Warehouse Condos Coming To Kapolei
The Crossing at Kapolei Business Park West
Avalon Group keeps finding creative ways to expand its Kapolei presence. Their latest warehouse condo project, announced in May ‘21, speaks to the continuation of red hot demand in Oahu’s industrial market. On a 5.15 acre parcel in Kapolei Business Park West, the project is comprised of forty-eight small warehouse units in the 1,000 - 2,500 sf range. Completion is anticipated by summer or early fall 2022.
The logic for going the condo route makes total sense. Hawaii has always been a pride-of-ownership market, but in today’s environment, coming up with a $1mm for the smallest available lots out there, plus another few million for construction costs, even with the help of financing (assuming an individual qualifies), is no small feat for most businesses. Instead, Avalon will deliver units turn-key with many users likely already qualified for SBA loans which allow for as little as a 10% down payment at lower-than-market interest rates.
Granted, there are cycle risks, especially with for-sale product as any condo developer would know. Waipio Business Center, a similar warehouse condo project, built right around the GFC, failed due to unfortunate cycle timing. However, with Avalon’s upfront involvement in the original land subdivision, (purchased in partnership with Walton Street in 2014) it’s logical to assume their low land cost basis gives the project plenty of cushion should the market soften. Besides market conditions, construction costs will be squarely in focus for any developer breaking ground in the next 12 - 18 months. At last glance, many of the components of warehouse construction, especially steel, were not easing off the way lumber has in recent months, to the benefit of the residential development market.
With Oahu’s industrial market firing at a low 4.7% vacancy rate (per CBRE) as of Q2 2021 and rents climbing back up, the back-up option of leasing these spaces doesn’t seem too bad either. It’s essentially what Nan Inc did with Malakole Industrial Center, a recently completed warehouse complex with for-lease small units right around the corner in Kapolei. The majority of available units for lease start around $1.25 psf per month.
For more PBN coverage: https://www.bizjournals.com/pacific/news/2021/05/18/avalon-plans-industrial-condo-project-for-hawaii.html