2020 Mauna Kea Realty Luxury Market Report by Hawaii Life

2020 (Q1-Q3) HAWAI‘I LUXURY MARKET REPORT

Sales and trends in Hawaii’s high-end real estate market. PRESENTED BY HAWAI‘I LIFE

In March, the world faced a watershed moment. Our lives will never be quite the same as before. Equally, our homes have become more meaningful to us than ever before. They are our safe haven, the space we share with our loved ones, our primary location for entertainment and entertaining. For some months of this year, they were virtually the only place we could access and enjoy the outdoors as lockdowns swept the nation. Where we spent March and April may meaningfully influence our decisions about where we call home for decades to come. Specific to real estate in Hawai‘i, we have been experiencing one of the greatest transfers of wealth on record since the late spring and early summer - as a direct result of the coronavirus pandemic. We are seeing a migration of people from one country to another, from one state to another, from urban centers to more rural places, and from condos to single-family homes. A recent San Francisco Chronicle article entitled “The California dilemma: Should we stay or go?” profiled a handful of Bay Area residents grappling with the recent wildfires—an annual occurrence compounded by the pandemic this year. My friend and colleague Errol Samuelson, Chief Industry Development Officer at Zillow, coined the term “The Great Reshuffling” to describe this shift.

In our profession, we help people trade their homes for money or their money for a new home. That responsibility is extraordinary in the best of times, but especially now. We’re hypersensitive to the impacts of change in Hawai‘i and the potential effects the real estate industry can have on our communities—small and large. There’s a certain sweetness inherent in these stirrings, changes, and migrations. One of these is homecomings—many families from Hawai‘i are returning home from the continent and elsewhere around the world—to be closer to their extended ‘ohana. The pandemic has called people home. We are craving familiarity, routine, normalcy, relative safety, and more space. Some returning residents are seeking multi-generational properties to accommodate their aging parents and growing families. There’s a very Hawai‘i-style beauty to these reconnections. The traditional exodus of state residents in search of economic and career opportunities abroad is experiencing a slight reversal. The “brain drain” is now flowing in the other direction, as remote work and distance learning—albeit foisted upon many this year—have created a few unexpected and positive outcomes here in Hawai‘i. Predictably, the K-shaped recovery will also result in a lot of people leaving Hawai‘i, as tourism and the economy take years to recover, but it’s not entirely a one-way migration. The pandemic has wrought lasting changes to the way we work and live. Whether our clients this year are from Hawai‘i or elsewhere, out-of-state home buyers are consciously choosing Hawai‘i. The near-perfect climate allows for indoor-outdoor living all year-round. Home buyers and long-term renters are drawn to Hawai‘i’s healthy and sustainable lifestyle, abundant natural beauty, direct access to major urban centers, and excellent private schools. As a result, Hawai‘i private schools are bursting at the seams this year— inundated with inquiries from returning families or those fleeing densely populated cities in favor of life in Hawai‘i.

Since more people choose to list their property for sale with Hawai‘i Life than any other brokerage in the state, we are at the forefront of this social change. We are the gatekeepers and the welcome wagon and the chaperones, in a way—introducing an unprecedented number of newcomers to their neighbors and their new communities. Now that many out-of-state home buyers are expecting to spend more than a few weeks or months of the year in Hawai‘i, they are more likely to want to meet their neighbors and gain a deeper awareness of their island community.

There’s a certain sweetness inherent in these stirrings, changes, and migrations. One of these is homecomings. As our profession, we are sought out not only for our brokering skills and market knowledge but also for our ability to broker new relationships. Many buyers in 2020 are more engaged and connected to our communities than they have been in the past. We are increasingly being called upon to provide community context and awareness to these (predominantly) West Coast newcomers seeking to make Hawai‘i home. Hawai‘i offers a unique way of life, and we want to serve as the connector or social maven that helps ease the transition—for new residents and our communities. When buyers move to Hawai‘i, we always hope to direct them to being great stewards. Our agents and brokers were chosen for their market expertise and knowledge, but moreover, for their extraordinary social capital, earned over lifetimes of living here and being active in our communities. Our social capital is more valuable now than ever before. Our team is poised to make key introductions

between buyers and sellers, of course—as they always have been. But this year, more than in any other, they are also providing vital social glue. We have spent much of this year making connections between buyers and their neighbors, community members, service providers, local private schools, child care options, public officials, non-profit leaders, and so much more. As I wrote in Break Glass, Pull Pin on our website’s blog, our leadership team mobilized and marshaled a strategic plan in the early days of the pandemic to temper the potential longer-term effects of this 100year event on our business. Our team continues to respond quickly and effectively to a fast-changing and evolving market. We’ve been successfully implementing digital strategies for more than a decade, and those well-honed skills have served us well in 2020, helping us successfully weather this extraordinary series of events. This year has brought so many changes. We didn’t expect that 2020 would turn out to be a tremendously successful year for the Hawai‘i real estate market—a year that has only deepened the demand for Hawai‘i properties, just when we thought the demand couldn’t further expand. We have engaged in an unprecedented number of private sales between high-profile clients. We are seeing more celebrities, financiers, and tech industry giants choosing Hawai‘i as their primary home, and we are highly attuned to their unique needs and considerations. With incredibly limited inventory, we connect these buyers to real estate opportunities to which they might not otherwise have access. Clients often choose Hawai‘i Life for our well-honed respect for privacy and discretion. More than the usual share of this year’s clients are exceedingly private.

occurred at the peak of the last recession—likely brought on by economic hardship that local brokerages could no longer sustain. As a result, Hawai‘i Life remains the only statewide, 100% locally owned and operated, full-service brokerage firm. These industry shifts serve only to consolidate Hawai‘i Life’s market share and our position, especially in the Hawai‘i real estate market’s highest tiers, where we continue to lead in both listings and sales volume. We have a deep bench of local market knowledge and offer a suite of hyperlocal services. With expanding demand, upward price pressures, and dwindling inventory across the islands this year, we encourage would-be home buyers to start working with your broker early and be aggressive when looking to purchase high-end properties, no matter which island you favor. Right now, supply is constrained, and we expect the pre-travel testing program launched in mid-October to unleash an even greater demand for high-quality Hawai‘i properties. Looking forward, we’re comfortably bullish on Hawai‘i’s high-end real estate. We’re confident that this recent intensity represents the early stages of what will likely be a long-term, high-velocity market in the high-end. There may be some bumps along the way, and of course, not everyone who’s purchasing or moving to Hawai‘i now will stay indefinitely—but we expect both values and volume to rise to new levels in the coming years.

