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Big changes along Kuhio pushing out many small merchants

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    About half of Duke’s Lane soon will be closing as the neighboring Waikiki Trade Center undergoes a major upgrade. Shop owner Taesu So, pictured Tuesday, is hopeful something can be worked out. Tenants have been told that their month-to-month leases are being terminated.
    Lance Wilhelm, Irongate’s managing principal for Hawaii operations, checked out the West Tower of the Ritz-Carlton Residences in Waikiki on Friday. The building is scheduled for completion in 2016.

Cindy Liang left her native China in 1990 to move to Hawaii, where she hoped to make a better life for herself.

She found a job at a sandwich shop and saved for eight years to help her husband buy a Duke’s Market Place cart, which they opened in 1998 as C&C Gift Shop.

"We didn’t want government help. We take care of our own. Every day, we come. Every day, we work hard. But don’t ask me about tomorrow. That, I don’t know about," said Liang, who stares pensively at the nearby network of construction scaffolding that engulfs the sky above the trinket carts lining Duke’s Lane.

The upscaling of Kuhio Avenue, which began with the Ritz-Carlton Residences Waikiki Beach, now spreads from Lewers Street to Uluniu Avenue and is on track to put Kuhio on par with the long glamorous Kalakaua Avenue. But each construction clang is a reminder to Liang that the multimillion-dollar transformation of Waikiki has landed on her corner of Duke’s Lane, bringing big winners and some losers.

With the closing of the International Market Place, Duke’s Lane is the last spot in Waikiki where small cart owners still operate. About half of Duke’s Lane soon will be closing as the neighboring Waikiki Trade Center undergoes a major upgrade. That means at least 40 carts will have to leave.

"We recently received letters saying that our month-to-month leases were being terminated as of July 31," said Roy Shinn, chairman of the Duke’s Lane merchants association.

"If I don’t have shop, I don’t have job," Liang said. "I don’t know what will help us. They are the elephant. We are little ants."

The carts must go to make way for a $25 million renovation of the Waikiki Trade Center’s retail offerings, including Nordstrom Rack on the first two floors.

Cordell Lietz, president of developer Coastwood Capital Group, said the project will create "the best possible mix of retail for visitors and residents of Kuhio Avenue."

Proponents say these changes and others will create a new gathering place capable of competing with international destinations and with Kakaako’s repositioning. The improvements, which are designed to meet the demand of Waikiki’s increasingly high-end travelers, also will increase property values and generate more jobs and taxes.

"When paired with retail holdings on Kalakaua Avenue, the changes on Kuhio will create a 15-acre stretch that will become Waikiki’s next golden goose," said Waikiki-based real estate consultant Stephany Sofos.

As that happens, carts and kiosks will be pushed out at least four or five blocks, said Mark Bratton, a vice president at Colliers International. While mom-and-pop operators want smaller interior spaces with cheaper rent, Bratton said in the current cycle developers are pushing for larger spaces.

"Eventually, developers may add some carts or kiosks, but they’ll be looking for more unique Hawaiiana that provide increasingly sophisticated visitors with unique experiences," he said.

While Waikiki cart owners may find ancillary space, Sofos said it probably won’t provide needed foot traffic.

"Their profit margins are thin. You have to sell a lot of cheap dolls and trinkets to make it work. Will they survive? I think so, but probably not in Waikiki," she said. "Tourists will be going to places like Ross and Nordstrom Rack to buy their economy goods."

Tennessee tourist Gavin Maness, who was shopping at Duke’s Market Place on Tuesday, said visitors are likely to miss this long-established part of Waikiki.

"Our tour guide told us to come here. It’s great. I just bought a selfie stick for $10. It was $18 in the stores," Maness said.

But it’s good that Waikiki continues orienting to higher-yielding markets, said Rick Egged, president of the Waikiki Improvement Association.

"There’s a limit to the number of people Waikiki can handle. If we want to grow tourism, we need to grow revenue," Egged said. "Kuhio’s transformation will improve Waikiki."

To be sure, developer Irongate is on track to make a more than $400 million investment in Kuhio with the construction of its two towers that make up the Ritz-Carlton Residences Waikiki, said Lance Wilhelm, Irongate’s managing principal for Hawaii operations.

Wilhelm said the success of an earlier Irongate project, the Trump International Hotel Waikiki Beach Walk, made formerly blighted Kuhio an easier sell.

"There was some sense that this area needed an initial reinvestment to bring critical mass to Kuhio and Waikiki," Wilhelm said. "It was a little bit of the ‘Field of Dreams’ mentality — ‘If you build it, they will come.’ We hoped that other investments would be made and that’s coming to fruition."

The topping-off of Ritz-Carlton’s West Tower should occur about the third week of July, and the building is on track for completion in the spring of 2016. Foundation work on the second tower should then begin late summer with opening slated for the third quarter of 2017.

"Demand has been incredibly strong for these products," Wilhelm said. "We’ve only got one three-bedroom unit left in our first tower and we’ve sold about 90 percent of the second tower."

Units in both towers, which range in price from just under $1 million to $25 million, have attracted a predominantly international buyer with future owners coming mostly from Japan and China, Wilhelm said. A smattering of buyers also comes from Australia, Korea and the U.S. mainland, he said.

Reinvestment and strong demand also has spurred other redevelopment along the Kuhio corridor including the International Market Place, which broke ground last March and is expected to open in 2016. The main gateway to the 360,000-square-foot development, which is anchored by Saks Fifth Avenue, will open onto Kuhio, creating major retail destinations from one end of the avenue to the other.

Members of MK Development Consulting LLC, a partnership of Kobayashi Group and The MacNaughton Group, also plan to construct a multilevel tower with heights ranging from the current 240-foot limit to a soaring 350 feet at the former site of King’s Village. Construction at the property, which is located at 133 Kaiulani Ave., is expected to start in 2016 with opening slated for 2018.

Redevelopment of the former Ohana Waikiki West, which will become a Hilton Garden Inn, and Ohia dorm, which was recently converted into the Aqua-managed Ohia Waikiki, also is expected to fetch higher average daily rates.

"The revitalization of Kuhio Avenue will create a new, improved shopping district for our residents and our visitors to enjoy, bettering their vacation experience in Waikiki, thus contributing to the number of return visitors and to tourism, our state’s largest economic driver," Lietz said.

But some mom-and-pop business owners, residents and tourists say they will mourn the passing of an era when they felt Waikiki had more color and diversity.

People who are reluctant to embrace the changes say the recent decimation of Duke’s Lane is only progress’ latest casualty. They point out that the $300 million International Market Place redevelopment, a partnership between Taubman Centers Inc., Coastwood Capital Group and Queen Emma Land Co., required the razing of the more-than-50-year-old International Market Place, displacing colorful tenants who were the heart of the outdoor bazaar. Likewise, the Waikiki Town Center and the Miramar Hotel were demolished to make way for the project, which supporters have said could provide some 2,500 permanent jobs at full ramp-up.

Eventually, King’s Village, a Waikiki retail complex designed to resemble Hono­lulu around 1900, will come down along with Prince Edward Apartments and Hale Waikiki. The planned leveling makes way for a $180 million development that will encompass a condominium hotel, parking deck, retail and office center, and a small park.

"I support updating and beautifying Kuhio," said Denise Boisvert-Jorgensen, who lives in the Governor Cleghorn condominium near King’s Village. "But I think they’ve built enough giant projects. They’re pushing out the lower- and middle-income tourists and residents. And, I feel sorry for the tiny merchants. I don’t see anything left for them."

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