INVESTMENT INDUSTRIAL & COMMERCIAL REAL ESTATE
 

Although first published in 2006, current economic factors give a breath of new relevance to this article by Andrew Gomes. Aside from the ideas to ponder at the city planning level are the many opportunities that are becoming available for more folks to consider real estate that offers income potential as well as a place to live!

If you're a seller, your target market might be changing... if you're a buyer, new opportunities could be opening up in your real estate future. Look closely, "it's all about zoning!"


Posted: Sunday, May 21, 2006

New way to live, work lies just around corner

By Andrew Gomes
Advertiser Staff Writer

Imagine living and working in Hawai'i with no daily commute, except for walking down a few stairs.

Nice?

How about having daycare for the kids and Starbucks coffee a few doors down from your home, and the corner store actually on the corner — of the same block?

This lifestyle might be possible in a few older neighborhoods — such as Mo'ili'ili, Chinatown or Kalihi — until now. Soon it will be spreading to new communities around the Islands, if developers' plans are realized.

Sometimes referred to as "smart growth," "neo-traditional" or "New Urbanism," communities closely integrating housing and commercial uses often tied to mass transit have become more popular on the Mainland and are coming to Hawai'i.

One of the first modern local examples of such a mixed-use neighborhood is scheduled to break ground next year with 1,150 homes in O'ahu's "second city" of Kapolei.

Similar projects, some smaller and some larger, are being planned around the state.

The Kapolei project, called Mehana, covers 135 acres on the makai fringe of Kapolei's unfinished civic center, and would help the "second city" realize a goal to be a smart-growth example.

Mehana, a project by the Schuler Division of homebuilder D.R. Horton, may be Hawai'i's first modern community featuring low-rise condos for residential and commercial use, said Francis Oda, chairman and CEO of local planning and design firm Group 70 International.

"They are in a forward wave in this new kind of living style," Oda said.

Of the 1,150 homes planned by Schuler at Mehana, about 650 are slated to be on land zoned for a mix of residences and a broad range of small businesses including home occupations, personal services, clinics, eating establishments and convenience stores.

Schuler has designed some of the 650 units as three-story townhomes with separate upstairs and downstairs entrances, enabling owners to live upstairs and operate a business downstairs.

"You don't need to get into the car to get eggs or milk ... the kids can walk to the elementary school," said Mike Jones, Schuler president. "It's a pretty cool concept."

Makakilo resident Nada Mangialetti said the concept is exciting, especially because she runs a psychological counseling service out of an office at Kapolei's major industrial park next to an automobile-crushing facility and a moving company.

"I can't find an office space in (Kapolei) town," she said. "I'm stuck out at Campbell Industrial Park."

Mangialetti said she'd like to buy a Mehana live-work unit, and would operate her business in the ground-floor flat and rent out the upper floors to a residential tenant.

"It'd be very, very convenient," she said, adding that she would have considered living at Mehana if she had not bought and improved her Makakilo home three years ago.

Mixed-use urban design was the prototypical planning style in most U.S. cities until after World War II when automobiles and exclusionary zoning gave rise to suburbs.

In the last few decades, communities mixing residences and businesses horizontally or vertically have sprouted on the Mainland. The first is considered to have been Seaside, Fla., which was developed in the 1980s. Others include Orenco Station in Oregon, Addison Circle in Texas and Haile Plantation in Florida.

Traffic congestion, rising land values and urban decay have helped make New Urbanist developments more popular. But other issues have held back the movement, such as zoning conflicts, few experienced developers and lenders wary of exposure to a combined residential and commercial market risk.

In Hawai'i, constraints on available land limit opportunities to develop mixed-use communities outside of residential high-rise condos with commercial ground floors.

A lot of land from Mo'ili'ili to Kalihi has BMX-3 zoning that allows a mix of office, retail and residential use. But little of that space is used for living, according to Kathy Sokugawa, chief planner for the city Department of Planning & Permitting.

Sokugawa said typical small lot sizes and landowners unwilling to sell land make it difficult to redevelop property for mixed use. There also aren't many experienced mixed-use developers seeking to rezone undeveloped land for mixed use instead of only residential.

"We suffer from a lack of land developers experienced in and interested in mixed-use development," she said.

But the idea in recent years has gained appeal by a handful of local landowners and developers.

"Residential mixed-use is really cool," said Mitch D'Olier, president and CEO of major downtown Kailua landowner Kane'ohe Ranch Co. "It could really add life to downtown (Kailua)."

Most downtown Kailua zoning is restricted to business use that leaves the area empty after merchants close up shop. Allowing residential condos without raising building height limits would energize the area, enhance safety and perhaps create more affordable homes.

"I think some residential — not a lot — would be interesting in downtown Kailua," D'Olier said. "That's how you really create a village. I would like to do it if the community would like to do it."

