Isle of Opportunity
Emerging as the leader in the state’s economic growth, the Big Island boasts a newfound confidence, a tight labor market, and a heavily diversified economy.
Critics deemed it one of the worst movies of his career, a total flop. But for Big Island residents, Kevin Costner’s Waterworld was a blessing. Crews for the sci-fi water-flick had begun filming within weeks of the shutdown of Hamakua Sugar in October 1993. Waterworld injected more than $40 million into the Big Island’s economy during their 14-month stay, employing more than 300 displaced sugar workers. “It was the best awful movie ever made,” says Hawaii Island Economic Development Board President Paula Helfrich. “The movie was a $40 million bridge between the collapse of sugar and new agriculture. Every dime that was spent benefited this economy at a very perilous time.”
Helfrich says it was around that time when people started to get more confident and the overall outlook for the island’s economy started to shift from one of pessimism to optimism. People started to look towards other industries, and, in turn, triggered the steady climb out of a long recession. Seven years post-Waterworld, the Big Island’s economy is healthier and more diversified. Small businesses are reporting stimulated revenues, while the number of bankruptcy claims are on the decline. High-end real estate sales to Silicon Valley transplants are creating an increasing demand for high technology and construction jobs. And another indicator that the Big Island is ascending out from its economic slump: Job growth on the island leads the state at 2 percent, with unemployment down from 9.2 to 6.9 percent for the first quarter of 2000.
“Economic activity creates jobs and there’s a high level of involvement of tech money that’s coming out of California,” says Marni Herkes, president of the Kona-Kohala Chamber of Commerce. “The construction industry is really healthy, and so are agriculture and technology. Due to a heightened marketing campaign, our visitor industry is also really hot right now.”
According to the July 2000 survey by industry consulting firm PKF Hawaii, hotel occupancy on the Big Island climbed nearly 10 percentage points to 82.1 percent from 72.6 percent the year prior. Hawaii County also experienced the largest increase in average daily room rates this year, up from $164.27 last year to $169.20.
Helfrich has initiated new programs to promote what she calls “tourism product development.” “It’s high-end educational tourism, and it’s much more lucrative than standard hotel-stays. It’s not so much the room rate, but the length of stay and the value of expenditures,” says Helfrich.
She cites tourism product development as one of three viable investments the community can make in order to maintain and even further stimulate the island’s flourishing economy. “We need to develop value-added tourism product, science, technology and education, and diversified ag.”
|Papaya Profits: The value of diversified agriculture, such as these Puna apaya trees, already exceeds the highest value that sugar ever had on the island.|
Not only are Big Island farmers diversifying their crops—growing everything from vanilla to ginger root, but they’re also expanding the agriculture industry at large. With the advent of companies such as Hawaii Pride and Aloha Hawaii Enterprises, which provide manufacturing and post-harvest treatment services, farmers are no longer limited to strictly growing and producing. Manufacturing, exportation, cold-storage, marketing, and processing have all become feasible—and lucrative—means of adding value to agricultural products. “It’s not what you can plant anymore, it’s what you can sell,” says Helfrich.
The value of diversified agriculture already exceeds the highest value that sugar ever had for the Big Island. In its prime in 1993, the value of sugar capped at $39 million, while, still in its early stages, the value of diversified agriculture crops is now $155 million. “Likewise, the value of flower and nursery products in 1997 is equal to that of sugar in 1993,” says Dr. Marsha Sakai, director of University of Hawaii at Hilo School of Business. “There’s a high interest for tropical ornamental plants and flowers.” Farmers are utilizing every inch of their small 3- to 5-acre farms to produce guavas, papayas, bananas, kawa, and practically everything else under the sun, to supplement a growing industry.
There’s also evidence of an upswing in the island’s construction activity. For the first half of 2000, the total number of building permits authorized increased 23.5 percent from last year, while the total dollar value of those permits increased 22.4 percent. Construction jobs climbed 45.5 percent from last year. And the construction industry’s average hourly earnings jumped from $19.60 in 1989 to $27.58 a decade later.
Construction in East Hawaii is being primarily fueled by jobs in the public sector. Projects such as the long-awaited $100 million Saddle Road Project, and the $30 million development of Kamehameha Schools’ 300-acre Keaau Campus are keeping construction activity lively. In addition, UH Hilo has allocated over 400 acres for the expansion of its internationally acclaimed research and technology park.
