Hawaii has been immersed in an economic recovery over the past two years. This recovery has exceeded the overall U.S. performance in regards to total employment growth and total personal income growth. These figures have grown in Hawaii by 2.2 percent and 3.4 percent, respectively.
Such economic growth has spurred strong performance from retail centers, while healthy spending from domestic and international shoppers has advanced the retail recovery in Hawaii.
According to the Hawaii Tourism Authority, total visitor expenditures for 2013 were a record high of $14.5 billion, a 2 percent increase over 2012. The total visitor arrivals increased 2.6 percent, to 8.2 million, exceeding the previous record of eight million in 2012.
International tourism is a strong factor in Hawaii’s economy as well. According to the Office of Travel and Tourism, Honolulu ranks as the fourth-largest port for total overseas arrivals. Honolulu received almost two million non-domestic arrivals in 2012, not including those from Canada and Mexico. Not only is the level of overseas visitor arrivals placing Hawaii close to the top of the pack, but its growth has exceeded the U.S. (on a year-over-year growth basis) every quarter since 2011.
International tourism arrivals to Hawaii have grown an average of 10 percent per quarter since 2011, compared to 4.5 percent in the U.S.
Strong local economic growth and international tourism growth has helped retail centers and hotels in Hawaii record some of the lowest availability rates and highest occupancy rates in the nation. The availability rate at retail centers in Hawaii sits at 4.3 percent, as of the first quarter of this year. This is down 60 basis points from its peak in 2011. This number represents the lowest retail availability rate in the U.S.
Hotels in Hawaii are experiencing a current occupancy rate of 85.6 percent. Waikiki’s occupancy is even higher, at 87.2 percent. This ranks Hawaii as the market with the highest hotel occupancy rate in the U.S.
There are also multiple residential and commercial development projects under development in Honolulu. About 15 residential developments have been announced, which will add more than 4,800 new housing units. There are also five major commercial redevelopment projects in the pipeline, three of which are now under construction.
New retailers entering the market include flagship locations for Bloomingdale’s, H&M, Saks Fifth Avenue and Urban Outfitters, along with Jimmy Choo, Omega and Harry Winston. Notable retailers expanding or in the market for new space include Anthropologie, Bath & Body Works, Eileen Fisher, Longs Drugs, Petco, Ross Dress for Less, Sports Authority, Target, T.J. Maxx, Victoria’s Secrets, Walgreens and Whole Foods.
Hawaii’s economic recovery will continue over the next two years. Total employment growth is expected to be 1.7 percent (comparable to the U.S.), while total personal income growth is forecasted to be 5.3 percent (above the U.S.). This, in conjunction with continued healthy growth in international tourism arrivals, will support the retail demand recovery.
Availability rates at retail centers in Hawaii should continue to decline, and the timing of Hawaii’s rent expansion will exceed that of the U.S. Rents are forecasted to rise above their pre-recession peak by 2015.
By Kimberly K. Lord, Senior Managing Director, CBRE’s Honolulu office. This article originally appeared in the July 2014 issue of Western Real Estate Business magazine.