UHERO Says Construction Forecast Positive
The newest University of Hawaiʻi Economic Research Organization (UHERO) released its construction forecast last week, and projections are positive.
The forecast indicates that Hawaiʻi construction activity continues at a healthy pace, with a modest pickup over the past year. New and pending projects, particularly high-rise residential building on Oʻahu, will sustain construction employment near its current level for the next several years, a UHERO release said.
Planned large-scale public sector projects will provide additional support. The primary risk to this forecast is a falloff in demand that could come from weakening local and global economic conditions, the release continued.
Number of building permits issued has fallen
The number of issued building permits has fallen off this year. However, this reflects in part delays in Honolulu permitting.
Large number of Oʻahu condominium projects underway
There are a large number of condominium projects underway on Oʻahu or planned for groundbreaking, centered in Kakaʻako and near Ala Moana Center. Affordable housing is an important piece of this activity.
Home resale markets soften
Home resale markets have softened over the past year, with a decline in resale volume on all islands. This is putting downward pressure on resale prices in most markets.
Resort construction focused on large renovation projects
Large renovation projects and a few new towers are the focus of resort construction. The bulk of this activity is in Waikīkī, although major resort renovations are also underway on Maui and the Big Island. New hotel projects on Kauaʻi have been stalled for now by financing difficulties.
Upgrades and incremental additions to be focus of retail space expansions
The past five years have seen a considerable expansion of retail space, despite the structural challenges from online shopping.
Considerable projects forthcoming in public sector construction
Despite a steep falloff in government contracts awarded this year, there is considerable forthcoming public sector construction. The largest projects are on Oʻahu, including rail transit, planned redevelopments of Aloha Stadium and the Neal S. Blaisdell Center, and the expansion and updating of facilities at the Daniel K. Inouye International Airport.
Enforcement on vacation rentals bring uncertainty
An uncertainty that has been added to the mix is the City and County of Honolulu’s crackdown on transient vacation rentals. The new enforcement actions have already reduced the available stock of visitor accommodations, which may support resort-related development.
Outlook is favorable but not immune
While the outlook remains favorable for continued construction near current levels, the industry is not immune to adverse economic developments here or beyond our shores. The weakening local economy could undercut local demand, and the global slowdown is a concern for offshore demand and project funding. At the same time, lower interest rates are a clear positive, as is the resilience so far of U.S. consumer spending.