Many investors are asking us today if we expect the economy to worsen in Hawaii. With a number of major indicators still soft in many mainland US cities, Hawaii’s economy, in particular the island of Oahu, is holding up well. I believe that in the office building marketplace, we are still bouncing along the bottom and there may be a small amount of additional office vacancy still to come. Most of the major structural changes in the Hawaiian economy have occurred and are playing their way through individuals, businesses, and enterprises. So, with the vacancy rate increasing a little bit through the end of 2010 and the first few months of 2011, we see light at the end of the tunnel. We expect in 2011 to again start seeing small amounts of job growth and increases in occupancy.
The office building investment markets are still showing strength, with the recent announcement of the Bishop Square office complex going under contract, reportedly to be sold to Douglas Emmett at a significant price, upholding values. In our own experience in selling office buildings in Hawaii, we are still seeing a number of investors looking at replacement costs, looking at alternative investments like the stock market, and then making strong offers on properties even during this dip in the marketplace. So, though the market for office building buyers is not as deep as it once was, there is still a small percentage of investors, families, and partnerships that see the long-term value in owning this type of stable commercial real estate in Hawaii