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Christine Camp paints a pretty picture. Standing on the gutted 14th floor of the Davies Pacific building, Camp shares her vision for the streets below: sidewalk cafes and boutique retailers catering to young, urban professionals who live and work in the area.

On the ground, where homeless people still sleep on cardboard boxes in front of shuttered retailers, that vision can seem more like a dream.

But Camp, the president and CEO of , has taken a step toward realizing that dream by spending $96 million to acquire the Davies Pacific building and convert 75% of its office space into condominiums. 

Camp is not alone in betting on downtown – developers are pouring hundreds of millions into the area between building purchases and renovations. The investment in Honolulu’s business district mirrors a countrywide trend toward downtown revitalization efforts following the pandemic. But in Honolulu, it is also long overdue.

Investment Flowing In

Walking along Merchant Street, Camp points to a row of stucco buildings. “All vacant,” she says.

Her hope is that the spate of development, which developers and officials say is the most private investment seen in the area in recent memory, will boost tenancy as well. Downtown Honolulu technically spans Chinatown and the Capitol District, but the influx of money has been concentrated in its central business district.

Even before the pandemic, Hawaii Pacific University’s 2019 migration to Waterfont Plaza and Aloha Tower left a void in the Fort Street Mall, a central downtown artery for foot traffic and retailers. That departure was then compounded by pandemic-era closures of a Chinatown and downtown Honolulu. And just this past April, the shuttering of Walmart left a roughly 100,000 square foot-size hole in the heart of the area after being heralded as potential salve years ago.

“There’s been talks about it like every five to 10 years to clean up downtown,” said Patricia Moad, vice president of Continental Assets Management, which is opening an AC Marriott hotel on the corner of Bishop and Hotel Streets.

“This is the one time where you have owners making sizable investment at the same time. One guy cleaning up his building is great, but I don’t know how much of an impact that’s going to make,” she added.

Moad, Camp and other local and regional developers have their sights set on the office buildings that the city has struggled to fill for much of the past 20 years. Office space is inextricably tied to the success of downtown, where in major metro areas, it can make up as much as.

Even before the pandemic, downtown Honolulu experienced office vacancies as high as 17% in 2018, and its historic struggles made the city an early candidate for reuse and revitalization efforts, said Mike Hamasu, research director at Colliers, a real estate research firm.

As of April, the downtown office vacancy rate sat at just over 15% with almost 1 million square feet of office space available, but the past five years have been a roller coaster for the market.

In 2019, with its office properties unfilled and the housing market still robust, real estate investment trust Douglas Emmett announced its plan to convert its 25-story office building at 1132 Bishop Street into nearly 500 rental units, roughly half of which are classified as affordable. Four years later, almost all of the roughly 350 built units are filled.

Empty Spaces

In addition to easing the office vacancy rate, Douglas Emmett’s project called The Residences set a template for other developers to take risks downtown.

“If a developer jumps in, everybody waits to see what happens,” Hamasu said. Hamasu said the apparent success of the project leads other developers to say “hey, let’s look at other alternatives. See if we can come up with a similar plan for some of the other office buildings downtown.”

The theory behind conversions is that they funnel commercial tenants into the remaining office buildings, helping to stabilize the office market, while at the same time bringing in residential tenants.

All told, at least 14 projects are planned, ongoing or completed in Honolulu’s central business district, according to documents from a local real estate conference in April. The planned development includes an array of projects, from condos that will likely go for over $500,000 to affordable housing for seniors to refurbished retail space.

The Davies Pacific conversion is the largest commercial sale and conversion project in the area, and Camp estimates at least another $150 million spent on construction with the hope of starting to fill condos by 2025. The Avalon Group also has plans to build a science lab for Hawaii Pacific University while adding adjacent workforce rental units that can be used by faculty or students.

“This is the one time where you have owners making sizable investment at the same time.”

Patricia Moad of Continental Assets Management

Around the corner from The Residences at 1132 Bishop, Continental Assets Management is converting a former Remington College building into an. Less than a block away, plans are being made to turn the office space above 1060 Bishop into roughly 50 affordable housing units.

An , a rental website, found that 2020 and 2021 saw that most office-to-apartment conversions of any previously recorded two-year period, and the more than 11,000 apartments created through these conversions was a 43% increase from pre-pandemic apartment conversions.  

But Honolulu stands apart in many ways. While cities like New York and Boston have nearly doubled their office vacancy rates since 2020, Honolulu’s has only crept back up and is still below 2017-2018 levels.

President of Hawaii Commercial Real Estate Jamie Brown believes between the existing commercial tenants and the concentration of buildings, there is too much of a gravitational pull “for downtown not to succeed at some level.”

Remaining Roadblocks 

Past the welcoming lobby of Douglas Emmett’s The Residences sits a common area facing Fort Street Mall that has its doors covered by a metal grate, “because it’s really unsafe at night,” Camp said.

While crime downtown is still below pre-pandemic levels according to HPD annual reports, the perception of empty streets and treacherous strangers is worrisome. Business owners in the area have as well.

