Last week, the international press spotlight was on Kakaako. The Financial Times published an article on Honolulu's Kakaako neighborhood, which highlighted current and future development in Ward Village. Jack and May were also interviewed for the article. Read more, below:
A few miles from Oahu’s famed Diamond Head volcano, more than a dozen residential towers are in development in a neighbourhood once dominated by warehouses and small shopping centres.
The largest project in Kakaako, which is about halfway between downtown Honolulu and the tourist haven of Waikiki, is the 60-acre Ward Village, a mixed-used development that will ultimately include more than 4,000 condos. Five more projects with a total of more than 1,680 units are scheduled to complete within the next three years in the area.
“It’s amazing what’s happened [in the area]”, says Stephany Sofos, a local real estate consultant. She describes activity as “frenetic”. New apartments “have been selling in a week or two”, she says.
Of the 1,400 units at Ward Village put on the market since 2014, 1,100 have been sold, with prices ranging from $1.5m to $14.5m, says Nick Vanderboom, senior vice-president of development for the Dallas-based Howard Hughes Corporation, which is developing the project. “There is a tremendous amount of pent-up demand,” he says. “The biggest thing we learnt is that Oahu is tremendously under supplied.”
Honolulu has traditionally been a difficult place to find a low-cost home. Developers have largely focused on the resorts, where there is little space for new projects, while downtown is primarily known as an office and business district.
The median price paid for a condo in Oahu jumped 8.3 per cent in 2016, to $390,000, according to the Honolulu Board of Realtors. In Waikiki, the most popular destination for international buyers, a three-bedroom, 2,504 sq ft penthouse in a 56-year-old oceanfront building is listed for $3.98m.
Since it is difficult to find developable land in Waikiki and other resort areas, builders are having to look for new neighbourhoods. Kakaako is “the last urban infill site” in the area, says Ricky Cassiday, a local real estate consultant.
The state created a special community development district in 1976 to facilitate development in Kakaako, but progress has been slow. High land prices, requirements for low-cost housing, a lack of infrastructure and escalating construction costs — coupled with the ups and downs of the property market, including the global downturn in 2008 — damped developer enthusiasm, says Cassiday.
The site for Ward Village was owned by the same family for more than 100 years until it was purchased in 2002 by General Growth Properties for $230m. In 2010, General Growth spun off the Howard Hughes Corporation, which traces its roots to the aviator and tycoon, and included the Kakaako property in the deal.
The first residential tower in the Ward Village development, the 36-storey Waiea, was completed in December. Two more towers, with a total of more than 775 units, are scheduled to complete by the end of 2018.
Condos in Ward Village have been selling at a “significant premium to the rest of the market”, with the average price close to $4m, Vanderboom says. In the Waiea tower, four apartments sold for more than $10m and another sold for $9.8m, he says. However, a five-bedroom, 10,000 sq ft penthouse with an infinity pool priced at $36m — which would be the highest price ever paid for a condo in Hawaii — remains unsold.
Kakaako is already one of the most expensive neighbourhoods on the island, with a median sale price of $530,000 in 2016, according to Locations, a Hawaii real estate company. A two-bedroom, 839 sq ft apartment in a 21-storey building neighbouring Ward Village is on the market for $720,000.
Local property agent Jack Tyrrell and his wife, May, bought two apartments in the Waiea tower in 2014 — one to live in themselves and one as an investment. They paid about $3m for their own home, a 2,000 sq ft three-bedroom apartment on the 13th floor with views of Diamond Head. The other apartment is rented out for $11,000 a month.
“It’s close to Waikiki, but it’s not Waikiki,” Tyrrell says of the neighbourhood. “There’s a much more peaceful, residential feel.”
About 80 per cent of the buyers in Kakaako are locals like the Tyrrells, who are often downsizing from a larger home or first-time buyers, according to research by Locations. This contrasts with tourist-focused areas such as Waikiki, where foreign buyers might account for the majority of sales in many buildings, agents say.
Most foreign buyers are from Japan, which has strong ties to Hawaii. About 13 per cent of the population were identified as Japanese in the 2010 census; in the 1920s more than 40 per cent of the territory’s population was Japanese.
Buyers in Kakaako are primarily interested in homes priced under $1m, says Robin Markle, vice-president of new home sales for Locations. Prices in the next two Ward Village towers start at $400,000, and a fourth tower offers Hawaii’s mandated low-cost housing units, with prices between $300,000 and $600,000 for qualified buyers.
Even with so many towers in the pipeline, developers should have few problems finding buyers, says Markle.
“There is plenty of demand left, especially in the $300,000 to $900,000 range,” he says.