Matthew G. Beall CEO, Hawai‘i Life

Another change afoot is the growing number of national and “global” companies moving into the Hawai‘i real estate market, either by acquiring locally-owned companies or through franchise agreements. A similar industry-wide transition

State of Hawai‘i

7% Land • 15 sales 26% Condo • 55 sales 67% Res • 143 sales

Luxury Market Overview Q1-Q3 2020

213

Kaua‘i

O‘ahu

TRANSACTIONS OVER $3M Maui

# of Sales over $3M 0

Hawai‘i Island 4

$36.75M

10+

This year is outpacing 2019 in high-end Hawai‘i residential sales by both number and total dollar volume—despite (if not due to) the current global pandemic.

HIGHEST SALE IN 2020

Hawai‘i Life represented both the buyer and seller in this year’s largest real estate transaction in the State of Hawai‘i.

Luxury Market Total Transactions Statewide $3M+

464

76% of all 2020 luxury transactions fall in the $3M - $5.99M range 19% of all 2020 luxury transactions fall in the $6M - $9.99M range 5% of all 2020 luxury transactions fall in the $10M+ range 356

$3M+ $3M-$5.99M

300

347 284

253 264

226 227

192

211

201 176 151

2013

2014

Source: MLS records (a third party source) deemed reliable, but not guaranteed.

2015

2016

2017

2018

2019

DATA :

State of Hawai‘i

The Hawai‘i real estate market has exhibited incredible strength and resilience this year, following a pattern in the real estate sector across the country. However, it’s important to put that performance in a broader economic context to consider potential impacts and opportunities.

All signs point to a distinctly K-shaped recovery, and while the luxury real estate market and other market sectors are flourishing, thousands of Hawai‘i businesses and residents are floundering. Hawai‘i is struggling and business closures are impacting many residents, making this year bittersweet for us, as the real market continues to flourish. We encourage our clients to support the Hawai‘i Life Charitable Fund and local businesses during these difficult times.

At Hawai‘i Life, we consider properties priced above $3 million USD to belong squarely in the luxury category. The average Hawai‘i home cost is close to $1 million. For the purposes of this report on the high-end Hawai‘i real estate market, we have included sales transactions that closed at or above $3 million in all data points quoted, unless otherwise noted.

Hawai‘i Real Estate Market Overview While we experienced a significant slowdown in home sales in the spring due to lockdowns across the country and widespread economic uncertainty, the Hawai‘i real estate market has been robust since the start of summer. In June, as restrictions began to lift across the nation, affluent buyers started flooding the market, driving Hawai‘i home sales back up. Exceedingly low mortgage rates also helped motivate local buyers. By July, Hawai‘i’s high-end real estate sales surpassed preCOVID levels following a recovery pattern in the real estate sector seen across the U.S.

Statewide Sales Above $3M In the first three quarters of 2020, Hawai‘i’s high-end real estate market

has kept pace with 2019 sales, with 213 transactions that closed above $3 million, compared to 206 during the same period last year. By dollar volume, high-end sales are on track to meet or exceed last year’s sales volume—tracking at just -0.66% compared to 2019—during a 100-year event that has hamstrung the global economy. Sales volume totaled $1.09 billion statewide, compared to $1.10 billion during the same period last year. Slightly more than 40 percent of all highend sales (by dollar value) took place on the most populous island of O‘ahu. Twenty-six percent of the remaining high-end sales volume occurred on Hawai‘i Island, 23% on Maui, and 11% on Kaua‘i.

2020 2019

$400M

$200M $100M

Hawai‘i Life was the market leader, representing 64 of the 419 sides of business to date this year.

Statewide Sales Above $10M Statewide, there were ten property sales above $10 million in the first three quarters of this year, compared to 17 sales in the this price segment last year.

This last property, listed by Hawai‘i Life, sold for its asking price of $36.75 million in mid-April, making it the largest sales transaction in Hawai‘i year-to-date. Hawai‘i Life represented both the buyer and seller of this oceanfront Hanalei estate.

$300M

Hawai‘i Life Luxury Market Share Statewide Sales $3M+

Sales transaction above $10 million included four sales on O‘ahu, three on Maui, two on the Big Island, and one notable beachfront home sale on Weke Road in Hanalei, on the North Shore of Kaua‘i.

Performance by Quarter $500M

15.3%

A full 46% of all high-end Hawai‘i transactions closed in the very active third quarter of the year, making up 46% of statewide sales by dollar value, as well. Close to 30% of all trades closed in the first quarter, and 24% in the quieter second quarter.

On the Big Island, a 6-bedroom Kūki‘o property with expansive ocean and coastline views sold for $13.2 million. Listed by Hawai‘i Life, the transaction closed in late June. Another single-family residence within the Kūki‘o resort community sold for $10.2 million in late February.

Second quarter sales by dollar volume declined by 28% over last year, whereas first and third quarter sales exceeded 2019 sales by 10.4% and 15.6%, respectively.

Hawai‘i Life’s $3M+ Market Share Our team of real estate professionals was responsible for 64 of the 419 total sides of business in sales exceeding $3 million to date this year, making Hawai‘i Life the leading brokerage statewide in highend listings and sales, with 15.27% of the market share of all sales above $3 million.

A West Maui home listed by Hawai‘i Life sold for $10.5 million. It went into contract in late November 2019 and closed in early March of 2020. An oceanfront West Maui estate listed by Hawai‘i Life sold for $14.5 million at the end of July. The third Maui sale in this price segment was for a Kapalua home in West Maui that sold for $15.5 million in mid-September. Notably, there have been no sales above $10 million yet in South Maui this year. The balance of transactions in the highest end of the market included two high-rise condos in Honolulu’s luxury Park Lane residences. Both condos sold for their full asking price of just over $10 million to Japanese buyers in February, just before the pandemic began. An oceanfront Kailua estate residence sold for $18.7 million on O‘ahu in May.

