Although statistics from Hawaii's Department of Economic Development, Business and Tourism cite retail jobs on the rise in the Aloha State (at 117,350, up 3.4% from 2000), figures also reveal a visible visitor slowdown. From January through April of 2001, Hawaii had close to 2.3 million visitors. That number sounds high, but it represents nearly 14,000 fewer money-toting tourists than the islands welcomed during the same period of 2000.

Whereas local retail developers, architects and property managers offer mixed views of Hawaii's current retail condition, Steve Sofos, a retail consultant and president of Honolulu-based SL Sofos & Co. Ltd., is perhaps the most realistic. “We're a little down in the resort area right now,” Sofos says. “People are visiting and eating out. They're just not spending. But our residents are still spending. All this makes Hawaii a little sideways right now in terms of retail movement.”

Located some 2,397 miles west of San Francisco and 5,293 miles east of the Philippines, Hawaii depends on both American and Asian economic factors. “The exchange rate is probably the biggest influence on retail sales in Hawaii,” notes Jon-Eric Greene, senior vice president and retail services manager for Colliers Monroe Friedlander of Honolulu. “1995 was a huge year here because the Yen was trading in the mid-80s. Now it's trading in the 120s to 130s. The ideal range is from 100 to about 108. That's the best range for visitor spending in this market.”

Tourism is no doubt Hawaii's largest industry. The state's resident population hovers near 1.2 million, but the number of annual visitors is now approaching 7 million. Consequently, island resort areas such as Waikiki (on Oahu), Wailea (on Maui), and Waiakoloa (on Hawaii) are cashing in on new retail projects as well as expansion and renovation of existing properties.

The market

“Waikiki, for example, has experienced more retail development and capital investment in the past two years than it has in nearly 20 years,” explains Cheryl Lau, a senior associate with Honolulu's CB Richard Ellis Hawaii, Inc. “And on the island of Hawaii, the Kings' Shops located in the resort area known as Waikoloa added approximately 20,000 sq. ft. to its existing resort center. A similar amount of space is planned for a second expansion in 2002.”

While people are quick to take notice of the recent retail growth on Maui and the west side of the Big Island of Hawaii, particularly the Kailua-Kona area, the Neighbor Islands also have been experiencing rapid development. “There's a lot of investment in the Neighbor Island markets,” says Greene. “Real estate investment is way up, mainly due to people that have made money either in Internet businesses or on the stock market. And real estate sales translate into retail sales.”

Still, not all development in Hawaii is tourist-sensitive. “Although we do depend a lot on the visitor market, residents in Hawaii spend a lot of money. There are a lot of discretionary dollars here,” says Dolores Hansen, owner of Hansen & Associates, Honolulu, an international marketing firm for shopping centers. “Twenty years ago people had to go to the mainland and shop because there was just nowhere to go in Hawaii. All that is changing. Now, we've got everything from outlet centers to European designers here.”

The big-box fervor on the mainland hasn't ignored Hawaii either: Kmart, Wal-Mart, Costco and Home Depot all opened or signed deals for new stores in the past year. However, Phil Russell of Honolulu-based Graham Murata Russell believes the category killers are beginning to retrench.

“For a time, big-box retailers were making serious efforts to expand in Hawaii, but they're not aggressively going for locations here now.” Graham Murata Russell acts as property manager and leasing agent for retail properties, including the Lanihau Center in Kailua-Kona on Hawaii.

The projects

As Lau points out, resort areas such as Waikiki on Oahu cater primarily to tourists, with some 90% of retail establishments trying to tap into the segment.

The recent opening of DFS Galleria in Waikiki, a 175,000-sq.-ft. center that's built on the theme of Old Hawaii “is very popular with Japanese visitors, who are more accustomed to Vegas-like experiences,” says Matthew Gilbertston, principal and design coordinator for Architects Hawaii Ltd., Honolulu.

Development is aflutter on the island of Maui as well. Three new shopping centers opened on the island last year: Maalaea Harbor Village, Piilani Village Shopping Center and The Shops at Wailea. Piilani Village is a 150,000-sq.-ft. facility that hosts grocery chain Safeway's largest store in the state, in addition to familiar retailers such as Outback Steakhouse, Blockbuster and Nevada Bob's Golf.

The Shops at Wailea is a long-awaited development for Maui. At 160,000 sq. ft., the center opened in December with 15 tenants and now has 58. The center's upscale East Wing includes Gucci, Coach, Tiffany & Co., and Luxe International, as well as Fendi and Charles Jourdan, both new to Maui. Italian designer Massimo Rebecchi's also chose to open his first U.S. location at The Shops at Wailea.

Near Maui Marketplace in Kahului, Maui, big-box retailers are knocking on, if not down, competitors' doors. Maui Marketplace opened in 1997 featuring a grouping of category killers including Lowe's, Sports Authority and Borders Books and Music. But stand-alone giant The Home Depot recently opened a 130,000-sq.-ft. store in the area, and a Wal-Mart Supercenter is on the way. The 150,000-sq.-ft. Wal-Mart is expected to compete heavily with Kmart and Costco, both within close proximity.

The future

As Hawaii ushers in new retailers, there is still desire for more. “The craft category is poorly served in my opinion,” says Norbert Buelsing, executive vice president of Honolulu-based Alexander & Baldwin's properties group. “The food category is missing a large number of food providers, too,” says Buelsing. “Outback Steakhouse and Chili's Grill & Bar are here, but there is the opportunity for much more.”

Jon-Eric Greene of Colliers Monroe Friedlander sees stores expanding that have been in Hawaii for five to 10 years, but isn't witnessing a tremendous influx of new retailers. Phil Russell agrees. “People used to look at Hawaii as a stepping stone for expanding into the Far East. Now, with the Asian economy having such difficulty, there doesn't seem to be as much confidence in companies to expand.”

“I think the next big boom in Hawaii will be village or lifestyle retail that seems to be the trend du jour on the mainland right now,” adds Greene. And he is likely on the right track. Architects Hawaii is currently working on the 64,000-sq.-ft. Shops at Mauna Lani on the Kohala Coast of Hawaii. The shops are scheduled to open in fall of 2002 with a mix of specialty retailers, restaurants, office space and grocery offerings.

“Five years ago, Hawaii was at the height of its economic malaise,” says CB Richard Ellis' Lau. Today, the general belief is that Hawaii, which Mark Twain once termed “the loveliest fleet of islands that lies anchored in any ocean,” has weathered the worst of its economic times and is on “a definite uptick.”

Stephanie Flack is a Golden, Colo.-based writer.

Hawaii economic statistics for April 2001
Data April 2001 % Changed from April
Civilian Labor Force 609,600 2.3
Unemployment Rate 4.0 -0.2
Total Non-agriculture Wage & Salary Jobs 561,400 2.4
Retail Wage & Salary Jobs 117,350 3.4
Private Building Permits 127,140 6.5
Residential Permits 64,514 -12.1
Commercial & Industrial Permits 26,204 145.9
Additions & Alterations Permits 36,422 2.9
Visitor Arrivals by Air 558,253 -2.4
Domestic Visitors 371,154 -1.5
International Visitors 187,099 -4.1
Sources: Hawaii Department of Labor & Industrial Relations; Hawaii Visitors & Convention Bureau; and Price WaterhouseCoopers — Hawaii. June 8, 2001.