Expansion Continues in Hawaii’s Retail Market
Like so many markets nationally, the Hawaii retail real estate market was firmly in a state of flux in 2019. Despite more new vacancies than new openings — and limited new development — the Hawaii market held its own amidst challenging times. Investment sales demand and fundamentals remained strong, new and prominent retailers entered the market, and existing operators continued to expand and innovate.
Last year brought both closings and openings to the Hawaii retail sector. Bucking historic trends, store closures outpaced new store openings. The closings that did occur were all related to corporate downsizing decisions, versus poor store performance by the Hawaii locations. Hawaii stores consistently post strong sales performances when compared to same-store national averages. In most instances, the Hawaii locations were the last to fold, given their consistently strong sales.
Sears closed its 128,000-square-foot Windward Mall in Kaneohe, Oahu, in May. Kmart closed its last Hawaii location, a 119,000-square-foot store in Lihue, Kauai, in September. There are currently five vacant Kmart buildings and one vacant Sears location throughout the state. Early 2020 will follow suit, with the anticipated February closure of all seven Pier 1 stores on the islands.
Brighter news included the return of Marshalls, which opened in two Oahu locations, including Ala Moana Center and Kapolei Commons. This marks the brand’s first return to Hawaii since exiting the market in 1996. Guitar Center also made a much anticipated first entrance into the local market with a new 20,000-square-foot location in Pearl Highlands, Central Oahu. Wildly popular Japanese discount chain Daiso opened its second Oahu location in urban Honolulu.
Grocers dominated the new store openings in the Hawaii market. While there were no new brands, the existing crop of grocery stores grew by four new locations, two relocations and one expansion in 2019. It’s also interesting to note Hawaii grocers are significantly expanding their footprint with larger spaces in these new locations.
Safeway opened two new stores, including 51,000 square feet at Waikele Center on Oahu and 57,400 square feet at Hookele Center on Maui. Safeway also expanded its Lahaina Maui location from 37,650 square feet to 64,500 square feet. Foodland opened two new stores in 2019. The chain relocated and expanded from 28,000 square feet to 45,000 square feet in Pearl City on Oahu, in addition to opening a new 12,000-square-foot store at Ahuimanu on Kauai. Specialty local grocer Down to Earth kept pace as well with two newly relocated and expanded stores.
Hawaii’s “Neighbor Islands” saw the only new development growth, including the 97,000-square-foot, Safeway-anchored Hookele Center on Maui, and the Foodland-anchored Niumalu Center in Kilauea.
— By Roger B. Lyons, partner, The Beall Corp. This article first appeared in the January 2020 issue of Western Real Estate Business magazine.