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Office market vacancy rises to 8.3% in third quarter

By Kristen Consillio

POSTED: 01:30 a.m. HST, Oct 03, 2008

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Honolulu's third-quarter office market vacancy rose to 8.3 percent - the highest since 2005 as the softening market continues its downward spiral, according to the latest report by Colliers Monroe Friedlander Inc.

The year-to-date increase in vacancy, which rose for the fifth consecutive quarter, totaled 91,773 square feet as nearly every submarket recorded occupancy losses in each quarter this year.

The outlook is dire with slowing demand, waning confidence among businesses and rising unemployment. Colliers anticipates vacancy above 9 percent next year. The highest vacancy in the last decade was 14.75 percent in 2002 following the Sept. 11, 2001, terrorist attacks.

"It definitely feels like (a recession)," said Mike Hamasu, Colliers consulting & research director. "We've been hit with significant inflation, unemployment's rising at a fairly rapid clip, we're faced with major layoffs in the business environment, optimism is down - definitely it doesn't feel like it's a positive situation."

Despite rising vacancy, landlords still have the upper hand in negotiating rents, the report said. The islandwide asking rent rose 14 cents in the quarter to $2.83 from $2.69 in the same period a year ago.

However, landlords have begun offering concessions, including free rent for several months and improvement allowances to retain tenants - an unequivocal sign of a weakening market, according to the report.

The firm doesn't anticipate a turnaround until 2010.

Honolulu's third-quarter office market vacancy rose to 8.3 percent - the highest since 2005 as the softening market continues its downward spiral, according to the latest report by Colliers Monroe Friedlander Inc.


The year-to-date increase in vacancy, which rose for the fifth consecutive quarter, totaled 91,773 square feet as nearly every submarket recorded occupancy losses in each quarter this year.

The outlook is dire with slowing demand, waning confidence among businesses and rising unemployment. Colliers anticipates vacancy above 9 percent next year. The highest vacancy in the last decade was 14.75 percent in 2002 following the Sept. 11, 2001, terrorist attacks.

"It definitely feels like (a recession)," said Mike Hamasu, Colliers consulting & research director. "We've been hit with significant inflation, unemployment's rising at a fairly rapid clip, we're faced with major layoffs in the business environment, optimism is down - definitely it doesn't feel like it's a positive situation."

Despite rising vacancy, landlords still have the upper hand in negotiating rents, the report said. The islandwide asking rent rose 14 cents in the quarter to $2.83 from $2.69 in the same period a year ago.

However, landlords have begun offering concessions, including free rent for several months and improvement allowances to retain tenants - an unequivocal sign of a weakening market, according to the report.

The firm doesn't anticipate a turnaround until 2010.

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