In contrast, construction in West Hawaii is primarily residential. “Contractors and sub-contractors on the West Side have been busier,” says Mike Fujimoto, CEO and president of HPM Building Supply. The heavier demand for residential and property lots and the diminishing supply of available resorts and condos are also driving construction. “We don’t have a lot of oceanfront properties left and some that are left are going for $10 million a piece,” says Kona-Kohala Chamber of Commerce’s Herkes.
The influx of tech money from the mainland, primarily the West Coast, has had a substantial impact on the Big Island’s recovering economy—particularly real estate sales. Hawaii Island Board of Realtors President Chris Brilhante says the market is experiencing a sort of trickle-down effect island-wide. “It started in the upper end, with the dot.com people coming from Silicon Valley to buy second homes, luxury lots, and oceanfront properties,” he says. “But because of that activity on the upper end, it really pulled the whole market up.”
In a market where offshore buyers have been competing with residents for a limited pool of available inventory, single-family home prices have continued to show steady gains. Resales of Kailua-Kona single-family homes have increased 30.7 percent from last year. Land sales for Hawaii County totaled 867 mid-year, which was a 16 percent drop from last year’s 1,030 during the same period. The average land price, on the other hand, increased 18 percent for Hawaii County, and a whopping 36 percent in Kona. “Not to worry,” says Michael Sklarz, Prudential Locations’ director of research. “So many of these prices are still well below their levels of 10 years ago.”
|Big Island, big spendors: Island officals hope to increase the length of stay and the money spent at properties like Bay Club to Waikaloa.|
Yet while vacant lots remain abundant and under-valued, condominium and resort inventory are drying up at staggering rates. Sklarz notes the “baby-boom phenomenon” as something to gear up for in the near future. “The number of people 50 and 60 and above will increase rapidly over the next 10 years. Any resort market will be logical places for them to buy second and retirement homes,” he says. “Unfortunately, we just don’t have the capacity to build new units to absorb that demand.”
Due to the lack of availability of existing properties in Kona, buyers are venturing out to Hilo, Puna, and the up-and-coming Hamakua Coast. “People are able to buy 70 acres at a price where they’d only be able to buy two acres in Kona,” says Brilhante. And a strategic location coupled with the recent advancements of modern telecommunications make it increasingly easier to conduct business from all parts of the island.
At least that seems to be the consensus gathered from a small wealth of high technology businesses setting up shop on the Big Island. “It’s no longer relevant where we are as much as whether we can be contacted and whether we can deliver,” says Randy MacDonald, senior partner of Global Gecko Internet Consultants. Groups such as the Hawaii Island Technology Association and the newly founded Big Island Chapter of the Hawaii Technology Trade Association spotlight growth in such fields as information technology, astronomical sciences, biotechnology, computer science and agricultural science. However, inadequate Internet connections and a lack of skilled technological workers continue to hinder the ability to expand the high-tech industry to its full potential.
Local network management company Integrated Networks maintains its corporate office in Kamuela, although the Honolulu office serves as its engineering and technological systems base. Integrated Networks President Mark Cook projects a self-stimulated economy for Hawaii. “I don’t think we should be hyped up for the infusion of money from the mainland because the economy’s so good,” says Cook. “ The moment that oil prices start going through the roof—and an oil shortage is inevitable—people won’t want to fly here anymore. Local businesses need to understand why they need to make a shift to the New Economy and how important IT (Information Technolgy) is to their infrastructure.”
Whether it be a shift into the New Economy or a shift into one of many new industries, Big Island residents certainly appear to be moving in the right direction. “It’s a lot of hard work that brought us to where we are, and we’re just getting started,” says Helfrich. “If we keep our heads down and keep working, we can maintain this pace no problem.”