Hawai‘i Life’s $10M+ Market Share Hawai‘i Life represented five of the 20 sides of business that closed above $10 million this year, capturing a 20% market share in the very highest end of the luxury market. Over the past five years, Hawai‘i Life has led the market, representing 42 sides of business in this price segment. Our nearest competitor in the space, the private club of Kūki‘o on Hawai‘i Island, has represented 17 sides of business.

20%

Hawai‘i Life Luxury Market Share Statewide Sales $10M+ Hawai‘i Life dominated the highest end of the market this year, representing 5 of 20 total sides of business in this segment.

Statewide Market News Broader Economic Impacts in Hawai‘i Outside of the real estate sector, the pandemic has caused widespread adverse economic impacts in Hawai‘i, as it has in most places. These have reverberated across the state, particularly in the tourism sector, which supplied $17.75 billion in visitor spending in 2019, according to the Hawai‘i Tourism Authority. Air arrivals, which have seen steady growth in recent years, are expected to incur a 73.7% decline over 2019 numbers.1 The non-tourism sector has also contracted, particularly on O‘ahu, where a surge in COVID-19 cases beginning in the summer months resulted in a second lockdown in August. Hawai‘i is likely to experience an expected 11.8% decline in real GDP in 2020, according to UHERO, the Economic Research Organization at the University of Hawai‘i. Their 2020 third-quarter report provides a baseline, optimistic, and pessimistic economic forecast. “Our forecast now sees meaningful economic recovery delayed until the middle of next year,” reports UHERO. The statewide unemployment rate is expected to average 12.4% in 2020, according to UHERO’s baseline forecast. Sixty percent of hospitality and leisure jobs were lost in the early stages of the pandemic, and employment in that sector remains at less than half of pre-pandemic levels. Employment isn’t expected to fully recover to pre-pandemic levels until beyond 2023.2 Some islands are hurting more than others. Maui County is expected to see an overall unemployment rate of 20% this year, with 19.1% in Kaua‘i

1 UHERO Economic Research Organization at the University of Hawai‘i, 2020 Third Quarter Update. 2 UHERO Economic Research Organization at the University of Hawai‘i, 2020 Third Quarter Update.

County, 12.4% in Hawai‘i County, and 10.3% in Honolulu County. The speed of Hawai‘i’s recovery is contingent upon several factors, including rates of infection both here and on the U.S. mainland, the delivery date of a vaccine, and the U.S. election results in November. At a local level, the recovery pace also rests heavily on the success of a statewide pre-travel testing program launched in mid-October. New COVID Cases vs. Total Passenger Count Air arrivals, which have seen steady growth in recent years, are expected to incur a 73.7% decline over 2019 numbers. Covid Cases

Passenger Count

2,000

250K 200K

1,500

150K

1,000 100K

500

50K

Mar '20

May '20

Jul '20

Sep '20

Mar '20

May '20

Jul '20

Sep '20

Mid-October Pre-Travel Testing As of this writing, travel into the United States is restricted from 37 countries, and U.S. citizens are prohibited from travel to more than 200 countries. Hawai‘i’s tourism sector has perhaps never relied so heavily on visitors from the U.S. mainland. According to the UN World Tourism Organization, international tourism could fall by 58-78% in 2020.3 The relatively long duration of flights to Hawai‘i from almost everywhere makes the state particularly vulnerable. To speed economic recovery, Hawai‘i Governor David Ige announced a pre-travel testing program to begin on October 15, 2020. Arriving passengers who produce evidence of a negative COVID-19 test taken no earlier than 72 hours prior to their flight arrival in Hawai‘i may be exempt from the currently mandated 14-day quarantine. Trans-Pacific travelers of all ages will be subject to the rule.

The new program is expected to boost Hawai‘i’s tourism-dependent economy, allowing West Coast and other visitors to travel more easily to the islands. While the newly established plan for pre-travel testing may improve Hawai‘i’s tourism economy, the success of that reopening rests heavily on its successful execution and Americans’ willingness and financial ability to travel. UHERO’s thirdquarter report suggests that the visitor industry’s recovery may be hampered by macroeconomic weakness across all major visitor markets. Only 20% of Americans are expected to travel during the winter holiday season this year, according to industry surveys, compared to 35% last year. 4 A more recent Franklin Templeton-Gallup study found that young people are more likely to drive tourism and travel recovery. It found that 52% of American adults who flew at least once a year before the pandemic now say they are uncomfortable with air travel. The proportion jumps to 69% among those over the age of 55 but drops to only 33% for those aged 18 to 34. 5

Resort Development Normally the lifeblood of the tourism economy, most hotels and resorts have been shuttered across Hawai‘i for the better part of this year. While new resort development is mostly on hold, some properties are taking advantage of closures to tackle renovation projects, including the Mauna Kea Resort’s $100 million capital investment project on Hawai‘i Island, and initiatives at Turtle Bay Resort on O‘ahu, and Ka‘anapali Beach Hotel on Maui. According to UHERO, it is becoming much more challenging to secure financing for new hotel projects. “With the significant, persistent decline in Hawai‘i hotel demand and unclear prospects for recovery as trans-Pacific tourism begins to reopen, the pipeline of hotel renovation and construction projects in the Islands will remain relatively weak.”

3 UHERO Brief, dated October 1, 2020. 4 UHERO Economic Research Organization at the University of Hawai‘i, 2020 Third Quarter Update. 5 UHERO Brief, dated October 1, 2020.

Hawai‘i’s Construction Sector Along with the real estate sector, construction has been a bright spot in Hawai‘i’s economy this year. Government contract awards have “surged fivefold” in 2020, owing to several large-scale military projects. The volume of private building permits issued rebounded by midsummer from March and April declines.6 Declared an essential activity, the construction industry has thus far avoided job losses, and construction jobs are expected to hold steady for the next two years, according to UHERO, declining only slightly at the end of that period. However, non-residential construction is suffering substantial impacts. Business closures and low utilization rates of commercial spaces like retail, restaurants, and office buildings have made commercial real estate challenging, to say the least. UHERO’s third-quarter forecast predicts that demand for centralized office space will continue to decline, with vacancy rates on O‘ahu already exceeding ten percent.

