The current wave of Waikiki hotel investment, which peaked at $1.1 billion in transactions last year, will peter out if local government cannot solve the challenges caused by the district’s swelling homeless population, say Hawaii real estate and tourism industry officials.

In 2013, Waikiki saw a 141 percent year-over-year rise in hotel investment activity, from $436 million in 2012, according to figures from Hospitality Advisors LLC. And a host of multimillion-dollar hotel and condominium proj­ects have been announced to add room capacity to the area.

While Waikiki homelessness isn’t likely to stop those proj­ects from proceeding, there is a growing concern among Hawaii’s real estate and tourism communities that the problem is gnawing away at the health of the market as the area is inundated with chronically homeless campers, aggressive panhandlers, and people using sidewalks and parks as toilets.

"I’m very concerned about homeless in Wai­kiki and everywhere else," said local developer Peter Savio, who owns the White Sands Hotel and the Ewa Hotel in Wai­kiki. "It’s like a fast-growing cancer: If you don’t treat it immediately, it will kill. The pendulum is ready to fall."

Savio and others in the community — including the Wai­kiki Neighborhood Board, the Wai­kiki Improvement Association, the Hawaii Hotel and Lodging Association, the Oahu Visitors Bureau and most recently the Hawaii Hotel & Visitor Industry Security Association — have joined forces with residents to demand that city and state leaders sweep the streets and parks and enforce existing laws while considering the creation of new rules like the one in San Francisco that bans sitting or lying on sidewalks during certain hours. The problem has even inspired the neighborhood board to push for creation of a special law enforcement district to clean up their home.

"We’re just fed up with how this homeless issue has degraded our neighborhood. It’s causing parts of our economy to fracture," said real estate analyst Steph­any Sofos, who last week snapped a picture of a pile of human feces left on a Kala­kaua Avenue sidewalk and emailed it to Mayor Kirk Caldwell. "Visitors don’t want to come; people who live here want to move; and if investors start to realize that our community is decaying, they’ll take their dollars out and put them in places that are thriving. It happened in Detroit and Sacramento and it will here … it’s Economics 101."

Caldwell said city officials have been meeting regularly to discuss homelessness with key stakeholders in Wai­kiki, including representatives from the visitor industry and service providers. The Sidewalk Nuisance Ordinance passed by the City Council last summer is enforced to maintain safe and free access to city sidewalks, officials said. The Hono­lulu Police Department also has been enforcing park closure hours, issuing citations and making arrests.

"It’s approximately $15,000 a week for all the cleanups that we do all over the island," Caldwell said. "Every time that we do one, we clear between three and 11 tons, and if we didn’t do it we’d get 20, 50, maybe even 100 tons and we’d have a health and safety issue and a visual impact."

Savio said residents and visitors are intimidated when homeless reside in public spaces. "Years ago the park was full of senior citizens and young people. Now it’s primarily homeless because they’ve scared everyone else away."

Jerry Dolak, president of the hotel security association, said homelessness in Wai­kiki also has become a safety concern. "They are more aggressive, and it’s getting harder to move them along," he said.

Joe Toy, president and CEO of Hospitality Advisors LLC., said that while developer demand is still pres­ent in Wai­kiki, he believes the problem has become an issue with investors. "I talk to a lot of private equity groups on a routine basis, and that question has come up more frequently in this cycle than in the past," he said.

Savio said homelessness has yet to disrupt investment flow to Wai­kiki’s largest oceanfront properties. Still, he expects that if the problem persists at its current level, smaller owners and would-be developers could find it harder to fund purchases and improvements.

"Lenders start to get nervous about the operational aspects of a property. They’ll anticipate slowdowns or declines, and they won’t be willing to give 100 percent," he said. "In that case the guy that just bought a property for $30 million will probably proceed because he’s got too much to lose. However, if the guy that already owns a property has trouble refinancing, he may be deterred from reinvesting."

Elton Wong, vice president and proj­ect manager for The Koba­ya­shi Group, said Wai­kiki’s strong occupancy rates have kept the district attractive to investors. A partnership between Koba­ya­shi Group, Black­Sand Capital LLC and the MacNaughton Group plans to raze King’s Village and replace it with a condominium hotel tower.

Waikiki "is the engine that drives Oahu and the state. But it’s running 80 to 90 percent full, so it cannot continue to grow unless we replace our inventory and have better accommodations for guests," Wong said. "When we came forward with our proj­ect, we tried to look for things that we needed in Wai­kiki. We believe homeless is a concern, but we want to be part of the solution."

Despite Waikiki’s well-publicized homeless problem, Irongate Capital Partners, which plans to build two condominium towers on Kuhio Avenue with Pacrep LLC, also remains bullish on the district.

"We believe in Wai­kiki and its future. We are also cognizant of Wai­kiki’s importance to the state and providing visitors and residents with an atmosphere that uniquely represents Hawaii," said Casey Federman, managing director at Irongate. "Outrigger’s redevelopment of Lewers Street is a great example of revitalizing a neighborhood. We believe the Ritz-Carlton Residences proj­ect (on Kuhio Avenue) will bring the same new life and energy to this neighborhood."

But some Wai­kiki hotel owners already have made it clear that they won’t upgrade their properties or make further investment in the community unless city and state leaders clear the district of homelessness, said Bulla Eastman, corporate director of safety and security for Aqua Hospitality, which together with its affiliate Aston Hotels & Resorts has 50 properties in Hawaii, including 26 in Wai­kiki.

"We need owners to invest and upgrade their properties. When they won’t invest, we have fewer jobs," Eastman said. "Is the problem worse than it was? Absolutely … and it’s more of a concern among our members because there’s no question that it’s cutting into our bottom line."