September 22, 2004

Kauai Enjoys Best Boom Since Iniki, With Development Pipeline Full

(Princeville, Hawaii, September 21, 2004) The economy of Kauai is on the verge of a boom unequaled at least since Hurricane Iniki in 1992, with several major development projects in the pipeline, supported to a great extent by tourism, First Hawaiian Bank economics consultant Leroy Laney said today.

At the 30th Annual First Hawaiian Bank Economic Outlook Forum at the Princeville Resort, Laney said one result has been a dramatic drop in the unemployment rate on the Garden Island.

From 1997 through the first half of this year, the state unemployment rate fell 2.8 percentage points, while Kauai’s rate plunged 7.2 points,” said Laney, who is also professor of economics and finance at Hawaii Pacific University. “Businesses find it increasingly hard to find qualified employees, especially for skilled jobs. Yet applications exceed openings by more than 2 to 1, suggesting that employed people are seeking better jobs, pay, hours, skills and career paths.”

In 2003 and so far this year, Kauai’s rate of job creation has been nearly twice the state average. “Kauai’s job strength has been pervasive, including construction and tourism as well as other service sectors such as professional, business, and health services,” he said.

Tourism: Arrivals Well Ahead of 2003

“So far in 2004, total visitors to Kauai have been running well ahead of last year. That looks good in comparison to Kauai’s most important local competitor, Maui, for which overall 2004 performance hasn’t been as good,” Laney said.

“The big story statewide is the return of the Japan market, which heavily impacts Oahu but isn’t so important for Kauai. Kauai’s surge in Japanese visitors is impressive – up 26 percent year to date -- but its share is so small that the overall impact is minor.”

“One vote of confidence in Kauai’s tourism future is found in the amount of turnover and renovations in hotel/resort real estate,” Laney said, noting that:

  • Sheraton Kauai Resort has been bought by Starwood.
  • Kauai Coconut Beach Hotel has been sold and is being renovated into a Marriott Courtyard.
  • Hyatt Regency Kauai completed a major renovation.
  • Jeff Stone’s group is buying the Princeville Resort, which should bring development after years of more passive Japanese ownership.
  • Kauai Lagoons Resort is headed for major changes that would revive long-stalled expansion plans.

Low Rates Spur Construction Boom

“Low interest rates and pent-up demand locally and off-shore continue to boost Kauai construction. Single-family residential building permits are approaching the post-Iniki rebuilding boom of 1993,” Laney said. “Development on Kauai is quite literally exploding, a boom that should continue for several years.”

Among projects in the pipeline, Laney said are:

  • Kukui’ula– an Alexander & Baldwin South Shore project in partnership with DMB Associates – which will have 1,500 units, mostly high-end resort/residential homes. Also included will be a 64-room hotel and some condo vacation units.
  • Poipu/Koloa developments: the 121-room Poipu Beach Hotel; the 323-condo unit Poipu Beach Villas; 120 single-family Kiahuna Mauka houselots; 529 condo and houselots at the Village at Poipu; an added 98,000 square feet of retail space at Poipu Shopping Village; plus 30,000 square feet of new retail space in Koloa.
  • The 88-unit first phase of Grove Farm’s Pikake single-family homes.
  • Waipouli Beach Resort, a $100-million, 196-unit residential condo development in Kapaa.

Dramatic Housing Price Rise

“One dark side to this boom is the dramatic rise in home prices. In just the first half of 2004, Kauai median residential prices rose 24%,” Laney said. “This is leading to a serious shortage of affordable shelter on Kauai, just as on other Neighbor Islands. Even young professionals often can’t buy, leading to out-migration and more hurdles to diversifying Kauai’s economy.”

He said the housing situation is a serious social problem on Kauai, which has higher proportions of “involuntary part-time workers” and “multiple job holders” than the national or state average.

“In the longer term, Kauai needs diversification that leads to higher-skilled, living-wage jobs with career paths, plus better educational opportunities,” Laney said.

Barking Sands Missile Range

“One valuable source of higher paying jobs is the Missile Range at Barking Sands, which has an estimated $130-million annual impact on the local economy and 935 jobs, making it one of Kauai’s biggest employers. The current bill going through Congress appropriates $27 million to the range for upgrades and equipment, and over $85 million has been appropriated for tools and testing,” Laney said.

“Over 275 companies receive funds from the range. To help house these sub-contractors, Phase II of the West Kauai Technology and Visitor Center is now fully leased.”