As retailers expand, vacancies rise

Retail vacancy rates are projected to double by next year as a number of new shopping centers open across Oahu, a new report shows.

At the end of the third quarter, 279,880 square feet of additional space was filled following the completion of stores such as Foodland Farms and Shirokiya’s Japan Village Walk at Ala Moana Center and the International Marketplace in Waikiki, according to the third-quarter retail market report released today by Colliers International.

Despite the addition of new stores, vacant space at new malls and the closure of a major sports retailer have increased the vacancy rate. Sports Authority closed its stores nationwide last quarter, leaving more than 160,000 square feet vacant at Waikele Shopping Center, Kapolei Commons, Ward Centre and Windward Mall.

Oahu’s retail vacancy rate rose to 5.5 percent in the third quarter from 4.2 percent in the second quarter. By the end of this year, Colliers expects the vacancy rate could rise to more than 8 percent, the highest since the aftermath of the terrorist attacks in 2001.

More than 60 percent of the space at the International Marketplace is still under construction or yet to be leased, boosting Waikiki’s retail vacancy rate to 16.7 percent last quarter from 9.6 percent in the second quarter, the report showed. Ala Moana has roughly 10 percent of its Ewa wing empty. The opening of the newest Kapolei mall, Ka Makana Alii, will add to the vacancy rate as it fills in spaces.

“For nearly a decade retail vacancy rates hovered near 4 percent. The current surge in development should help release some of the pent-up demand by prospective retailers,” said Mike Hamasu, Colliers director of research. “It just means that prospective tenants looking for space to expand now have a lot of options. Should vacancy rates remain high over the next couple years — ’cause you have a bunch of projects coming online — rents could decline.”

Oahu’s average base asking price rent rose 21.6 percent over the past four years to $3.94 per square foot per month at the end of the third quarter from $3.24 in 2012.