Is there life after Downtown Walmart?

by Keli'i Akina, Ph.D.President / CEO Grassroot Institute of Hawaii

It seems a lot of people were surprised last week to hear that the huge Walmart store in Downtown Honolulu will be closing this month. 

It’s tempting to speculate about what this means for the future of retail in the area, but we shouldn’t make broad assumptions based on the closure of a single big box store.  

Instead, I would like to talk about the opportunities that such a closure represents. 

In particular, Hawaii needs more housing. At the same time — because of changing demographics, more people working from their homes, economic trends, whatever — we are increasingly seeing more empty office and commercial buildings around the islands, such as the soon-to-be ex-Walmart. 

Why not convert those empty spaces into places to live?

There’s a name for this practice of transforming buildings for new purposes: adaptive reuse. You take a building that was built for one purpose — a retail space, a warehouse, an office building — and you remodel or renovate it to serve a new purpose, like providing housing.

Adaptive reuse is a new name for an old practice, but it has been gaining popularity in American cities. Partly, that’s because it makes economic sense. 

One study found that repurposing an older building to create new housing can save as much as 48% in construction costs compared to building from scratch. Given Hawaii’s high material and construction costs that contribute to the high price of housing in the islands, adaptive reuse is a great way to make housing more affordable.

It’s also environmentally friendly. Demolishing an older building creates a lot of waste for landfills, and even the new, energy-efficient building that might replace it does not always entirely offset the environmental cost of the demolition.

And from an emotional point of view, sometimes we grow attached to older buildings. We like the character they give our cities and neighborhoods. We don’t necessarily want to replace them with cookie-cutter apartment buildings. 

In terms of the economy, creating new housing units in vacant commercial spaces can help revitalize neighborhoods and benefit local businesses.

So why hasn’t Hawaii fully embraced adaptive reuse? Well, to some extent it has. In early 2021, Hawaii Business magazine wrote about the office-to-residential conversion in Downtown Honolulu of 1132 Bishop Street and the transformation in Kailua of the former Macy’s into Lau Hala Shops. But both involved seeking regulatory waivers that take time and money.

Hawaii Public Radio noted in an article last month that the developer behind the conversion of 1132 Bishop Street — now called The Residences at Bishop Place — "worked with the city to use a powerful housing incentive called 201H that waives some building requirements to generate more affordable units." But even that took time to arrange, and was focused on just one segment of the housing market.

So the problem of inflexible excessive regulations remains.

Consider the case of the Davies Pacific Center office building in Downtown Honolulu, about 75% of which the Avalon Group is planning to turn into more than 400 condos. Not only is it expecting the permitting to take at least 18 months, it has run into problems with the city’s building code, which could make the conversions financially infeasible.

Christine Camp, Avalon president and CEO, suggested to Hawaii Public Radio last month that "the City and County of Honolulu should consider changing building requirements to match the evolving nature of acceptable living conditions, such as air conditioning and ventilation in lieu of having windows that open.

"If we're clamoring for housing and housing to be built now," she said, "shouldn't we look at ways to change our code to reflect our current environment? … Do we really need park dedication in downtown core? Or should we make it so that the downtown units are far less expensive and less expensive to maintain overall?"

In addition to building code changes, such as one proposed recently by Honolulu Council member Tyler Dos Santos-Tam, we also need to address the permitting backlog, zoning regulations that prohibit residential uses in commercial or industrial zones and myriad other regulations that slow down the creation of new housing.

Addressing Hawaii’s housing crisis requires a multipronged approach with solutions aimed at encouraging housing growth across different categories. 

We don’t need just sprawling new developments of single-family homes, such as Ho‘opili in Ewa Beach and Koa Ridge between Mililani and Waipio. We need condos, duplexes, triplexes, studio apartments and a wide range of other options. 

Not everyone might not be excited about the possibility of buying an apartment in a converted Walmart, but for some people, it could be perfect. 

E hana kākou! (Let’s work together!)