Growing construction activity and continued strong tourism are propelling Oahu’s industrial real estate market into "severe shortage" territory just 18 months after the warehouse leasing sector began a recovery.
That’s the assessment from commercial real estate brokerage firm Colliers International in a new survey of warehouse occupancy on the island.
Colliers calculated that businesses filled about 200,000 square feet of empty warehouse space on Oahu during the first half of this year, which pushed down the vacancy rate to 3.15 percent from 3.75 percent at the end of last year.
The firm said ongoing moves by the state to reclaim warehouse space near Honolulu Airport and Sand Island are contributing to demand for private warehouse space along with growing needs of businesses tied to construction and tourism.
The relatively tight inventory of available warehouse space for rent has encouraged landlords to raise rents a bit and reduce incentives such as free-rent periods, the report said.
However, the relatively tight supply isn’t as acute as it was from 2003 to 2007 when Hawaii’s economy was booming.
Vacancy rates during that period sank to a low of 1.7 percent in 2004. But then a weakening economy pushed vacancies up over 4 percent to almost 5 percent from 2008 to 2011, until a rebound occurred last year and reduced Oahu’s warehouse vacancy for the first time in seven years.
The 3.15 percent vacancy rate at the end of June represents about 1.3 million square feet out of 40.2 million square feet, based on a Colliers survey of 1,842 properties.
Colliers said landlords on average have increased asking rental rates to $1 per square foot of space, up from 96 cents last year.
A competing report from rival commercial real estate firm CBRE said the recovering warehouse market is pressuring tenants of industrial property in Honolulu to seek cheaper alternatives farther from the urban core.
Because CBRE tracks a different collection of properties, its calculated vacancy rate at the end of June was 4.3 percent, down from 5 percent at the same time last year. CBRE’s recent figure is based on 1.5 million square feet of available space out of 34.1 million square feet.
CBRE said the average asking rent on Oahu was 96 cents per square foot, down 1 cent from the first quarter.
"Currently, the market is in the recovery stage and expecting to trend towards the expansion stage," the firm said in its report.