With a sequel to Waterworld very unlikely, that’s very good news.
|Building Name||Address||Island Area||Owner||Leasing Company||Leasing Phone||Year Built||Number of Floors||Total SF in Complex (Net)||Total Available for Lease||Direct||Sublease||Rate Type||Ground Floor Rent||Upper Floor Rent||CAM|
|141 Haili Street Building||141 Haili Street||East Hawaii – HiHilo||Security Partners||Hilo Security Partners||523-8922||1949||1||34,351||0||0||0Net||—||—||—||—|
|American Savings Building||100 Pauahi Street||East Hawaii – Hi||Hideo Saito||New Kaiko’o Building||935-0565||___||2||16,910||500||500||0Net||—||$1.00||$0.55||___|
|Bank of Hawaii Building||120 Pauahi Street||East Hawaii – Hi||New Kaiko’o Building, Inc.||New Kaiko’o Building||935-0565||1972||3||31,562||1,200||1,200||0Net||—||$1.00||$0.55|
|Garden Exchange Building||290 Keawe Street||East Hawaii – Hi||Garden Exchange Ltd.||Garden Exchange Ltd.||961-2875||1936/1942||2||21,000||0||0||0||Gross||$1.25 – $1.50||—||____|
|Goo Building||Corner of Kinoole & Haili||SEast Hawaii – Hi||John Pearne||Matchmaker Realty Co.||935-6922||1942||2||7,000||—||—||—||Gross||—||—||—|
|Hilo Plaza Building||180 Kinoole Street||East Hawaii – Hi||Hawaiian Sun Investment||Hawaiian Sun Investment||935-4728||___||3||17,000||2,000||2,000||0||Gross||___||$1.30||—|
|Keawe Center||190 Keawe Street||East Hawaii – Hi||Keawe Group||Ala Kai Realty||935-4918||1960||2||10,851||2,100||2,100||0||Net||$1.00 – $1.2||$1.00 – $1.25||$0.75|
|Kress Building||174 Kamehameha Avenue||East Hawaii – Hi||Market City Ltd. / Oceanview||Market City Management||734-0282||1996||3||25,210||16,891||16,891||0||Gross||$1.00||$0.75||—|
|MJD Building (frmrly Lycur56)||Waianuenue Avenue||East Hawaii – Hi||Melvin Shigeta/Maikai Realty||Ala Kai Realty, Inc.||935-3378||1939||2||11,500||360||360||0||Gross||—||$1.00||—|
|Ponahawai Professional Cntr||275 Ponahawai Street||East Hawaii – Hi||Ponahawai Joint Venture||Ginoza Realty||969-1471||1974||2||15,600||0||0||0||Net||—||$0.95 -$1.25||$0.28|
|The Matchmaker Building||Corner of Ponahawai & Kilau||East Hawaii – Hi||John Pearne||Matchmaker Realty Co.||935-6922||1940||2||3,500||—||—||—||Gross||—||—||—|
|Waiakea Office Plaza||345 Kekuanoa Street||East Hawaii – Hi||Department of Water||Dept. of Water||961-8660||1971||1||24,475||0||0||0||Gross||$1.50||$1.50||—|
|Alii Sunset Plaza||75-5799 Alii Dr.||West Hawaii – Ko||Kona View Partners||Property Network||329-9300||1990||1||22,800||5,500||5,500||0||Net||$2.00||—||$0.55|
|Bali Kai Business Center||76-6241 Alii Dr.||West Hawaii – Ko||Mr. & Mrs. Pires||Clark Realty Group||329-6446||1998||2||2,288||0||0||0||Net||$1.00 – $1.2||$1.00 – $1.25||$0.64|
|Casa Business Center||75-6082 Alii Drive||West Hawaii – Ko||Waterfront Investments, Inc.||Knudsen & Associates||329-1010||—||2||7,000||0||0||0||Gross||$2.00||$2.00||—|
|Frame Ten Center||75-5586 Ololi Road||West Hawaii – Ko||Frame Ten||William L. Wong, CPA||329-0911||—||3||7,305||2,328||2,328||0||Net||—||$1.00 – $1.50||$0.59|
|Hanama Place||75-5706 Kuakini Highway||West Hawaii – Ko||
||PATDI Inc.||326-6022||1990||1||13,715||3,000||3,000||0||Net||—||$1.85 $0.62||___|