Remote Work in 2020 The pandemic is accelerating the widespread adoption of technologies that make remote work possible around the world, and according to UHERO, across all Hawai‘i industries. Remote work and distance learning have been driving factors in the Hawai‘i real estate market, acting as a catalyst for many new residents already considering Hawai‘i as a refuge and safe haven. We expect a flood of new buyers following the launch of the pre-travel testing program—ones who aren’t subject to the constraints of school holidays or office commitments. It remains to be seen how the current necessity for remote work and online classes will be embraced when they’re no longer required.

statewide team, making for a nearly seamless transition for both our employees and agents in March of this year. It’s fair to say we hit the ground running. Agents, brokers, and a distributed creative and support team were well-positioned to leverage the tech tools and digital platforms this unusual year demanded. No learning curve required.

Virtual Showings Real estate professionals at Hawai‘i Life are adapting at pace with the evolving marketplace, leveraging available tools and technology in impactful ways. For agents, these included 3-D matterport tours, livestreaming events, video walk-throughs, social media and content marketing, and video conferencing. Though digital and virtual tools were in use before March 2020, clients are now asking frequent and detailed questions about properties they’ve viewed online in 3-D matterport tours or videos. They want to know about that third bedroom referenced in the text but not covered in the video. In short, buyers are paying very close attention. Skilled agents also needed to be on their toes and hyper-knowledgeable about available real estate to share the Hawai‘i lifestyle with their non-resident clients this year. Many Hawai‘i Life agents and brokers have reported very high-end home sales conducted entirely by virtual means in recent months. Hawai‘i Life secured a $15 million sale following a Facetime showing with a buyer that lasted four and a half hours. The purchaser subsequently spent their vacation safely ensconced in their new Maui home. Hawai‘i Life listed a single-family home for $11.75 million and pinpointed a buyer through an internet lead. Following a virtual showing also conducted on Facetime, the property went into escrow at the end of August.

Here at Hawai‘i Life, we’ve always believed in flex-time and remote work opportunities for our

6 UHERO Economic Research Organization at the University of Hawai‘i, 2020 Third Quarter Update.

Technology isn’t going to supplant consultative expertise and guidance any time soon, though. Working with clients virtually has evolved the agentbuyer relationship, making it a more intimate, oneon-one, grassroots process. We believe the seller experience will also change.

Technology has actually helped to make the broker even more valuable. The value of expert guidance provided to both buyers and sellers has increased in value in this evolving landscape. Technology has actually helped to make the broker even more valuable—because of their capacity for remote trading and an increased need for high-level historical market insights and context, community awareness, and detailed commodity information. The selling experience is becoming a little more complex. While there may be a larger time commitment for real estate professionals who are now showing homes virtually. Nonetheless, sizable transactions like the ones mentioned aren’t exceptional under our “new normal” and sales transactions are moving forward in the luxury market, despite travel restrictions. We advise clients not to sit on the sidelines.

Virtual Staging Virtual staging is also a trending tool being deployed by our team that provides a broader menu of options to furnish, decorate and style their listings. Unlike in the brick-and-mortar world, agents can optimize a listing’s décor with a few clicks to better suit the architecture of a home. The choices are virtually limitless. Hawai‘i Life agents are able to target prospective buyers with customized interior design to appeal their unique interests and style.

Honolulu’s Premium Condo Market While Hawai‘i’s real estate market has rebounded quickly after a brief lull, luxury condo sales have proven an exception to the sector’s recovery. According to UHERO, historically low mortgage rates have fueled median price increases of 8% for single-family homes and 6% for condos, overall. But condo sales have lagged behind single-family home sales in Honolulu—due, in part, to travel restrictions imposed on buyers from Asia. Considering that Asian buyers have been unable to visit and experience all that Hawai‘i has to offer, Honolulu luxury high-rise condominium sales have been only slightly lackluster. Some Asian buyers have been less inclined to make substantial investments without seeing the product in person. The chatter is that West Coast buyers are most comfortable purchasing remotely. Compounding the declining demand due to travel constraints, many buyers normally drawn to Honolulu’s premium condo market are exhibiting a preference for residential homes with backyards, private pools, a lanai and space to safely enjoy with family. The pandemic has, at least temporarily, made high-density living somewhat less appealing to many buyers. Only the newest, most premium oceanfront condos situated along Kaka‘ako’s “front-row” are still trading swiftly. There have been 24 high-priced condominium sales on O‘ahu in the first three quarters compared to 27 in the same period last year, for a total condo sales volume of $128.5 million versus $135.9 million last year. Honolulu’s cosmopolitan appeal, relatively small size compared to major West Coast cities, and Hawai‘i’s spectacular climate still hold enormous appeal. After all, the pandemic can’t and won’t last forever, but those sweeping ocean views from your high-rise likely will.

LeadingRE’s Global Survey Paul Boomsma, President and CEO Leading Real Estate Companies of the World®, recently spoke to affiliated brokers about the state of global real estate, noting that travel restrictions have been impacting the high-end real estate industry worldwide. Despite these restrictions, LeadingRE’s annual global wealth study found that in China, 94% of affluent consumers surveyed felt their life was getting back to normal, and 48% of Europeans felt the same way. In contrast, only 26% of affluent American consumers felt their lives were returning to normal. LeadingRE survey respondents intend expenditures on big-ticket items in the next year, and the top three listed items were home renovations, new cars, and real estate, according to Boomsma. However, tight inventory is increasingly a global issue since 28% of those surveyed consider themselves buyers, while only 18% are planning to sell. While many foreign investors are looking away from the U.S. toward other markets, LeadingRE’s survey shows a common theme: a flight from highdensity urban centers and renewed interest in rural and country homes. Acreages, large fenced yards, swimming pools, tennis courts, and the bonus room of the 1990s are all back in vogue.

relatively stable. Given that inventory of both singlefamily homes and condos is finite, prospective buyers will soon be chiefly concerned with availability, if we haven’t already reached that threshold.

