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NO SPACE? NO PROBLEM: A CITY REINVENTS ITSELF

These days Honolulu might look more like New York City than an island paradise. It enjoys the same successes and faces the same pitfalls as New York: high rents, major traffic, booming retail, vertical design and millions of tourists. And like the Big Apple, the Big Island suffers from lots of congestion.

Honolulu has only so much space, of course, comprising 82 square miles, and its retail sector has felt the squeeze. “Space is running out,” said Molly Mosher-Cates, managing director of the Kailua, Hawaii, office of Sperry Van Ness. “The only place you can add space is vertically, and we are seeing that, as well as redevelopment projects.” Honolulu’s retail vacancy rate is just over 2 percent, Mosher-Cates says, and one redevelopment project, the Waikiki Beach Walk, has its developer, Outrigger Entertainment Group, moving as fast as possible to create more hotels and condominiums. The new Trump Tower, part of Waikiki Beach Walk, sold all its $700 million worth of condominium units in one day. Five hotels are being planned as part of the $500 million project, and 46 new shops and five new restaurants have already opened on the Beach Walk.

Shopping centers, too, are getting new life. One of the largest retail projects is the redevelopment of Waikiki’s Royal Hawaiian, by the Los Angeles-based Festival Cos. “It’s essentially the Rodeo Drive of Hawaii,” said Rosalind Schurgin, principal of Festival Cos. “We’ve completely redone it, especially with remerchandising. It hadn’t been touched in 24 years.”

The center will feature 110 new stores and a dining area with nine restaurants, spanning three blocks. The center will contain a 40,000-square-foot park called The Royal Grove, planted with coconut palms. The $165 million redevelopment, begun in 2005, is slated for completion sometime during the third quarter. Schurgin says one of the major challenges has been that the center has remained open during construction to cater to Honolulu’s year-round visitors. “We have retailers, like Hermés, Ferragamo and Fendi, that have opened flagship, two-level shops in our center,” Schurgin said. “We have retailers that have never been in Hawaii before.” And she predicts that they will not be disappointed. “Stores in Waikiki typically do 2.5 times the sales volume of stores in the continental U.S. The pedestrian count and the number of visitors is so high, they see the results of that.”

— Kerri Linden

RETAILERS BRAVE OCEANS FOR STRONG SALES

U.S. big-box stores have avoided Hawaii for a long time, largely because of the prohibitive cost of shipping merchandise from distribution centers on the mainland. But the trend is reversing, observers say, with chains such as Costco and Target opening new stores and Nordstrom planning to open a 200,000-square-foot unit at Ala Moana Center (right). The retail vacancy rate is at a 15-year low, according to the latest market research by locally based PM Realty Group. The firm expects base rents on retail space to be about $3.05 per square foot on average this year.