HAWAII NEWS

Energy

Hawaiian Electric begins upgrades to EV fast-charging sites

Hickam Federal Credit Union installs solar system at headquarters

Infrastructure/Logistics

Hawaii to receive federal funding for Kawaihae Harbor improvements

The UPS Store opens in Waipahu

Travel/Resort

Alaska Airlines acquires Hawaiian Airlines for nearly $2 billion
Montage Kapalua Bay acquired by Tennessee-based company

Housing
EAH Housing to develop Kahului project
Affordable rental project breaks ground in Koa Ridge

Retailing

Pahoa retail center sold

 Healthcare
Top marks for Hawaii’s hospitals
New CVS pharmacy will open on Oahu in December

LOCAL RESEARCH REPORTS

Reports

Q3 '23 Office Figures

Q3 '23 Industrial Figures

Q3 '23 Retail Figures

Q3 '23 Hotel Figures

Hotel 2023 vs 2019

Medical Office Building

Weekly Take with Spencer Levy

RECENT NATIONAL RESEARCH REPORTS

10-Year Treasury Yield: Higher for Longer but Not Forever
The recent bond market sell off has lifted the 10-year Treasury yield to nearly 5% and further dampened investor sentiment for commercial real estate.

Several factors are undermining bond values, but higher inflation is not one of them. Inflation has been falling and is near the Fed’s most recent 10-year expectation of between 2% and 3%.1  Three-month annualized core inflation is close to the Fed’s 2% target.

Rather than inflation, a mix of short- and medium-term economic and political pressures is driving up bond yields. These include a stronger-than-expected economy with robust consumer spending, increasing term premiums,2 the surging government deficit and reductions in the Fed’s balance sheet (quantitative tightening).

Why does a stronger-than-expected economy impact the 10-year Treasury yield if inflation is falling? The logic is that a strong economy leads to job creation and low unemployment, which means that inflation—particularly wage inflation—is not fully under control. This near-term fear is also related to the return of the term premium. Some say that the Fed finds it more socially acceptable to have inflation in the 3% to 4% range alongside low unemployment. This means that investors will require a higher premium to commit their capital for 10 years or more. The main risk of a long-term, fixed-interest investment is unexpected inflation.

Another factor pushing up bond yields is the growing federal deficit, which is on an unsustainable path3 in the long term. The deficit rose to 7.5% of GDP in fiscal year 2023 from 5.3% in fiscal year 2022. While there are several reasons for this,4  the increase is contrary to the general expectation that deficits should shrink when the economy is growing.

Investors also have little confidence that government spending will soon be restrained, given increased U.S. military commitments to overseas allies and congressional gridlock over setting a budget. Other factors causing bond yields to surge include the need to refinance more than one-third of total federal government debt and the Fed’s ongoing quantitative tightening program.

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Facilities Management Cost Trends 2023
FM Cost Outlook: Both hard and soft costs rose significantly in 2021 and 2022 but are expected to trend downward in the next two years.
Energy Cost Factors: Some commodity prices are expected to fall, which may provide some relief for FM costs in the coming years across nearly all global locations.
Subcontract Cost Factors: Higher input cost growth has driven FM subcontracts up, especially for hard services.
Labor Cost Factors: The gap between FM wages and the rest of the private sector is narrowing, but there is wide variance across FM sectors.
Cost Management Strategies: Prepare for costlier labor, invest in skills development, target Total Portfolio Impact and more.

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Food & Beverage Tomorrow: Online grocery order fulfillment goes local

Grocers are evolving their stores into omnichannel micro fulfillment centers that function both as regular stores and distribution hubs that can more quickly fulfill online orders. While most groceries are still sold in stores, just 6.6% of food and drink sales occur online, according to Forrester, and online sales are forecast to grow 12.9% annually through 2028. This may lead to changes in how the grocery industry approaches its retail and industrial real estate strategy.

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For more information, please contact:

Blair Bonucelli
Managing Director - Hawaii Region
+1 808 541 5170
blair.bonuccelli@cbre.com
Lic.RS-86388