He who sees the past as surprise-free is bound to have a future full of surprises. Many businesspeople are taking a step back, a pause, and reassessing what’s meaningful in their lives. With tremendous liquidity in the stock market, many are looking to real estate as a place to hold their wealth. All of this year’s trading activity is a strong indication of the market’s realization of the actual value of Hawai‘i real estate assets. All in all, we think these buyers are ultimately the early-adopters or mavens of a new bull market in Hawai‘i’s high-end real estate; and we think that market has been radically reset—not just this year— but over the past few years, and will likely continue on its current trajectory for many years to come. As Amos Tversky said, “He who sees the past as surprise-free is bound to have a future full of surprises.”

Statewide Forecast We continue to be slightly surprised by the tenacity and the diligence of the high-end market since the start of the pandemic and during the state’s quarantine. Overall, we see constrained supply and a very robust demand for Hawai‘i properties. We expect the high-end market to see even more significant activity in the coming months, especially once quarantine restrictions in the state are lifted. We expect that rapidly declining single-family home inventory will eventually lead to higher velocity in the condominium market. Inventory of newerbuilt condominiums around the state has remained

O‘ahu

Luxury Market Overview Q1-Q3 2020

Pupukea

Hauula

Wahiawa

Waianae

Kahaluu

Kailua

Waimanalo

2 Ewa Beach Honolulu

Heat Map # of Sales over $3M

Sales over $10M 0

10+

3% Land • 3 sales 27% Condo • 24 sales 70% Res • 62 sales

TRANSACTIONS $3M+

NORTH SHORE/ WINDWARD An unusual number of North Shore and Windward properties traded this year.

Source: MLS records (a third party source) deemed reliable, but not guaranteed.

Year-to-date high-end sales on O‘ahu are outpacing 2019 in both number of transactions (+7) and total dollar value (+3.7%), for a total of almost $434 million.

$18.7M

An oceanfront Kailua estate sold in May.

2 Residential, 2 Condos

HIGHEST SALE IN 2020

TRANSACTIONS $10M+

DATA :

O‘ahu

O‘ahu’s real estate market is booming, especially through the fall. COVID has created an “if not now, then when” question for many buyers who feel ‘stuck’ in the continental U.S. They’re making a move for various personal reasons, but COVID has been a driving force in getting them to O‘ahu. The state’s initial response to the crisis and low infection rates held through the end of May and made O‘ahu even more attractive to savvy buyers this year. While that has since changed, with infection rates steadily rising on O‘ahu through the summer months and into the fall, many buyers from larger, more densely populated West Coast cities still see O‘ahu as a safer alternative to ride out the pandemic. Honolulu’s healthy lifestyle, unbeatable climate, and relative safety are drawing out-of-state buyers to our shores. O‘ahu is home to excellent private schools, business infrastructure, and adequate population to support new businesses and second careers. Urban amenities, a major medical center, along with gorgeous beaches and the largest number of direct flights—these factors have consistently made O‘ahu attractive to out-of-state buyers. Many buyers missed the traditional window this year to enroll in the most elite of Honolulu’s private schools. Despite this, many arriving families opted to arrive and get settled before the academic year revved up, choosing instead to

enroll their children in smaller “feeder” schools with the hope of getting on track for the academic year 2021.

All O‘ahu Sales Above $3M Eighty-nine property sales closed above $3 million on O‘ahu in the first three quarters of 2020, up 3.7% by dollar volume over last year, for a total of almost $434 million. Overall, O‘ahu luxury sales have kept pace with 2019, with seven more high-value transactions and an increase of about $15 million in sales over last year. O‘ahu property sales above $3 million included 62 residential homes, 24 condominiums, and three pieces of land. While both land and residential homes above $3 million saw growth in sales over 2019, luxury condo sales were down by almost eight percentage points. Above $3 million, residential home sales were spread fairly evenly across the island, from the North Shore to Kaka‘ako to the Windward side. While some of the early 2020 escrows were holdovers from Christmas activity—when many buyers traditionally visit the O‘ahu market—

20 of the 41 transactions in the first half closed in the second quarter, after the pandemic’s economic impact began to be felt globally.

Hawai‘i Life’s Market Share Hawai‘i Life’s O‘ahu team accounted for almost 13% of all sides of business in transactions above $3 million. Six Hawai‘i Life listings on O‘ahu sold for a cumulative price tag of $31.5 million in the first three quarters of 2020. Our skilled brokers represented buyers in an additional five transactions that closed for a cumulative total of $25.2 million.

Performance by Quarter Nearly 54% of all high-end O‘ahu transactions closed in the very active third quarter of the year. These made up almost 52% of this year’s total O‘ahu luxury sales in dollar value. Following a soft second quarter where overall sales in the high-end were down 33% from Q2 last year, the third quarter made up for any declines. $250M

2020 2019

$200M $150M $100M $50M 0 Q1 O‘ahu

Q2 O‘ahu

Q3 O‘ahu

Sales Above $10M Two Japanese buyers paid full price for Park Lane condos in February, closing at $10.3 and $10.8 million, respectively. While the pandemic didn’t precipitate these sales, its early signs may have acted as a catalyst. Two Kailua beachfront homes closed at $18.7 million in mid-May and $10.5 million in late August.

O‘ahu Market News Hawai‘i Life brokers on O‘ahu worked with local, Asian, and U.S. mainland buyers considering properties this year. O‘ahu buyers included foreign nationals from Japan and Singapore and high-networth financiers and tech industry professionals from the San Francisco Bay area. Some purchased homes sight unseen, while others took pains to travel to O‘ahu, knowing they’d have to submit to the state’s required 14-day quarantine before viewing any properties. Many local buyers were in the mix, some taking advantage of this year’s great interest rates. At the highest echelons of the market, very interested buyers have been somewhat constrained by travel restrictions. However, since the end of June, clients have been jumping on O‘ahu’s best real estate opportunities. Top-tier residential and condominium properties are seeing fewer days on the market this year, while some older homes that haven’t been updated are spending more than 200 days on the market. As a way to work around the barriers to travel in recent months, many buyers are conducting business virtually, or they are traveling to Hawai‘i with a full understanding that they need to quarantine for 14 days, as required by law. Many families have traveled together, with one or both parents working remotely and with their kids in tow. Some Asian buyers have sent hand-picked representatives willing to travel to Honolulu, quarantine, and shop for an O‘ahu property on their behalf. Urban buyers from major metropolitan areas have decided that Honolulu is a great place to be. Many have come here and quarantined so they can look at properties. They like the climate and schools, and today’s buyers are skewing slightly younger and are more aggressive in their real estate buying habits. Unlike many major cities and desirable real estate locations, Honolulu is a year-round market. It’s easy

to imagine your life in Honolulu, especially as a family. O‘ahu has homes that appeal to a wide range of tastes and lifestyles. Homes are available with large yards and space, safety, and privacy—advantages that may not be readily available or within reach in larger, more populated cities.