“Anybody who comes downtown, the first thing they ask me about is security,” Camp said.

The concern for developers and residents is that people just won’t want to live downtown if it feels dangerous. “The streets are completely empty and you feel very isolated,” said Ross Isokane, a member of the Downtown-Chinatown Neighborhood Board. The potential of new faces in the area would add to a “sense of community” and protection, Isokane said.

Developers are also battling cost overruns.

Interest rates have nearly tripled in the past year, and every percentage point adds to development and investment costs. The price squeeze has obliterated the market for buildings like Davies Pacific — nationwide from 2022 to 2023.

“Hats off to Christine Camp for having the guts” to invest in Davis Pacific, Brown said, but he also wondered “how she’s pulling it off.”

Moad said that high rates have prompted her to consider pausing work on the AC Marriott, but she said, “ultimately we decided to keep going because costs just keep increasing.”

Developers have also been facing rising labor and materials costs. In a 2022 report, CBRE estimated that nationwide construction costs will have. And in Honolulu, a recent that high-rise construction costs in the first three months of 2023 were 14% higher than costs in 2019. From 2015 to 2019, costs rose just over 4% according to the report.

Red Tape

The inflationary and interest rate pressures are compounded by some obstacles unique to Honolulu such as permitting delays and restrictive building codes. 

Delays in permitting approval, which can take over a year for some commercial permits, can add millions in costs to projects.

Developers scored a potential win after an executive order issued from  to convert offices into residences in business districts, which includes downtown. The proclamation gave counties the authority to adopt “reasonable standards” in allowing multifamily homes in areas zoned for business, giving the local government the flexibility to sidestep certain building requirements in these cases.

Adaptive reuse and revitalization projects require efforts from the city and state to improve outdated city functions, said Tracy Hadden Loh, a metro fellow at the Brookings Institution.

“If the guy who’s in charge of your building inspections team is just a grumpy guy who likes to say no, well, you have a problem,” Loh said, adding that updating permitting processes can provide “100% predictability and certainty in the permitting process.” 

And while the zoning downtown allows for the most dense and varied development in the city, requirements around windows, ventilation and public space have all slowed progress, developers say. 

City Councilman Tyler Dos Santos-Tam, who represents downtown Honolulu, introduced Bill 21 with the aim of removing the current requirements for residential buildings to provide direct natural light and natural ventilation to bedrooms. Instead, developers would look to emulate the setup in The Residences, which in some units installed windows in the common areas and sliding glass doors in the bedrooms to allow some light to filter in. 

That bill, though, is currently stalled after it passed a first reading in March. 

“We have to look at things like our building codes, things like that our housing code, which are obstacles that are Honolulu specific obstacles that don’t exist in other jurisdictions,” said Dos Santos-Tam. 

Hadden Loh highlighted Washington D.C., which had the of any metro area in 2020-2021, as a municipality that allowed indirect lighting for conversion projects. Other cities have taken efforts to incentivize reuse projects like Boston, where mayor Michelle Wu as 75% for residential conversion properties. 

But there are those who say that developers don’t need any more assistance turning a profit. 

Douglas Emmett applied for a variance to allow for it bypass the natural lighting requirements, and environmental attorney Dave Frankel said there’s no reason that shouldn’t be a viable path.

“To call for a blanket gutting of regulation seems a little short-sighted,” Frankel said.

An Uncertain Future

On the other end of downtown Honolulu, Paul Min stands watch over Chinatown’s Kekaulike Market on a sunny Sunday morning.

25 years ago, he says, “people were waiting outside the door” at 6 a.m. for fresh seafood and produce. Now, a handful shuffle through during what should be peak business hours.

He is one of the many longtime residents and business owners still waiting for change, and he hopes that the buildings “changing into apartments will generate more income for Chinatown business.” 

By some measures, downtown Honolulu is already nearly back. Downtown Honolulu ranks ninth across the nation in foot traffic recovery, according to a . And tourism visits downtown already exceed 2019 numbers, data. 

Additionally, shows that new small businesses in the  downtown Honolulu ZIP code 96813 have already secured over $1.3 million in 7a loans in 2023, more than any previous year since 2010.

But many of the biggest bets in the area have yet to cash in. Davies Pacific has an optimistic timeline of 2025, an affordable housing proposal developed by Catholic Charities Housing Development is still in the permitting process, and nobody knows what will take the place of the former Walmart location in the heart of Fort Street Mall.

Continued inflation and financing challenges also mean that at any minute, the price of doing business could cause a developer to back out or discourage new development.

After doing a full loop of Fort Street Mall, Camp explains how she thinks each project will encourage the next phase of investment and migration to the area.

“While people are focused on the loss of occupancy with the office, I see that as a turning point for an opportunity for increased residency downtown,” Camp said. “And when you have that, I think the occupancy will come back.”

“Hawaii’s Changing Economy” is supported by a grant from the as part of its CHANGE Framework project.