September 2, 2004

Second Straight Boom Year for Big Island, Thanks to Job Growth, Construction, Real Estate

(Hilo, Hawaii, September 2, 2004) – Hawaii County is in its second consecutive year of broad-based economic growth, with strong job creation, booming construction and real estate, stronger visitor arrivals from Japan and “a new sense of dynamism and optimism” in Hilo, First Hawaiian Bank economics consultant Leroy Laney said today.

At the annual First Hawaiian Bank Economic Outlook Forum at the Naniloa Hotel, Laney said:   “The Big Island is now seeing stronger growth than in a number of years.   Infrastructure and adequate affordable housing for those who live and work on the island are the big constraints on that growth – just as they are on all of Hawaii's Neighbor Islands.

“Even in 2002, just after the terrorism events and national recession of 2001, the Big Island economy did quite well.  The Big Island  is the most diversified of the three Neighbor Island economies, and often when there are blows to tourism that diversification pays off.”

Laney, who is also a professor of economics and finance at Hawaii Pacific University, made these points about Hawaii County’s economy:

JOBS AND UNEMPLOYMENT

Hawaii County’s unemployment rate has followed the state’s rate down and stood at 5.6 percent in June, the lowest since 1991, Laney said.  He said the labor market is particularly tight on the Kona-Kohala side of the island with strength across most sectors of the economy including construction, tourism and service sectors such as professional, business, and health services.

“All across the island this year, businesses report that finding qualified employees, especially for skilled jobs, is getting increasingly hard.   Along with this, rising labor costs – including benefits – are a big constraint to business expansion,” said Laney. 

TOURISM

Laney said visitor arrivals to the Big Island are running slightly (2.9 percent) ahead of 2003.  “One of the biggest stories in tourism statewide is the return of the Japan market, and the Big Island can thank its direct flights from Japan into Kona,” he said. He noted that:

  • Total air seats into Kona are up almost 33 percent so far this year.
  • The West side of the island will add 530 rooms with the opening later this year of the Sheraton Keauhou Bay Resort, formerly the Kona Surf.
  • “Kohala Coast resorts remain the crown jewel of the Big Isle visitor plant,” Laney said, providing almost 10 percent of the county’s non-farm jobs and 21 percent of property tax revenues on the Big Island.
  • The growing cruise industry will benefit the island, especially Hilo where “debarking cruise passengers can walk the town and visit various retail outlets.”  But he said growth of that industry may be hampered by inadequate harbor infrastructure and competing uses for docks.

CONSTRUCTION

“Construction remains one of the strongest sectors of the economy.  The drivers have been continued low interest rates, and strong local as well as off-shore demand for residential properties,” Laney said.  “Growth continues to be highly concentrated, mostly in South Kohala and North Kona,” putting increasing strains on roads and other infrastructure in West Hawaii.

REAL ESTATE

“Big Isle real estate is extremely hot now.   An overwhelming portion of sales are to out-of-state buyers, for mid-range as well as for higher-end homes,” Laney said, and some speculation has begun to surface.   “Home affordability for local residents has become a very hot topic.   Even professionals with higher incomes often can’t afford to buy, and this puts obvious strains on attracting qualified people and keeping them here.”

He cited figures from Clark Realty showing that average home sales prices since 2000 have risen 52 percent in Hilo, 102 percent in Waimea, 42 percent in Kona, and 74 percent in Keauhou.

ASTRONOMY AND TECHNOLOGY

“Astronomy, a clean and exotic industry, creates about 600 high-paying jobs on the island.   The combined annual budgets of all observatories could amount to $70 million, and there is an estimated $1 billion in capital worth at the Mauna Kea summit now,” Laney said.

He said rejection of the pending proposal for the KECK Outrigger Telescope Project could mean an end to observatory development at the summit of Mauna Kea, with future projects migrating to places like Chile or the Canary Islands “where the development climate is more certain.”   The KECK project has encountered environmental and cultural objections.

Laney said the 870-acre Natural Energy Lab at Keahole Point “has been going through the difficult process of weaning itself from taxpayer support.”  It has recently attracted five firms – three Japanese, one Korean, and one North American – who sell desalinated deep sea water as bottled drinking water.

“This industry has already become one of the state’s biggest exporters, and a fee is being charged to use a special logo, certifying the water is from Hawaii,” Laney said. 

OPTIMISM IN HILO

“A new sense of dynamism and optimism seems to be emerging in Hilo,” Laney said.  “Hilo has several things going for it including the University of Hawaii at Hilo, health care development, diversified agriculture, and cheaper housing – even though home prices in Hilo are rising like everywhere else.”

Among positive signs Laney cited in Hilo:

  • UH-Hilo aims to grow from its present 3,300 students to 5,000 and may reach that level by 2008.  “Its goal is to become a comprehensive university that emphasizes teaching, selected graduate degrees, applied research, and community involvement,”   Laney said, and it plans a pharmacy college.   The school’s $28-million Mauna Kea Astronomy Education Center is expected to open in 2005.
  • Over $1.1 million has been raised in the community to renovate and expand the Hilo Medical Center emergency facility.   These funds that will be matched about 3 to 1 with state money.
  • A $28-million veterans’ home, the state’s first, will be built on the site of the long deserted Hilo Hospital.
  • “There are signals that the state might move ahead with a new lease for the Naniloa Hotel, which would encourage improvements and new management.   The relatively few years left on the existing lease have discouraged that.”
  • New lava flows from Kilauea Volcano are attracting up to 2,000 visitors a day, most of them passing through Hilo.