High-rise condominiums dominate the options today for buying a new home on Oahu, and Kakaako between downtown Honolulu and Waikiki is ground zero for this market.
The area bounded by Ala Moana Boulevard and King, Punchbowl and Piikoi streets has been envisioned by state planners for decades to become a dense core of condo towers. Now that vision appears to be turning into a reality.
Unit sales are ongoing at four Kakaako tower projects, two of which are under construction. Three more towers have development permits but have yet to start sales. And two other towers have been announced but still need permits.
State planners have envisioned the area bounded by Ala Moana Boulevard and King, Punchbowl and Piikoi streets as a dense core of condo towers. Projects by the numbers:
9: Towers being built
4,000: Number of units
2016: Estimated year of full completion
Source: Star-Advertiser research
In all, nine towers with a total of about 4,000 units are in this development pipeline.
Far fewer homes are on the market or under development elsewhere on the island, where a handful of single-family house and townhouse projects — including Mehana in Kapolei, Hoakalei in Ewa Beach and Ka Malanai in Kailua — are ongoing.
The boom in Kakaako is filling a void of homebuilding elsewhere that has been constrained by the availability of suitable land and a more difficult permitting process to covert farmland for urban development.
So far, buyer demand is strong. The first Kakaako tower project to launch sales was Waihonua at Kewalo, on Queen Street at the base of Pensacola Street. Local developer Alexander & Baldwin Inc. started sales and construction late last year, and has sold 321 of 341 units priced between $375,000 and $1.9 million.
The next Kakaako tower to launch sales was 801 South St., a project by local developer Marshall Hung. Buyers snapped up almost every one of the 635 units priced between $253,200 and $501,300 in March.
Hung recently announced plans for a second adjacent tower with 410 units and said about 6,000 people had visited the sales office of the first tower over the last three to four months.
A third project where sales have begun is Symphony Honolulu, a project by San Diego-based OliverMcMillan with units priced from $500,000 to about $3 million. Sales began in July and buyers claimed about 200 of 288, or 70 percent, of market-priced units. Another 100 moderate-priced units under a state program are scheduled to be sold via lottery today.
Most recently, sales began last month for 397 units in a tower that’s the focus of a condo complex called The Collection on the former site of a CompUSA store. Unit prices range from $380,000 to $1 million. Prospective buyers reserved 250, or 63 percent, of the units, though the reservations have yet to be converted to binding sales.
Three other towers with development approvals, planned by Howard Hughes Corp. at Ward Centers, have yet to start sales but are expected to do so by the end of the year. Construction is projected to begin early next year.
One of the three Hughes Corp. projects is a 177-unit luxury tower overlooking Ala Moana Beach Park at the corner of Kamakee Street and Ala Moana Boulevard. Ten townhomes are also part of the complex, nicknamed the "Fish Net" tower.
The other two Hughes Corp. projects are a 424-unit tower with moderate-priced units on Ward Avenue just ewa of Sports Authority, and a somewhat more upscale complex with 230 units in a tower and 82 low-rise condos on the site of Pier 1 Imports on Kamakee Street.
Nine towers with close to 4,000 units sounds like a lot, raising questions about whether enough demand exists. A recent report by commercial real estate firm Colliers International said Oahu’s market for multifamily housing is on the defining line between expansion and hypersupply phases.
"Concerns are being raised that the considerable amount of new residential development in the Kakaako area will result in an oversupply situation without the level of demand needed to absorb the number of units planned,"said the report, released last month.
Local economist Paul Brewbaker of TZ Economics said such concern is off base because of the relative dearth of new housing being built elsewhere on Oahu amid a rising economy. Brewbaker said that even 5,000 new homes is not a huge supply when considering it was a little more than what was produced in half a year on average from 1950 to 1974.
"(Five thousand new homes) would seem to so many people as if it’s a lot of units when it really isn’t in any meaningful context,"he said in an email.
Developers cite the high response to date from buyers as evidence supporting Brewbaker’s view. However, they are also aware that unexpected shocks to the economy, significantly higher interest rates or a longer-term slowdown can hurt buyer demand.
"The market’s only going to last so long before it tips again," Paul Kay, director of real estate development for Kamehameha Schools, said in July during an event announcing a Kakaako project called Keauhou Place. The project is designed with 450 moderate-priced units in a condo tower and 150 low-rise homes including rental apartments on a South Street parcel owned by the trust.
Brewbaker agrees that while current demand supports the volume of new home development in Kakaako, whether demand lasts until all the tower projects are completed is another question.
It typically takes two years to build a high-rise, at which point unit sales are completed. During Oahu’s previous real estate boom, developers failed with two towers — Moana Vista in Kakaako (now known as Pacifica Honolulu) and Allure Waikiki. Other developers took over and finished the projects.
The nine Kakaako towers in the works now are projected to be completed between 2015 and 2016.