Concerns about consumer spending might lead to more retail stores closing than opening on Oahu this year, but five months into the year, vacancies haven’t grown, according to a new report.
So far this year, 10,472 more square feet of retail space was filled than emptied, lowering the vacancy rate to 3.48 percent from 3.75 percent at the end of last year, a survey by local commercial real estate firm Colliers Monroe Friedlander shows.
However, Colliers expects the vacancy rate to rise to somewhere between 4 and 4.5 percent by the end of the year before falling in 2012.
Colliers said uncertainty over inflation and bumps in the tourism industry’s recovery is expected to hinder growth for retailers.
"Retailers appear to be cautious as growing concerns over global events place a dampening effect on projected expansion plans," the report said.
Retail space vacancy rates by region on Oahu:
Source:Colliers Monroe Friedlander
Even if vacancies rise to what Colliers projects, the level would still be relatively low. Retail vacancies in the last decade reached as high as 8.5 percent in 2003. In the past four years, vacancies have hovered between 3 and 4 percent even as new shopping centers expanded the inventory of space for lease during a recession.
"It’s not that bad," said Steve Sofos, president and chief executive officer of Sofos Realty Corp., another local commercial real estate firm.
Sofos said mainland retail chains and big local chains are still pursuing expansion, though the slow economic recovery and increased costs and regulations by government make it more difficult for small retailers to start up or expand.
The challenges facing retailers have led landlords to reduce average asking rents for vacant space. Colliers reported that the average rate sought for vacant space was $3.38 per square foot, excluding operating expenses. That was down slightly from last year and is down about 11 percent from a peak of $3.74 a square foot in 2008.
According to the Colliers report, strip centers have the highest vacancy rate at 17.4 percent, followed by resort/specialty centers at 7.8 percent. The vacancy rate for regional shopping centers is 1.1 percent. Neighborhood centers were 3 percent vacant.
The overall vacancy rate of 3.48 percent represents 429,846 square feet of vacant space out of 12.4 million square feet of space counted by Colliers.