The Bratton Team

Commercial real estate investment sales volume passes pre-pandemic levels

By Stephanie Salmons – Reporter, Pacific Business News
September 23, 2022

Commercial real estate investment across the Islands in the first half of 2022 has surpassed pre-pandemic levels, according to a new midyear investment report from Colliers International Hawaii.

By the end of June, Hawaii’s commercial real estate investment market saw $1.43 billion in sales volume and marked the second consecutive year of increased investment activity, the report noted. Additionally, the 182 commercial property sales were just shy of the record 184 transactions tallied at mid-year 2021.

“Nationally, investors seeking a safe haven away from volatile stock and bond markets allocated an increased share of their capital for commercial real estate,” the report stated, noting it is estimated that U.S. commercial real estate investment volume climbed 38% in the first six months of the year, compared to the same time last year.

Investment activity similarly surged in Hawaii during Q1, according to the report, with a sales volume of more than $930 million.

Three “mega deals,” or sales of more than $100 million — The Element for $206 million, Oasis Townhomes for $163.5 million and Hoopili Business Park for $130.1 million — accounted for nearly $500 million of that total, the report stated.

That pace, however, slowed significantly in Q2, which only had approximately $500 million in total sales.

“The lack of mega deal activity, coupled with stiff economic headwinds, contributed to this slow down,” the report read, also noting that inflation and recent interest rate hikes have led to uncertainty with real estate investors.

“Transaction sales volume will slow as real estate investors sit on the sidelines until economic uncertainty resolves itself,” Senior Vice President Mark Bratton said in the report.

Mainland investors acquired $967 million in commercial properties in the Islands in the first two quarters of the year — nearly two-thirds of the $1.43 billion sales volume, the report noted — but Hawaii-based investors bought 144, or 79%, of the properties sold during the same period.

“As a result, Hawaii-based investors paid an average of $3.2 million for their acquisitions versus U.S. Mainland-based investors’ average price of $25.4 million,” the report said.

The report also noted that foreign investment this year dropped the lowest level in a decade as Covid-related travel restrictions, unfavorable exchange rates, global inflation and tightened Chinese monetary policies hindered Asian investment in Hawaii’s commercial properties.

And in terms of popular property types, multifamily investments had the largest share of both dollar volume — $530.1 million — and sales.

According to the report, of the 182 properties sold in the first half of the year, 48 were multifamily properties — 43 of those were purchased by local investors and five by Mainland buyers — while 43 were industrial properties, 34 were retail, 30 were land, 21 were office and six were hotel/golf properties.

“Of the 48 multifamily transactions recorded, only three exceeded $10 million in sales price,” the report stated. “For the local investor, this lower price point provided an easy entry into commercial real estate investing.”

And while land transactions and industrial sales totaled approximately $290 million and $227 million, respectively, the report noted that “underlying pandemic-related challenges” resulted in reduced investment activity for the office and retail sectors.

Office accounted for $180.47 million of the total sales volume while hotel/golf properties accounted for $115 million and retail accounted for $86.23 million.

According to the report, notable transactions of 2022 include:

  • Maui Seaside Hotel, $57 million. Property type: hotel/golf. Buyer: ASAP International Holdings. Seller: Kimi Hotels Inc./Springboard Hospitality.
  • 91-196 Hanua St., $55.27 million. Property type: industrial. Buyer: Malakole Partners LLC. Seller: HICO Industrial LLC.
  • The Element, $206 million. Property type: multifamily. Buyer: Blackstone. Seller: Alakai Development.
  • Oasis Townhomes, $163.5 million. Property type: multifamily. Buyer: Waterton. Seller: DiNapoli Capital Partners.
  • Pacific Park Plaza, $57.6 million. Property type: office. Buyer: STG Group. Seller: Highbrook Investors.
  • Clinical Labs of Hawaii, $50.3 million. Property type: office. Buyer: SRS Real Estate Partners. Seller: Safehold Inc.
  • Hoopili Business Park (45 acres), $130.1 million. Property type: land. Buyer: Costco. Seller: Jupiter Holdings LLC.
  • Harborside Industrial Park (49 acres), $76 million. Property type: land. Buyer: Amazon. Seller: Kapolei Property Development