Commercial property investments in Hawaii sank during 2019

Investors buying commercial real estate in Hawaii were more active last year but collectively spent vastly less money, a new report shows.

Commercial property brokerage firm Colliers International said in a report released for publication today that the market for hotels, shopping centers, apartment buildings and other commercial real estate statewide rose to a more than decade-high for transaction volume but sank to a seven-year low in total value.

There were 315 deals last year for commercial property assets over $1 million, which was up from 290 the year before and the most since 350 in 2006.

Of the 315 transactions, 278 were for under $10 million, the report said.

At the other end of the price spectrum, only five deals were for more than $100 million. This, Colliers said, was why the total dollar volume for all sales plummeted to $2.6 billion last year, a 50% drop from $5.2 billion the year before and the lowest total since $2.2 billion in 2012.

In 2018 there were 12 sales for at least $100 million, which Colliers refers to as mega-deals.

“This year’s drop-off (in total value) is directly attributed to the reduction in the number of mega-deal transactions,” the report said.

Colliers described the 12 mega-deals in 2018 as an “anomaly” that included the $1.1 billion purchase of the Grand Wailea resort on Maui. Still, the company also said it didn’t expect the reduction in value for all sales last year would be as dramatic as it was.

“The 2019 dollar volume for mega-deals totaled a meager $854.4 million,” the report said.

The biggest deal last year was a collection of 520 rental homes in Kalaeloa that sold for $212 million.

Other mega-deals last year included the 596-room Holiday Inn Express hotel in Waikiki, which sold for $206 million; the 452-room former King Kamehameha Kona Beach Hotel, which sold for for $104 million; and a portfolio of 1,221 affordable rental homes that the state sold for $139 million.

The Queen Liliuokalani Trust, a charitable foundation, sold two valuable properties last year that were noted in the Colliers report: land under the Alohilani Resort Waikiki Beach hotel for $195 million, and land under the Hilton Waikiki Prince Kuhio Hotel for $78 million.

By property type, the most money poured into land deals that included the two Waikiki leased-fee hotel properties and totaled $688 million.

Rental housing was next at $645 million, followed by resort property at $453 million. Retail property sales totaled $382 million. There were also $267 million in industrial property sales and $165 million in office property sales.

Colliers projects that the value of all commercial property sales will continue to decline this year, slipping 10%, largely based on the expected availability of mega-deals.