beginning of 2011/2012 with other projects being scrapped all together.
The Worst is Over
With no new threat of supply, we believe many retailers have hung on throughout the worst part of the down cycle by using their savings, credit lines where applicable, and hoping for a better tomorrow. With an up-tick in sales, and a projected increase in sales 2010 over 2009, many of these retailers will be back to profitability during 2010 and 2011. Due to the lack of supply of available space, we believe that we will actually miss any decline in rents in retail and shopping center properties here in the State of Hawaii.