Two steps forward and one step back. That appears to be how a recovery is going for the office leasing market on Oahu, according to a new report.
During the last two years, office vacancies on the island improved as the market shook off lingering effects of the recession. But so far this year there’s been a major rise in vacancies, according to the report by commercial real estate firm Colliers International.
Colliers said 137,959 square feet of office space was emptied during the first half of this year. That’s the rough equivalent of a nearly 14-story building.
The setback followed two years of improvements that filled about 100,000 square feet of empty space in each year and ended five years of growing vacancies.
The resumed growth in vacancies this year pushed the vacancy rate up to
13.6 percent from 12.2 percent at the end of last year.
A 13.6 percent rate represents 2 million square feet of vacant space out of 14.9 million square feet.
Colliers said two tenant relocations drove most of the slump: the National Oceanic and Atmospheric Administration consolidating staff to Ford Island from office buildings largely along the Kapiolani Boulevard corridor, and the state Office of Hawaiian Affairs moving into a building it bought in Iwilei.
The firm also mentioned downsizing at Parsons Brinckerhoff and Sandwich Isles Communications as contributing to vacancy growth.
Colliers noted in its 2013 year-end report that the NOAAmove would have a negative impact on the office market, but expected that added demand from businesses — especially ones related to construction such as engineers, architects and planners — would largely balance out the loss.
In the new report, Colliers said it doesn’t expect vacancy rates will drop until mid-2015. "Although the office market appears mired in a bit of quicksand, Colliers believes that the bottom of the market is in sight,"the report said.
Colliers said there has been a recent uptick in prospective tenants looking to lease office space, though the firm noted other forces — including businesses making more efficient use of space and employing a mobile workforce using wireless technology — suggest that office leasing will see slow growth over a longer term.