Commercial Real Estate, Office

Downtown Honolulu office market stays flat

Demand for office space in downtown Honolulu is expected to remain flat or negative this year, with business possibly picking up in 2011.

The weak demand for space will be magnified by several large blocks of office space that will become vacant, according to the Honolulu office market report for the fourth quarter of 2009 by Hawaii Commercial Real Estate.

The vacancy rate for Class A downtown space was 11.5 percent at the end of the year. When sublease space is factored in, the rate was 12 percent, the report said.

The report noted that the relocation of one large tenant, [CompanyWatch allows you to receive email alerts with stories related to your companies of interest. <p>You can watch up to ten companies at a time.</p>] Morgan Stanley, to Pacific Guardian Center will create a domino effect. AECOM will move to Bishop Square to fill Morgan Stanley’s former office space, leaving 32,000 square feet vacant in Davies Pacific Center.

The report also noted that several other businesses will close their downtown offices, including Metlife Home Loans, which has a 12,000-square-foot space at Alii Place, and Pacific Health Research Institute, which has 11,500 square feet at Topa Financial Center.

Most demand for office space from new tenants is associated with Honolulu’s rail project and with the federal government, whose spending ranges from military work in Hawaii and Guam to relocating agencies during a renovation of the federal courthouse building and general federal services, the report said. Demand from businesses associated with tourism and real estate remains weak, the report said.