Unlike many major cities and desirable real estate locations, Honolulu is a year-round market. O‘ahu’s Hottest Neighborhoods The three ‘Whole Foods neighborhoods’ continue to dominate the high-end market on O‘ahu. These include Kahala, Kailua, and Kaka‘ako. Twentyseven of this year’s O‘ahu sales recorded above the $3 million luxury benchmark were located in these neighborhoods, with an additional four sales in Diamond Head, which sits immediately adjacent to Kahala. Waialae Iki and Hawai‘i Loa Ridge are great neighborhoods for home buyers searching for real estate opportunities on O‘ahu, while the nearby Portlock area of Hawai‘i Kai has been down-trending for the past decade. While it used to be high-end and sought after, Portlock’s higher-priced properties are spending more time on the market these days. This year saw only one sale in the waterfront neighborhood for $4.75 million. That extra ten minutes in traffic is somehow a barrier to many potential buyers, as is the older condition of many of the area’s homes. Nonetheless, there’s value in Portlock and we encourage clients to consider the neighborhood. Most surprising this year was the sale of three beachfront properties that sold in Laie, with a price tag of more than $3 million. While Laie is

technically the Windward coast of the island, it’s located a full hour’s drive from Honolulu, near O‘ahu’s northernmost tip. There are no sales in the $3 million+ price point that far north on O‘ahu in most years. Remote locations are seeing a boost in popularity. Other properties on Mokule‘ia Beach on O‘ahu’s North Shore and Hau‘ula and Kahalu‘u have sold above $3 million this year.

O‘ahu’s 2020 Residential Market Many of this year’s buyers want private retreats that can serve as a safe haven from the world. Phrases like ‘utmost privacy,’ ‘self-contained’ and ‘sanctuary’ have been the buzzwords for 2020. Properties outside the city, including beachfront properties, are suddenly hot. Remoteness has become a plus in today’s market. Home buyers are increasingly seeking residential homes with outdoor spaces and swimming pools to enjoy with their families. Many clients have expressed interest in separate entrances for added safety, home offices, single-level floor plans, and multi-use spaces. Other buyers are looking West to have more control over their home and environment. Some clients are less worried about COVID and more concerned with establishing a new residence and getting settled in Honolulu. The best, newest, and most updated residential homes are being snatched up quickly, as are condominium properties. Buyers are eager to find turnkey homes in desirable neighborhoods, with views and space being key selling points. There are generally three tiers of homes in O‘ahu’s high-end market: the fixer/tear down, the middle tier of luxury homes that are now a bit dated but still good, and the brand new home or recently fully remodeled home. O‘ahu’s mid-priced tier is experiencing downward price pressure. There’s increasingly a top tier and bottom tier, but fewer homes available in between. This year’s buyers

are highly focused on new or recently remodeled move-in ready properties. Mid-tier residential homes simply aren’t attracting as much buyer attention. As in the condominium market, only the very best, newest O‘ahu opportunities have been selling quickly.

We expect pent-up demand for Hawai‘i real estate from China, Hong Kong, and Japan in the future, from the feedback we have been getting from our clients and prospects. Many are being conservative, waiting to buy at a dip when they feel they can safely return.

In addition to the many young buyers entering the Honolulu market, a flurry of older buyers from the U.S. mainland are looking for high-end single-family homes on O‘ahu, too. Many O‘ahu buyers with family ties to the state are looking to return home. Other local families are consolidating into multifamily properties this year—intending to keep their “bubble” close and safe.

Economic activity is gathering momentum in China. China’s economy is quickly picking up steam and regaining strength after strict coronavirus measures. While we expect the balance of 2020 to be slower, we remain optimistic about foreign buyer interest in the longer-term, especially for residential real estate projects that offer access to the outdoors, thoughtful design, and flexible short- or long-term rental options.

Days on the market for single-family homes are fewer this year, and O‘ahu buyers seeking the ideal single-family home to fit their needs should expect to spend at least two to three months shopping for the right opportunity. With tight inventory on great single-family homes, buyers need to stay on top of the market and act quickly when the right opportunity comes along. A trusted broker who knows the market well and does their research can be crucial in finding the right residential property in Honolulu’s highly competitive market.

Asian Investment Hawai‘i is considered one of the safest places in the world, yet travel restrictions are hampering foreign investment. O‘ahu has traditionally seen considerable real estate investment from Asian buyers. However, Japan, China, and Hong Kong currently require their citizens to quarantine for 14 days at their own expense following any U.S. travel. Travel restrictions are likely to remain until a successful vaccine has been approved. We should not have unrealistic expectations that international visitors will be able to return to Hawai‘i soon. Their absence potentially impacts market segments that usually attract international buyers—notably Honolulu’s high-rise, luxury condominium market.

Clients from Asia generally see Hawai’i as a safe place to stay and invest. We should start to see some modest demand from Hong Kong, as China has implemented a new national security law, though Hawai’i will not be a major beneficiary relative to other gateway cities in the U.S. and worldwide.

Honolulu’s Premium Condo Market Honolulu’s high-end condo sales have seen only a slight decline in units and total sales volume since last year, despite a considerable pause in the spring. There were 24 O‘ahu condo sales above $3 million this year versus 26 last year, and $128.5 million in total sales compared to $132.1 million in 2019. Honolulu’s highest-profile condominium projects in the Kaka‘ako corridor are still garnering attention from Asian and West Coast buyers. Clients from Asia generally see Hawai’i as a safe place to stay and invest. They still prefer high-end condominiums with high walkability over singlefamily homes as their vacation home.

