Hawaii’s commercial real estate market has moved from a rebound to full-blown boom, according to a tally of major property sales last year.
Institutional investors that snapped up several luxury hotels and a couple of prime retail centers helped break a 9-year-old record for the value of major commercial property sales statewide based on a report released for publication Friday by commercial real estate firm Colliers International.
In all, $4.6 billion worth of commercial property in Hawaii was bought last year, a roughly 25 percent jump from $3.7 billion the year before. The prior record was $4.3 billion in 2005.
"Investment capital is flowing back into real estate," Colliers said in the report.
Sales of Hawaii commercial properties sank to $630 million in 2009 after the implosion of financial markets and a recession. An upswing began in 2012.
Colliers said record tourism and rising home values are among factors that have made local commercial real estate attractive to buyers. Another key factor is low interest rates. That is providing cheap capital for acquisitions while discouraging alternative fixed-income investments such as bonds.
Scott Mitchell, a Colliers broker, said in the report that lots of competition exists to buy commercial investment property on the mainland that is driving more offshore investors into smaller markets like Hawaii.
The Colliers report said offshore investors bought $3.7 billion of Hawaii property last year, compared with $832 million for Hawaii investors.
"Record investment sales volume indicates that institutional investors are scouring tertiary markets like Hawaii with hopes of avoiding heightened competition faced in other markets," Mitchell said in the report.
The report counts sales of retail, resort, industrial, office, multifamily housing and land purchases over $1 million.
The biggest single sale was Royal Hawaiian Center, the largest shopping center in Waikiki. It was sold by Kamehameha Schools to an affiliate of banking firm JPMorgan Chase & Co. for $698 million excluding the land under the mall.
Other big retail property sales were the Town Center of Mililani for $227 million and Hawaii Kai Towne Center for $110 million.
Resort property sales represented the biggest category of transactions by dollar volume at $1.7 billion, compared with $1.4 billion for retail. Among resort property sales were the Wailea Marriott for $326 million and a golf course and undeveloped land around Princeville Resort for $343 million.
The biggest number of transactions occurred in the multifamily housing category, where there were 76 sales for a combined $463 million. Sales in this category included a subdivision of rental homes in Kalaeloa for $154 million and a piece of what used to be Kukui Gardens now known as Waena Apartments on the edge of downtown Honolulu for $146 million.
Overall, there were 265 commercial property transactions last year. That was up from 245 last year. In 2005 there were 431 sales, though appreciation in real estate values since then helped 2014 break the old record for dollars invested.
Examples of that appreciation can be gleaned from properties that were sold in 2005 and again in 2014.
For instance, the Town Center of Mililani, which sold for $227 million last year, sold in 2005 for $151 million. The Kahala Hotel sold for $282 million last year, compared with $176 million in 2005.
