Hawaii's economy in 2008 is satisfactory, but is clearly showing signs of slowing to a crawl. The condition of the market is much better than it was in 2001 as employment figures are still reasonable, and economic growth projections remain positive.
The Hawaii commercial real estate industry is certainly subject to the same adverse conditions being felt across the US; however, the basic fundamentals of market supply versus demand are in relative balance in Hawaii. While there was healthy growth for new space in the retail sector in the past seven years locally, there was only very marginal growth for new office space, industrial and multifamily. We are no longer seeing upward pressure on rents, but neither are we seeing downward pressure.
We are not looking at particular markets or sectors, but rather at the Hawaii economy as a whole. We still see a relatively unbalanced economy that relies too heavily on military and tourism spending, but we hope to encourage corollary relationships with industries that can build on our existing ones. For example, we need to be supporting the dual use companies in the defense sector as they will bring wider commercialization opportunities. People tend to look at San Diego or San Francisco's Silicon Valley as models for Hawaii, but only look at the last 10 to 15 years as a basis for comparison. The genesis of California's technology success was rooted in the defense sector. However, the largest issue Hawaii faces today is addressing our basic infrastructure, including the three major areas of housing, education and transportation. All three areas are in dire condition, and while progress is being made, now is the time to redouble our efforts.