This year, only the newest condominiums with frontrow ocean views are garnering the most attention. As in the single-family home market in Honolulu County, only the most select properties are in demand. Buyers aren’t showing as much interest in Kaka‘ako high-rise condominium developments located even one or two streets away from Pacific Ocean views. Asian buyers are less likely to purchase properties without seeing them in person. Nonetheless, thirdquarter sales indicate that Honolulu’s condo market is alive and well—especially considering that affluent buyers could realistically afford to purchase anything, anywhere. There were 12 condominium sales above $3 million in the third quarter this year, totaling $59.75 million, compared to nine units cumulatively valued at $43.67 million during the same quarter last year.

There will be pent-up demand for Hawai‘i real estate from China, Hong Kong, and Japan. The sheer volume of virtual showings happening this fall is perhaps an indicator that a rush of Asian buyers will initiate purchases once travel challenges are alleviated. We believe the Japanese buyer pool will soon come back, and Japanese buyers will be excited to return to Honolulu, when it’s safe and when the time is right. We encourage clients—no matter where they live— to take the leap and relocate to Hawai‘i now. Many clients who picked up stakes and opted to rent or purchase long-term on O‘ahu are currently enjoying their Hawai‘i life rather than living in limbo. Most are all exceedingly happy with their decision. This pause, coupled with the modern Asian buyer’s affinity for new high-rise condominiums presents an

opportunity for architects and developers focused on well-designed, ultra-modern, and even compact high-rise condos with high-end amenities and outdoor spaces. In the highest end of the market, the high-rise condominium offerings at Park Lane, Waiea, and Hokua have dominated this year’s high-end condo sales. There were nine closed transactions in Park Lane this year and three in each of Waiea and Hokua. All three Waiea sales closed in September. With its private residence-style access, private outdoor spaces, and direct entry to each luxury condo from the Park Lane parking structure, this luxury development in Honolulu holds tremendous appeal. The property takes the focus of the central lobby entrance with 22 elevators for residents, making social distancing attainable. Hokua, due to recent upgrades and its incredible views, is getting second looks from buyers right now, despite its age.

O‘ahu Forecast Due to the rapid pace of business and with demand already running very high, we expect that O‘ahu real estate inventory will have difficulty keeping up with the additional bump in demand that pre-travel testing will likely precipitate. Successful buyers need to be tenacious and aggressive to secure the best properties. We advise buyers to working with your broker in advance, especially in a market where inventory is traditionally low, and even lower now, due to the pandemic. Skilled brokers do their research and leverage their market knowledge and familiarity to help buyers connect with the best properties. Buyers from other markets don’t often have a sense of the limitations of O‘ahu inventory, and believe homes come on the market frequently in Hawai‘i. Finding the right property is harder than it seems. Hawai‘i Life agents often educate our buyers to help them understand what a good value is here,

and also, what the limitations might be, which are often completely different from Los Angeles or San Francisco or New York. Buyers waiting for prices to drop on the highest quality properties are likely to be disappointed. Honolulu’s inventory of quality properties has always been low. It is now even lower this year, and O‘ahu properties continue to sell at or close to the asking price, with little to no discounts. We anticipate a flurry of new listings coming to market in the coming months, with the best properties selling very quickly. “Dated or problematic properties may sit, and those buyers looking for a deal may see those drop in price later in the year. Overall, we expect a very active fall and winter selling season, with many buyers bringing new energy to the market.

Top-Tier Honolulu County Condo Inventory First/Top 90-Day 650 625 600 575 550 525 500 475 450 Oct ‘17

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O‘ahu Notable Listings *See photos on following pages

Dillingham Ranch - Priced at $45 million, this North Shore legacy property spanning 2,740 acres from the beach to the ridgeline is the largest land offering currently available on O‘ahu.

202 Kaikuono Place, Honolulu - Priced at $23 million and featured in Forbes and Architectural Digest, this Black Point oceanfront home offers some of Honolulu’s finest surf, sand and ocean views.

3639 Diamond Head Road, Honolulu - Priced at $15.8 million, this home offers the classic charm of traditional Hawaiian design in a coveted location with more than 85 linear feet of sandy beach.

3311 Beach Road, Honolulu - Priced at $12.9 million, this ultra-modern, custom Diamond Head home enjoys sunrise, sunset, coastline and ocean views from its exquisite, light-filled interior.

4005 Black Point Road, Honolulu - Priced at $7.5 million, this newly built, modern Black Point residence is smart home technologyenabled, allowing full control from a phone, tablet or computer.

1388 Ala Moana Boulevard, Suite 6504, Honolulu - Priced at $12.75 million, this is a rare fourbedroom in Park Lane, Honolulu’s preeminent oceanfront luxury condominium development. 1388 Ala Moana Boulevard, Suite 7401, Honolulu - Priced at $6.95 million, this premier, spacious and modern Park Lane residence features services, amenities, security and ease of ownership.

H. 4670

Kahala Avenue, Honolulu - Priced at $5.9 million, this custom-designed residence in a prime Kahala Avenue location is ideal for resort-style entertaining and relaxing at home.

242 Kaalawai Place, Honolulu - Priced at $3.8 million, this contemporary island home sits on the slopes of iconic Diamond Head in a private enclave with gated access to a white sandy beach.

4358 Royal Place, Honolulu - Priced at $4.15 million, this contemporary home in the Black Point neighborhood has been impeccably remodeled, blending West Coast and Hawai‘i design influences.

O‘ahu Notable Listings by HL1 (see previous page)

O‘ahu Notable Listings by HL1 (see page 20)

Hawai‘i Island Luxury Market Overview Q1-Q3 2020

Kapauu

Honokaa Puako Waikoloa Village

Waimea Pepe‘ekeo

Hilo Keaau

Kailua-Kona Pahoa Captain Cook Kalapana

Milolii

Pahala Naalehu

Heat Map # of Sales over $3M

Sales over $10M 0

10+

11% Land • 6 sales 28% Condo • 16 sales 61% Res • 35 sales

TRANSACTIONS $3M+

MAUNA KEA RESORT Mauna Kea Resort is flourishing in an already thriving North Kona + South Kohala real estate market, with 11 sales above $3M

Source: MLS records (a third party source) deemed reliable, but not guaranteed.

