Five reasons to bet on Downtown Honolulu
Reporter, Pacific Business News
Mar 23, 2023
Downtown Honolulu is different now than it was three years ago, before the Covid-19 pandemic shuttered businesses and sent many employees to work from home a work style that seems to have become permanent.
The once-bustling business district experienced a dramatic drop in foot traffic due to pandemic-related restrictions and the move to remote work. Although some employees have returned, anyone who was working in the area in the pre-Covid era will tell you that activity levels arent where they were.
Discussions of Downtown dominated a portion of Pacific Business News annual Commercial Real Estate Roundtable, which was held March 3 at PBNs Downtown office.
Panelists included Christine Camp, president and CEO of Avalon Group; Jay Elicker, senior vice president of Commercial Asset Advisors; Jamie Brown, president of Hawaii Commercial Real Estate; Jeff Pauker, senior vice president of investments for Alexander & Baldwin; and Kevin Aucello, principal with Powell & Aucello.
Meet the panelists
There are a lot of concerns about Downtown Honolulu safety and security, as well as office and retail vacancies were among the worries and challenges noted by the roundtable panelists.
People are shrinking their offices and arent coming to the office as much, Camp said, so those office vacancies lead to vacancies of retailers who rely on that traffic. When that traffic goes out, what you have is vagrancy.
But there are plenty of reasons why you shouldnt count Downtown out yet.
Great things are happening! Camp said, noting, for example, the ongoing conversion of a former Downtown office into a hotel.
Now thats going to be anchored with new activity, she said. Because activity [and] numbers create safety because its foot traffic.
Based on the conversation with the panelists, here are five reasons to bet on Downtown:
1. Location, location, location
Theres a synergy that comes from the concentration of businesses Downtown, and the proximity to others makes it easy for businesses to connect.
Brown said theres a lot of gloom and doom about Downtown Honolulu, but I think the thing that keeps Downtown from a complete downward spiral is the reason why Downtown exists in the first place in Honolulu 50% of the [office] inventory is Downtown. Were adjacent to federal, state and county governments, and for business-to-business tenants most of our clients and vendors have their offices Downtown. And we have great vehicular access, we have great bus access, and maybe someday well have rail access.
In fact, you have to think of the mentality of why do people join clubs? Camp said. Why do people [network]? In the same way that presence in Downtown, Bishop Street, along the financial corridors is exactly what Jamies talking about.
People need to do business with each other and sometimes its spontaneous. Just by seeing you, [its like] oh yeah, I should do business with you. The younger generation may not, but the decision makers will still think, I still need a Bishop Street address, I still need to be in [the Central Business District], I still need to see other people.
Theres also an efficiency being Downtown, Brown said.
[In Los Angeles], it takes you an hour, each way, to go to a meeting, whereas here, you walk across the street.
2. Office conversions are transforming Downtown into something new
Downtown Honolulu is transforming into a 24/7 neighborhood as more residential opportunities come online.
Oahus office market has lost more than 240,000 square feet of occupancy over the past three years, with vacancy rates climbing from 9.93% in the last quarter of 2019 to 12.9% in the fourth quarter of 2022, according to a fourth-quarter office market report from Colliers International Hawaii that was published in January.
Not only has the impact from Covid-19 on Oahus office market changed the level of demand, available supply and how businesses use their office spaces, the report noted, but the conversion of existing office space to residential, hotel or other uses is also affecting the islands office market.
In 2019, investment company Douglass Emmett announced plans to convert 1132 Bishop into workforce rental apartments, removing more than 462,000 square feet of office space from the market, as PBN reported at that time.
Meanwhile, in 2021, Continental Assets Management acquired the leasehold Remington College building with plans to convert the space into a boutique hotel under the AC Hotels by Marriott brand, as PBN previously reported.
And in January, Camps Avalon Group acquired the Davies Pacific Center and announced plans to convert the 378,000-square-foot Downtown Honolulu office building into a mixed-use building.
About 100,000 square feet will remain office use, while 280,000 square feet will be converted to residential, Camp said during the roundtable. Shes expecting the construction cost to convert the property to be about $500 per square foot.
It was so surprising, we interviewed all the tenants in our building ... and what was really surprising to me was that most of them didnt want to have a complete closure of their offices, Camp said. They wanted to look at downsizing. Surprisingly, a few of them wanted to increase their footprint, but most of them, ... they really liked the idea of being around mixed-use because, again, safety in numbers. It creates people. They want people back in Downtown. They want that energy.
3. New hotels are coming
Panelists said a number of new hotels are planned in and near Downtown, which will bring more people to shop, dine and visit ultimately supporting existing Downtown businesses.
In addition to the AC Hotel by Marriott planned for Downtown, other hotels in the Wo Fat and Yee Hop buildings are expected in the area.
One, its good for Downtown, but I think those hotels will do well and theyll be a great alternative for people who come to Oahu and dont want to be in Waikiki, said Aucello, whose company offers hospitality real estate consulting and brokerage services. I think those guys will do well.
4. New housing efforts
Along with office conversions, more housing projects are being planned to bring more residents Downtown.
Camps Avalon group, for example, is also working to add affordable senior housing at the top of Fort Street Mall.
In a follow-up email with PBN, Camp said the project, which is being developed on behalf of Catholic Charities Hawaii Development Corp., will have 66 resident units and one resident manager unit for seniors making 30% to 60% of the area median income. It will also include space for The Roman Catholic Diocese program office. Avalon is jointly developing the project with CCHDC, and it will be owned by CCHDC, she said.
Her Downtown projects, however, wont break ground this year because of the nature of the permitting process, she said.
Additionally, Camp said there are other housing efforts underway near Fort Street Mall.
5. Future projects
In addition to
Friday, March 24, 2023 at 12:19 am