Empty retail space dipped an iota in 2014

Consumers on Oahu had some new stores in which to shop in 2014, but the amount of retail space occupied by merchants increased only slightly last year, according to a new report.

The mix of store openings and closings last year resulted in an additional 12,972 square feet of retail space filled last year — roughly the size of a Petco store or the garden area at Home Depot — according to the report from commercial real estate firm Colliers International.

The reduction in vacant space was small, but it overcame what was an unfavorable start to last year when Price Busters closed eight stores in January and dumped 90,000 square feet of empty space on the market.

"Oahu’s retail market showed its resilience," the report said. "Many of these vacated spaces now have prospective tenants in tow."

The gain in occupied retail space reduced the vacancy rate a tad to 4.1 percent at the end of the year from 4.2 percent a year earlier. The 4.1 percent rate represents 642,717 square feet of vacant retail space out of 15.7 million square feet on the island.

Though the improvement was small, it marks a second straight year with a reduction in vacant space since a post-recession peak of 4.6 percent in 2012.

Generally, a rate close to 4 percent on Oahu is relatively low. Since 2000 the rate was as high as 8.5 percent in 2003 and as low as 2.2 percent in 2006.

Colliers said the retail market is typically in a zone of equilibrium — where tenants and landlords have parity in negotiating rents — when the vacancy rate is between 6 percent and 8 percent. So at 4 percent, landlords have more of an upper hand, and Colliers said they are asking for higher rents on average.

The average retail base rent landlords were seeking last year per square foot of retail space was $3.64, up from $3.35 in 2013, the report said.

Colliers predicts that there is a "strong likelihood" that the average will pass $4 within the next 18 months.

As for the vacancy rate, Colliers expects it to slip to 3.5 percent by the middle of this year as more retailers open.

Driving the movement, according to the report, is higher consumer confidence and spending as more people are being employed and are earning more while tourism arrivals break records.

Developers have been responding to the market with plans for new shopping centers, but completion of only a few projects is expected this year.

Among those are SALT, in Kakaako, with 80,000 square feet of space, and an outlet store phase at Kapolei Commons with 253,690 square feet.

Major new retail projects slated for completion in 2016 include an initial phase of Ka Makana Alii in Kapolei anchored by Macy’s, and a new wing on Ala Moana Center anchored by Bloomingdale’s. A new International Market Place in Waikiki anchored by Saks Fifth Avenue is under construction but isn’t expected to open until 2017.