Businesses needing to rent work space helped reduce the amount of vacant office property on Oahu last year, but only slightly, as the market endured a sixth straight year of general flatness.
Commercial real estate firm Colliers International, which produced a report on office space vacancies for publication today, said a trend of government agencies moving out of privately owned office buildings is offsetting demand from the private sector.
Last year 42,103 square feet more office space was filled than vacated by tenants, the report said. That barely dropped the vacancy rate to 12.66 percent at the end of last year from
12.69 percent the year before.
Overall, nearly 1.9 million square feet of Oahu office space was empty out of almost 14.7 million square feet.
Since 2010 the vacancy rate for Oahu office space has fluttered between
12 and 13 percent. The low over the past decade was
7 percent in 2007.
“It has been seven years since the end of the Great Recession and while many other commercial real estate sectors have boomed, the office market still remains mired in mediocrity,” Colliers said in the report.
The firm noted that there have been four consecutive years of job growth and that 800 jobs were added to the office sector in 2016. Meanwhile the unemployment rate on Oahu fell to a seven-year low of 2.7 percent in November. Yet demand for office space has stayed more or less flat.
One big reason, Colliers said, has been government agencies as well as companies moving out of leased office space and into buildings they own. A couple of recent examples include the National Oceanic Atmospheric Administration and Queen Emma Land Co.
Colliers said similar moves by the state Department of Health, state Department of Human Services and American Savings Bank are expected in the next few years. Also, the state should have a long-delayed renovation of its nine-story Princess Victoria Kamamalu Building in downtown Honolulu completed by midyear, which will make about 90,000 square feet of space available for state use.
Companies that use mobile technology and cloud computing also are reducing the need for employees working behind desks in buildings, the report said.
All the trends lead Colliers to predict that more space will be filled than vacated this year, but only enough to bring down the vacancy rate to 12 percent before 2018.
For its report, Colliers tracks 162 buildings with office space that is rented or available for rent from a landlord. The company said average monthly base rent sought by landlords ticked up a bit last year — to $1.69 per square foot from $1.67 per square foot the year before — largely because of higher demand for more limited space in suburban areas such as Windward, Leeward and East Oahu.