Q2 Delivers Strong Results for Oahu Industrial Market
If there’s any doubt the future of real estate is industrial, all you have to do is glance at Collier’s recently released Q2 2021 Oahu Industrial Report. The pandemic-induced slowdown seen in the second half of 2020, leading to a nine-year high of 3.05% at year-end, per Colliers, has turned the corner sharply. Oahu’s total market size of roughly 41 million SF absorbed 196,872 sf of new demand, pushing down quarter-end vacancy to 2.29% from 2.78% at the end of Q1 2021.
Curiously, “asking” rents are still only inching up incrementally, around $1.25 psf/month, down slightly from $1.28 psf/month in Q1 2021, but up from $1.20 psf/month in Q2 2020. Given that asking rents represent a skewed data set of rents of vacant spaces available at a point in time, it’s probably mostly noise to look at the data on a quarterly basis. Zooming out to annual numbers, with a glance back in history, you might ask, “why haven’t rents today risen much higher than where they stood in 2015 at around $1.24 psf/month?” Aging product in town? Or perhaps only the worst spaces stay on the market long enough to be captured by the data? Maybe we’ll soon see a tipping point where the growing stock of new supply in places like West Oahu, with starting asking rents closer to $1.35 psf/month or higher, finally starts moving the average numbers upwards.
However we slice the pie, it’s clear local businesses have regained confidence in Hawaii’s economy, with renewed willingness to sign leases and expand into larger spaces, where available. The underpinnings of future economic growth can be seen everywhere from inbound arrivals, hotel occupancy, rebound in retail spending and a red-hot residential real estate market. The later of which which has the ripple effect of creating construction jobs and a multitude of related service activities, much of which leads to the need for industrial space to house these expanding operations.
Despite the good news, I can’t help but peak around the corner as we enter a period of growing COVID cases related to the Delta variant. Q3 2021 will likely continue the trend of last quarter. Beyond is anyone’s guess, much dependent on the likelihood of future restrictions weighing on daily life and a fragile rebounding business sector.