Vultures aren’t visibly circling overhead, but investors are expected to swoop in and buy distressed Hawaii commercial real estate this year after relatively little market activity last year.

A new report by Colliers International said purchases of shopping centers, hotels, office buildings and other commercial property statewide plummeted 54% to an 11-year low of $1.2 billion last year. That’s down from $2.6 billion in 2019, which followed a record high in 2018 at $5.2 billion.

The commercial real estate firm said the drop was primarily due to mainland and international investors staying away during the coronavirus pandemic.

This year, however, Colliers expects a rebound of commercial property sales over $2 billion as some investors target properties under financial stress due to revenue declines related to COVID-19.

“During these challenging times, many investors squirreled away capital anticipating future opportunities to invest in ‘at-risk’ properties,” Colliers said in the report.

The firm generally regards regional shopping malls, power retail centers and urban office buildings as the highest-risk bets. Behind those are luxury and limited service hotels, suburban office buildings, retail centers with grocery anchors, undeveloped residential land and apartment buildings, which have strong long-term fundamentals but perhaps near-term stress.

Colliers also said in its report that it can envision developers pursuing struggling retail and office properties for conversion to residential or industrial use.

Total sales activity last year was dismal, but not as bad as during the Great Recession, when Hawaii commercial property sales totaled $788 million in 2008 and $627 million in 2009.

The biggest sale last year was a 14-acre industrial site near Sand Island acquired by Amazon for $125 million. The seller was Servco Pacific, which used the property for vehicle processing and an auto parts depot. Amazon is expected to use the site to expand its operations locally.

Colliers said the Amazon purchase was the only deal for over $100 million. The next biggest sale was King Kalakaua Plaza, a long-empty Waikiki retail building that sold for $76 million. The buyer, an affiliate of Athos Capital Partners, partnered with Marriott Vacations Worldwide to turn the four-story building once anchored by Niketown into a seven-story timeshare, with construction expected to start this year.

Typically, hotels represent the biggest segment of Hawaii commercial property sales. Last year, however, hotel or resort property sales represented 1% of the total, or $14 million, compared with $453 million to $2.4 billion in each of the past few years.

Because of COVID-19 and safety-related travel restrictions, Hawaii tourism withered in 2020 and is not expected to rebound to pre-coronavirus levels until after 2023. Colliers said this increases the risk of hotel owners defaulting on loans.

“The risk of loan defaults will continue to grow while hotel occupancy and room rates are negatively affected by the downturn in travel,” the report said.

By property type, most sales last year involved industrial real estate, which accounted for $369 million in sales. Next was retail at $270 million, followed by apartments at $256 million. There was also $167 million in office property sales and $117 million in land sales.

Colliers counts commercial property sales over $1 million.

The report said that with so many mainland and international investors absent, local investors did most of the buying, which is uncommon. In 2018, mainland buyers accounted for 73% of commercial real estate sales volume in Hawaii, while local investors accounted for 23% and foreign buyers the 4% balance.