FIRST HAWAIIAN BANK ECONOMIC FORECAST - Big Island
BIG ISLAND STILL SHARING IN STATEWIDE EXPANSION
However, Signs of a Construction Slowdown Appear and Residential Boom Is Over
(Hilo, Hawaii, September 13, 2006) – Hawaii County continues to share in the blessings of the statewide economic expansion, now in its 10th year, First Hawaiian Bank Economics Consultant Leroy Laney said today. “Tourism continues to be healthy, especially the exploding cruise ship market. The labor market remains extremely tight,” Laney said at the 32nd Annual First Hawaiian Bank Economic Outlook Forums held at the Hapuna Beach Hotel and Hilo Hawaiian Hotel.
“But, for the first time, there are signs of a slowdown on the horizon for the construction industry. Also, the Big Island’s boom in residential real estate seems to be over, or at least nearing its final days.”
He offered these comments on Hawaii County’s economic sectors:
Residential real estate: “As 2006 has progressed, there has been a distinct drop in real estate sales activity across the Big Island. Local Realtors observe that speculators are gone, while potential buy and hold customers are waiting, watching prices closely.”
Through June 2006, sales volume in single-family residential properties was off 23.2 percent, Laney said. Median prices were up 17.3 percent, far less than the 33.5 percent rise for 2005, and increases in the 20 percent-plus range the two years before that.
“One thing is for sure -- buyers can no longer automatically expect a guaranteed immediate appreciation in Big Island real estate purchases,” he said. “One favorable development over the past year was the overturning of the controversial Hokulia ruling, which cast into doubt the legality of any residential properties built on agriculturally zoned land. With property rights more clearly defined, that shadow on real estate and the investment climate is removed.”
Labor market: “Employers everywhere on the Big Island are having a hard time finding employees. Traditionally, Neighbor Island unemployment rates are higher than Oahu's, but that gap is almost closed now for the Big Island. On the West side, jobless rates are already well below the statewide figure. Some estimates indicate that the Kohala Coast hotels have vacancies for almost a thousand workers.
“When job growth does eventually run out of steam, it could be as much because the island is running out of workers as it is because the economy itself is slowing.”
Tourism: “Big Isle tourism remains healthy in 2006, even though total visitor growth has come back down into a more normal range of 8 percent after 2005's surge of 16 percent. Total visitor spending also grew almost 17 percent during 2005.”
He noted that several hotels --Four Seasons Hualalai, Outrigger Keauhou and Kona Village -- have changed hands recently, with the potential for future upgrades, while the Marriott at Waikoloa is getting a $40 million facelift. New retail space for visitors is being added at the Shops at Mauna Lani and the Queen's Marketplace in Waikoloa.
Construction: “Previously permitted construction projects -- both residential and non-residential -- are now coming out of the ground all around, tangible evidence of the continuing Big Isle construction boom. However, those close to the industry, such as major building suppliers, see emerging signs of some cooling off in the future.”
Astronomy: “The Big Isle's astronomy sector got some bad news when NASA's budget eliminated Keck's $50-million Outrigger telescope project. The immediate cause was a redirection of NASA funds toward the space shuttle, but had the project not encountered prolonged cultural and environmental objections it could have been underway long before.
“Big Island astronomers have long felt a cancellation would be catastrophic for the future of the astronomy industry in Hawaii; other world locations such as Chile or the Canary Islands are not quite as good as the Mauna Kea summit, but are quite adequate.”
He noted that another possible telescope is being considered for Hawaii -- a Thirty Meter Telescope (TMT) being proposed by Gemini. “Whether it can proceed, given the Outrigger's fate, is something that will be closely watched by the industry,” he said.
Ocean Thermal Energy: “Skyrocketing oil prices have caused the Natural Energy Lab at Keahole Point to refocus its efforts on alternative non-fossil fuel energy sources, its original mission. NELHA announced that it will partner with a Honolulu company to build a 1.0-megawatt ocean thermal energy conversion (OTEC) demonstration plant. This technology was discontinued in 1993, after oil prices fell so low that it made OTEC uneconomical.”
Agriculture: “Agriculture sector is more important to Hawaii County than any other county in the state,” Laney said, making these points:
- Macadamia nut production has been good, with favorable weather and higher prices, thanks to lower production on the world market.
- The 2005-2006 season yielded a large coffee crop, but a smaller crop next year is likely because of lower rainfall during the flowering period. Prices to farmers should remain about stable.
- There are now over 30 aquaculture farms on the Big Island with combined revenues of about $20 million annually.
- Beef prices are expected to remain strong in the near future.
- Parker Ranch is deciding what to do with its vast land holdings.
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