Other communities with potential to more closely integrate residences and businesses include Chinatown, which two years ago received City Council approval allowing single-family dwellings above businesses.

At Kalaeloa, the former Barbers Point Naval Air Station largely owned by the state, planners suggest integrating a lot of envisioned new residential development with businesses in low-rise buildings to maximize use of limited, high-value land.

According to a draft master plan coordinated by the state Hawai'i Community Development Authority, "mixed-use and compact development patterns will be an increasingly appropriate strategy to accommodate a wide range of land uses while requiring less land and resources."

On Maui, Alexander & Baldwin Inc. plans a mixed-use project to replace its Kahului Shopping Center that partially burned down last year.

The company proposes replacing the 100,000-square-foot center with 150,000 square feet of retail and office space topped by about 200 to 300 condos. A&B is working on designs and permitting, and expects construction could start next year.

In a separate project in Kahului announced last week, A&B said it will build five low-rise buildings for sale soon — four mixed-use and one residential — including 103 residential units.

"This location — across from (Queen Ka'ahumanu Center) and within easy walking distance of Kahului Shopping Center and Maui Mall — makes it attractive for residents who prefer to be close to many services, and will provide the option of fee-simple commercial space in a prime business area," said Grant Chun, vice president of A&B Properties.

Oda of Group 70 said local developers and landlords embracing New Urbanism are responding to changing demographics where retired or semiretired baby boomers are moving out of larger suburban homes, and young professionals are trying to avoid rush-hour gridlock.

Another major driver of the change is the Internet, which has enabled more people to start home-based businesses and has encouraged telecommuting by employees of bigger companies.

"It's responding to a demand," Oda said. "The strength of that demand in Hawai'i, however, is untested."

In Kapolei, the genesis of Mehana as a residential neighborhood mixed with businesses was largely influenced by the University of Hawai'i Sea Grant College Program, which is concerned with urban growth affecting coastal areas.

Sea Grant partnered with the Environmental Protection Agency and the city to bring a national team of smart-growth experts to visit with local landowners, developers and city planners.

One of the team's focus areas was Kapolei, whose master developer and primary landowner Campbell Estate embraced the mixed-use concept, particularly for parcels within Kapolei's slowly developing commercial core and the property Schuler wanted to develop as Mehana.

Campbell Estate earlier had identified the Mehana site for residences. After meeting with the smart-growth team, the estate worked with Schuler and the city to devise a mixed-use plan and to rezone the land.

"At first because it was so different, we had to give it a little bit of thought, but I think it made a lot of sense for us to put our arms around," said Schuler's Jones.

Mehana's live-work units, which come with three parking spaces, will be spread mostly over seven blocks stretching along the future edge of Kapolei's commercial core.

The first mixed-use block to be built at Mehana features a park surrounded by 100 residential condos in two rings, of which the outer ring contains 20 live-work units and two larger business-only units with small customer parking lots.

Sales for Mehana's first phase are expected to begin late next year. Future mixed-use phases are expected to proceed block-by-block along with about 250 single-family homes, 250 low-density condos, a central block that includes a city park and a small commercial complex. Full buildout of Mehana could take a decade or more to complete.

Bob Bruhl, Schuler vice president of O'ahu development, said there were some tricky design issues, such as how the future edge of Kapolei's commercial core would relate to Mehana.

One of the solutions the city supported was for Campbell Estate to rezone seven commercial blocks adjacent to Mehana with BMX-3 zoning that has a commercial emphasis but would allow up to 300 homes, which could be built above retail stores and offices.

Another solution was to create a transition called Village Walk to connect the future edge of Kapolei's commercial district to Mehana. Village Walk's design includes a single one-way lane for vehicle traffic and a row of diagonal parking spaces between two landscaped strips buffering sidewalks.

"You just didn't want the butt ends of buildings facing residential," Bruhl said, adding that another fear was that a less pedestrian-friendly design might invite formation of a trash pile alley.

There are still uncertainties, such as how prospective buyers will respond to the live-work units, and whether residents and businesses will peacefully coexist over time.

Bruhl doesn't anticipate significant problems. "My sister lives in a home on Koko Head Avenue right across from the post office," he said. "It's not that much different. This is meant to be an urban plan. It's not a suburban plan."

Jones believes any potential drawbacks are outweighed by benefits of flexibility for residential and commercial use, plus the convenience of being able to walk to commercial establishments and planned mass transit.

"We'd like people to go in right away and start businesses," he said. "It'd obviously add to the fabric of the community."

Maeda Timson, chairwoman of the Makakilo/Kapolei/Honokai Hale Neighborhood Board, said she supports the mixed-use neighborhood concept, especially for a region whose biggest concern is commuter gridlock.

"Doing that kind of mix is such a wonderful fit," she said. "It's not a new idea. That's how it used to be. We're going back to what was good."

 

 

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