|Hualalai Professional Cntr||75-170 Hualalai Road||West Hawaii – Ko||DND||Chaney Brooks & Company||322-3777||1980||3||27,837||5,269||5,269||0||Net||—||$1.35 – $1.50||$0.53|
|Kailua Trade Center||75-5706 Hanama Place||West Hawaii – Ko||75-5706 Hanama Partners||Holualoa Management Corp||329-6060||1980||3||18,122||2,062||2,062||0||Net||—||$1.30 – $1.50||$0.70|
|Kaiwi Square Office Bldg||74-5565 Luhia Street||West Hawaii – Ko||Mauna Lei Partners||The Commercial Group, Lt||329-1111||1987||2||37,590||565||565||0||Gross||$1.00 – $1.5||$0.80||$0.46|
|Kamuela Business Center||Mamalahoa Highway||West Hawaii – Ko||Hawaiian Trust Co.||PATDI Inc.||326-6022||1991||1||18,437||0||0||0||Net||$1.00 – $1.5 —||$0.32||____|
|Kealakekua Business Center||81-980 Halekii St.||West Hawaii – Ko||Hawaiian State||Clark Realty Corp.||329-6446||1980||1||27,000||4,000||4,000||0||Net||$1.00 – $1.2||$1.00 – $1.25||$0.40|
|Kona Plaza||75-5719 Alii Drive||West Hawaii – Ko||Island Equities||Property Network, Ltd.||329-9300||1973||1||8,630||0||0||0||Gross||—||$2.00||—|
|Kuakini Commerce Center||75-5737 Kuakini Highway||West Hawaii – Ko||HPC & Associates||HPC & Accociates||329-3519||—||2||9,448||0||0||0||Net||$1.60||$2.00||$0.65|
|Kuakini Plaza South||77-6400 Nalani St.||West Hawaii – Ko||Mizuta||Clark Realty Corp.||329-6446||1998||2||2,812||1,125||1,125||0||Net||$1.00||$1.00||$0.40|
|Kuakini Towers||75-5722 Kuakini Highway||West Hawaii – Ko||Putnam D. Clark||Clark Realty Corp.||329-6446||1978||2||25,719||2,500||2,500||0||Net||$1.25||$1.25||$1.17|
|Lanihau Professional Cntr||75-5586 Ololi Road||West Hawaii – Ko||Frame Ten||William L. Wong, CPA||329-0911||1991||2||18,004||4,394||4,394||0||Net||—||$1.50 – $1.75||$0.59|
|Lunapule Professional Plaza||75-127 Lunapule Rd.||West Hawaii – Ko||William Babbit, DDS||Property Network||329-9300||1992||2||16,180||9,384||9,384||0||Net||$1.25||$1.25||$0.45|
|Palani Court Office Bldg||74-5620 Palani Road||West Hawaii – Ko||James Trask/Real Estate Cnslt||James Trask||329-2213||1991||2||18,745||6,561||6,561||0||Gross||—||$2.25||$0.65|
|Territorial Center||75-5751 Kuakini Highway||West Hawaii – Ko||Willum Ltd.||Property Network||329-9300||1984||2||16,088||1,490||1,490||0||Net||$1.25||$1.10||$0.69|
|The Pottery Terrace||75-5995 Kuakini Hwy.||West Hawaii – Ko||Gordon Bartsch/Don Leonard||Gordon Bartsch/Don Leo||329-3203||—||2||50,000||1,600||1,600||0||Gross||—||$1.65||—|
|Village Professional Plaza||Kuakini Highway||West Hawaii – Ko||Petty Corporation||Clark Realty Corp.||329-6446||1992||2||10,003||0||0||0||Net||$1.25||$1.25||$0.65|
|Waikoloa Highlands Center||Waikoloa, HI||West Hawaii – Ko||Jason North, Corp||Old Hawaii Realty||329-7373||—||2||19,934||7,000||7,000||0||Net||—||$1.50 – $2.00||$0.49|
|Waimea Office Center||Kamuela, HI||West Hawaii – Ko||Hawaiian Trust Co.||PATDI, Inc.||326-6022||—||2||10,125||2,025||2,025||0||Net||—||$1.25 – $1.45||$0.44|
|Wiliwili Center||Kalawa Street||West Hawaii – Ko||Gordon Bartsch/Don Leonard Gordon Bartsch/Don Leo||329-3203||—||2||8,800||0||0||0||Gross||—||$1.65||—||____|