More retail vacancies could open up as marginal performers close, a report says
POSTED: 1:30 a.m. HST, Dec 17, 2010
Despite an improving economy, Oahu's shopping centers have lost tenants in the last six months.
Vacancies at shopping centers rose to 3.75 percent this month from 2.87 percent in June, according to a report by Colliers Monroe Friedlander Inc.
Shopping center vacancies could climb higher -- to about 5 percent -- next year as marginally performing retailers that hung on through the holiday shopping season end up closing, the report said.
"It's not going to get better until we're comfortable to start hiring again on a major scale," said Carol Pregill, president of Retail Merchants of Hawaii. "We need consumers and to have consumers who are comfortable with spending they need to be employed." While stores appear to be having a good Christmas, "it could be what we're seeing for the holiday is an anomaly," Pregill said.
This month's 3.75 percent vacancy rate was the highest since 2004, when the rate was 5.83 percent, said Colliers, who has been tracking shopping center vacancy for 15 years. The highest rate recorded was 10 percent in 1998, while the lowest was 2.18 percent in 2006. In 2009 it was 3.47 percent.
The Colliers report shows Oahu's retail segment gained a net 70,000 square feet of new tenants in the first half of 2010, in large part due to the addition of Bed, Bath & Beyond at Pearlridge Center. By the end of the year, softness in the marketplace resulted in a loss of more than a net 100,000 square feet of tenants.
"There was probably a little more optimism, consumer confidence in the beginning half of the year when we had residential home tax credits, federal stimulus money released into the economy and a boost in tourism," said Mike Hamasu, Colliers' consulting and research director. "In the later part of the year, we're still trying to find our footing. Job growth's been spotty. It's been concentrated in tourism, retail and a little in the construction sector, but other components in the economy haven't shown a recovery."
Vacancies are concentrated in neighborhood shopping centers and resort/specialty areas such as Aloha Tower Marketplace and Royal Hawaiian Center, he said.
Meanwhile, average asking rental rates dropped 8.3 percent -- falling for the second consecutive year -- from the record high of $3.74 per square foot per month at the end of 2008.
Colliers forecasts rental rates will drift downward anywhere from 5 percent to 8 percent in the near future, with major national chains looking to capitalize on the soft market.
The National Retail Federation estimated a 3.5 percent boost in sales on Black Friday nationwide and strong sales on Cyber Monday, resulting in $1 billion in online sales.
"Although it appears that prospects for the retail market are brightening, sizable problems still remain that will likely temper the enthusiasm," the report said of the national market. "Mounting government debt, rising foreclosure activity and slacking job markets are still cause for concern."
Roughly 2,750 jobs were added to Hawaii retailer payrolls over the past year as stores such as Walgreens, Victoria Secret's, Target, Martin & MacArthur and Petco expanded, marking the first gains in retail employment since the recession started in late 2007.
However, job growth hasn't returned to the levels seen before the recession, Hamasu said.
"We still have some hesitancy and uncertainty going into the future," he said. "We're not having any upsurge in the economy, so retailers are still going to have to survive over the next year or so."