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Commercial Real Estate is Good News for Maui Economy

Number of building permits spikes 350 percent in first quarter.

September 13, 2012
Susan Halas , The Maui Weekly

A 350 percent hike in new, private construction building permits for the first quarter of 2012 compared with the same quarter a year ago was the best news delivered at the annual economic dog and pony show hosted by First Hawaiian Bank on Friday, Sept. 7.

The event held at the Maui Beach Hotel featured a survey of the global and national economic outlook by Dr. Jack Suyderhoud, professor of business economics at the University of Hawai'i at Manoa, while the state and local forecast came from Dr. Leroy Laney, professor of economics and finance at Hawai'i Pacific University.

Buried in Laney's segment was a whopper statistic for the local construction sector. "Any time one sees that kind of surge, it's probably due to a few major projects underway or in the pipeline," he said.

Laney highlighted the projects contributing to the growth, mentioning the recently completed Courtyard by Marriott, an Alexander & Baldwin (A&B) hotel near Kahului Airport, and A&B's new 179-acre, phase-two Business Park. Also on the Laney list was the Andaz Wailea Hotel project renovation of the Renaissance Hotel due for an early 2013 opening. He went on to mention the Maui Lani Village Center, Kaheawa Wind farm phase-two in Mala'aea and the Auwahi Wind farm in 'Ulupalakua.

Farther out and in the public sector he named the proposed construction of a massive consolidated car rental facility and other improvements to Kahului Airport.

Put all together, it spelled good news for Maui construction--news that was unique to the Valley Isle and not evident on any of the other Neighbor Islands.

He was also upbeat about the robust performance of Maui's visitor industry. No matter how he sliced it, the outlook was positive.

"In every measured category--arrivals, visitor days, length of stay, total spending, person per day and person per trip spending--Maui continues to be up from 2011." Laney also noted increasing airlift to Maui from Oakland, San Jose, Seattle, Sacramento, Bellingham, Monterey and Canada.

Then there was the not so good, but improving, jobs report.

"Jobs in each of Hawai'i's four counties peaked in December 2007, the same month the national economy entered recession," Laney said. "The job count has been climbing out of the post-recession hole ever since."

"At the deepest part of the recession, Maui was bringing up the rear in job creation relative to other counties," Laney said. "Yet it has made the greatest strides since then. Its level of jobs is now only 6 percent below the 2007 peak. The gap between Maui's jobless rate and the state rate has been narrowing steadily, the only Neighbor Island for which that is the case."

He even managed to put a positive spin on Maui's troubled residential real estate sector, saying, "The decline in median prices for both single-family homes and condos seems to be reversing, or at least leveling off." Inventory, the economist said, has declined almost 20 percent over the past year for both single-family and condo units.

Though the local view presented by Laney had a distinctly optimistic tilt, the big picture as seen by Suyderhoud was less sanguine.

"The most intractable issues revolve around the 'rebalancing' the world's major economies," Suyderhoud said. "Rebalancing requires steps that are pretty self-apparent, but really hard to implement."

In broad strokes, he painted a picture of the developed nations with meager growth rates, non-existent yields and mountainous debt. At the same time, bank ledgers are flush with money that was meant to stimulate growth.

He pointed to countries like Germany, China, Japan and Singapore--all in surplus positions with high domestic savings rates and positive trade balances. He contrasted these with the persistent trade deficit and low savings of the U.S. and many of the nations in the EU.

Suyderhoud closed with a mention of the November elections.

"In the short term," he said, it not clear that it matters who wins, because "the underlying economic issues we face for 2013 will still be there, and dealing with them will still involve the same types of choices. However, if after the election there is a lack of clarity in how we are going to confront our long-term rebalancing problems, that will cause our economy to further stumble.

"Right now, whatever growth we have is largely in spite of policies and not because of [government fiscal] policies. I am hoping that the election will provide the consumers and business some clarity in what to expect policy-wise for the next few years."



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