One of Honolulu, Hawaii's most recognizable buildings, the Davies Pacific Center, sold amid a historic shift in market dynamics in the downtown area, with the buyer planning to redevelop the office property into much-needed housing.
Pacific Office Properties Trust, a real estate investment trust based in Honolulu, sold the 380,462-square-foot office tower to Honolulu's Avalon Group. The $96 million deal earned a 2024 CoStar Impact Award for sale/acquisition of the year for Hawaii, as judged by real estate professionals familiar with the market.
Avalon Group is a vertically integrated real estate development, management and investment firm focused on Hawaii. The company, which has developed and managed over $1 billion of Hawaii's residential, industrial and retail/commercial real estate over its 23-year history, plans to redevelop Davies Pacific Center in response to a severe housing shortage in Honolulu. This includes converting most of the offices into 416 residential condominiums, priced to be affordable to buyers making an average income. It will maintain the ground-level retail and continue to operate the lower five floors as office space.
Originally erected in 1972, Davies Pacific Center is one of the largest Class A office properties in Honolulu, and the only Class A office tower downtown to have sold in more than 10 years.
Hawaii is a high-barrier-to-entry market due to a lengthy entitlement process, limited to no new supply and high construction costs. Honolulu is experiencing increased demand for additional housing, with multifamily market rents rising and the vacancy rate declining to 2.5% in 2021. Davies Pacific Center offered investors an opportunity to reposition the property to multifamily given its flexible floor plates, ideal bay depths and bifurcated elevator stack.
About the Deal: Located at 841 Bishop St. in the heart of the Bishop Street Corridor, the 22-story office building sits on a full 1.42-acre city block, with views of the Honolulu Harbor and downtown skyline.
What the Judges Said: "This is a significant transaction that has the potential to revitalize downtown Honolulu, opening up opportunities for an office-to-residential conversion," said Yifan Chen, assistant professor of finance and real estate at the University of Hawaii at Manoa.
They Made It Happen: CBRE's Todd Tydlaska, Matthew Bittick, Serena Longo and Greg Grant brokered the deal on behalf of the seller. Christine Camp of Avalon Commercial worked on behalf of the buyer.
CoStar Market Manager Dominic Capocelli contributed.