Reprinted from Pacific Business News
Steve Sofos founded the commercial real estate company that bears his name back in 1989. Today, he is the president, CEO and principal broker of Sofos Realty Corp., and has led his team to become one of the top firms in the state.
The Punahou School alumnus talked with PBN about how the market has changed since he first began his career and about what state lawmakers could do to make his job easier.
What is the biggest issue facing Hawaii’s commercial real estate market and how can we solve this issue? The economy is the biggest issue. Hawaii’s economy is built on a three-leg basis whereby Hawaii thrives off of tourism, construction and military spending. If those industries drop, it will affect Hawaii’s economy. There is really no way to solve these issues as it is beyond people’s control.
How will the redevelopment of Kakaako affect the local commercial real estate market? There is purportedly a lot of commercial space to be added in Kakaako. If everything is built that is planned there will be over 1 million square feet added to the commercial market.
Where are the areas of growth for commercial real estate on Oahu, other than Kakaako and Kapolei? Koa Ridge and D.R. Horton’s Waipahu/Kapolei project will be good future markets. Possibly Haseko’s Ewa project will have hotels and retail. Ko Olina will continue to grow.
Is Hawaii over-retailed? Why or why not? Hawaii will be over-retailed when Robertson [Properties] gets the former [Pearlridge] drive-in built along with Howard Hughes [Corp.’s] additional retail and Ala Moana’s expansion.
All of these owners and developers want to open at the same time; if the timing is such, the market will be flooded. So if these projects open in 2015 and another one in 2016, and another one in 2017, etc., then the market will not be flooded.
How has the market changed since you first began your career? Technology has changed the market so that it moves fast nowadays. There is more Internet marketing whereas it used to be word of mouth and newspapers.
One of the large problems that exists is that many Mainland brokers are coming in to Hawaii to sell large assets and they don’t pay their share of [General Excise Tax] and state income taxes.
What could state lawmakers do to make your job easier? Create term limits, so there is fresh blood and fresh ideas instead of the same people dictating laws. I was asked a year or so ago by a legislator why has it taken so long to build Mililani? I said the city and state governments want control.
If the developer has a master plan, it should all be approved so that the developer can say ‘We are building parcel one and plan to submit for parcel two and three.’ They should not have to go through a re-zoning issue all the time.
It should automatically be approved. Same thing with the city. They should have the architects and engineers approve building permits under $500,000. Instead, the city people have to approve every plan before the building permit is issued.
What is your best deal to date? Why? Costco in Iwilei was the best because it changed the face of Iwilei, which is now a thriving successful area.
Second would be [Airport Industrial Park], because the project changed the airport area from a mostly industrial area to a successful office area. I have enjoyed working on projects that changed the geographic area they are in and thus the area becomes successful. Iwilei, Mililani Tech Park, Kapolei, etc.
What is the key to making deals in commercial real estate today? Education and experience. Too many agents have no clue as to the clauses in a lease and understand how leases affect tenants.
When I first started out I was given several leases to read and a legal dictionary to learn what all of the clauses meant in a lease. Younger people today think they know everything and make a lot of mistakes.