Commercial property sales surge

Commercial real estate investors returned to Hawaii in a strong way last year, spending more than twice as much money buying property such as hotels and shopping centers compared with the year before, a new report shows.

Investors acquired about $1.5 billion in commercial property statewide last year, up from $630 million in 2009, according to the report by local commercial real estate firm Colliers Monroe Friedlander that tracks sales of more than $1 million.

The rebound occurred after four consecutive years of declines but still represents a relatively nascent recovery compared with transaction volume that varied from $2 billion to $4 billion between 2003 and 2007.

Colliers said last year’s pickup was driven by the availability of more financing and a relatively healthy commercial property market in Hawaii where not much overdevelopment happened during the economic boom years.

Colliers expects the positive trend to continue this year, with close to $2 billion in commercial property sales.

"Optimism seems to be the prevailing investment market attitude heading into 2011," Colliers said in the report released yesterday. "As the economy gains firmer footing and there is a corresponding rise in business and consumer confidence, commercial real estate investment activity should benefit from both property appreciation and improved tenant demand."

Last year, purchases were fairly diversified among property types — retail, office, resort, industrial, multifamily apartments and undeveloped land.

The bulk of the sales involved retail property, which accounted for 40 transactions totaling $441 million. This category had the largest single sale, Pearlridge Center, which was bought by a mainland investment partnership for $245 million.

Office property was the second-biggest category, representing 17 transactions for a combined $314 million, including the second-biggest single sale, Bishop Square, which sold for $230 million to a mainland firm.

Ten hotels sold for a combined $262 million. There also were 41 industrial property sales for $197 million, 22 land parcel transactions for $190 million and 27 apartment sales for $79 million.

The total number of sales last year was 157, which was more than the 113 a year earlier but less than 166 in 2008 when transaction value reached only $788 million.

The average sale price last year was $9.4 million, up from $5.6 million the year before.

Colliers said it had anticipated that more distressed property would be among sales last year, but in several cases lenders have been holding onto foreclosed property to wait for more improvement in the market.

Mark Bratton, a Colliers agent, said in the report that lenders foreclosed on six Hawaii hotels, but only two of those are for sale: the Sheraton Keauhou and Kauai Sands. At the same time, investor demand for hotels is high, Bratton said. "We receive a call a day from someone interested in acquiring a 100-room fee-simple beachfront hotel," he said.