Year-to-date high-end sales on Hawai‘i Island are outpacing 2019 in both number of transactions (+15) and total dollar value (+16.7%), for a total dollar volume of $288.7 million.

$13.2M HIGHEST SALE IN 2020

A custom-designed Kūki‘o property with coastline views sold in June

TRANSACTIONS $10M+ Both SF in North Kona

DATA :

Hawai‘i Island

The Big Island of Hawai‘i had been experiencing a period of economic recovery since the summer of 2018 when volcanic eruptions impacted a relatively isolated area of Hawai‘i Island’s 4,028 square miles. The tourism and real estate industries had mostly rebounded from the somewhat overblown national media coverage that year, which gave the impression that the impacts were more far-reaching than they actually were.

On the heels of the volcanic activity, COVID-19 came along. The pandemic caused uncertainty in the early spring. Due to our remote location, many were unsure if the islands would be impacted at all. Nonetheless, some sellers chose to take their homes off the market in March and April—especially those in a position to hold. Despite the very novel situation the world was facing in the early spring, Hawai‘i Island still saw robust sales activity above the $3 million benchmark this year. The number of 2020 sales in that price segment year-to-date has exceeded sales in the same period in 2019.

Sales Volume Above $3M The Big Island saw a total of 57 sales above the $3 million luxury benchmark in the first three quarters of 2020, for a total dollar volume of $288.7 million. There were 56 Hawai‘i Island sales above $3 million made in all four quarters of 2019. Year-to-date high-end sales on Hawai‘i Island are outpacing 2019 in both number of transactions (+15) and total dollar value (+16.7%).

Big Island properties selling above $3 million included 35 residential homes, 16 condominiums, and six pieces of land. Properties were evenly distributed between the North Kona and South Kohala districts, with only two high-priced sales in South Kona.

Hawai‘i Life’s Market Share Hawai‘i Life took part in just over 20% of the sides of business above $3 million on the Big Island year-to-date. Those transactions accounted for more than 30% of the island’s total sales dollar volume in that market segment yearto-date. Hawai‘i Life agents represented both the buyer and sellers in several of the highest closing transactions.

Sales Volume Above $10M Only two of this year’s high-end sales transactions closed north of $10 million—both located in the North Kona District. Hawai‘i Life represented the seller in the largest Big Island residential sale this year for a custom-designed Kūki‘o property

with coastline views that sold for $13.2 million on June 30, 2020. In 2019, there were a total of eight sales above $10 million. We expect a surge of sales at the highest end of the market through the fall. Significant sales currently in escrow (as of this writing) include a beachfront property listed at $45 million within Kūki‘o Resort and another property listed at $12.9 million, also listed by Kūki‘o Properties. A singlefamily residence on Ali‘i Drive listed at $10 million is also currently in escrow. Two significant home sales are also pending within Hualalai Resort, listed at $8.8 million and $6.75 million, respectively.

Performance by Quarter The second quarter was relatively quiet on other islands, but Hawai‘i County was the only one in the state that saw consistent growth in all three quarters. Hawai‘i Island’s very low infection rates, remoteness, and relative safety proved an appealing combination to many U.S. mainland buyers. Whereas Maui and O‘ahu both experienced secondquarter declines over last year in high-end sales, the Big Island saw a bump of 28% or $15.6 million in the second quarter (in transactions above $3 million). Second-quarter trading on Kaua‘i was up over last year, mainly due to an extraordinary $36.7 million closing in April. $120M

2020

$100M

2019

$60M $40M $20M 0 Q2 Hawai‘i Island

New possibilities emerged with the advent of widespread distance learning, homeschooling, and remote work this year. Hawai‘i Island is primarily a second home market in the $3 million and up price range, but this year marked a significant transition. As on other islands, many buyers looked West for a respite from the stay-at-home orders and uncertainty. Families arrived on Hawai‘i Island prepared to quarantine for two weeks, using the summer months to make decisions about where to live for the foreseeable future. Once arrived, clients see how beautiful the Big Island is and they opt to stay. This year’s clients are looking for ample outdoor space, healthy living, amenities, fruit trees, a garden, and sustainable, farm-to-table living from their own backyard. Hawai‘i Island offers world-class beaches and golf, but also, some incredible equestrian properties, acreages and ranchland areas.

Some buyers were even purchasing Big Island homes sight unseen. Big Island brokers have been catering to many families with plans to stay for the next year or more. As a result, Hawai‘i Island’s buyer’s market shifted to a tighter product inventory through the summer. Some buyers were even purchasing Big Island homes sight unseen.

$80M

Q1 Hawai‘i Island

Hawai‘i Island Market News

Q3 Hawai‘i Island

In the $3 million price range, Hawai‘i Island homes are receiving multiple offers, and they’re not staying on the market for very long. Favorable interest rates have been motivating more buyers to take the leap.

We’ve rarely seen interest rates as low this year’s 2.5% to 3.5%, in some cases. It’s a good time to buy on the Big Island, if you are in a position to do so.

Mauna Kea Resort Market Flourishing Sales within the Mauna Kea Resort communities are flourishing in an already thriving Kohala Coast real estate market. There have been ten sales exceeding $3 million in the Mauna Kea Resort year-to-date. Hawai‘i Life Mauna Kea represented 7 of the 20 sides of business above $3 million. An additional nine homes have closed for more than $3 million in October, following the end of the third quarter. Within the Mauna Kea Resort’s many residential neighborhoods, 29 sales totaling more than $157 million closed through the first three quarters. Overall sales in all price segments within Mauna Kea Resort have outpaced 2019 by 65% and exceeded 2018 sales by 32%. This high water mark is the highest volume of sales recorded within the resort in more than a decade. Many buyers purchased their Mauna Kea Resort properties sight unseen this year. There is a lot to be said about the serenity and safety of the Kohala Coast. Even during a global pandemic and economic crisis, there remains considerable demand for resort properties, turn-key homes and condominiums within the safe bubble of Mauna Kea Resort.

The new spa will be located on the North Garden grounds, and a lap pool and state-of-the-art fitness center will replace the Mauna Kea’s Garden Room. The resort’s oceanfront, 18-hole championship golf course—originally designed by Robert Trent Jones Sr. in 1964 and then restored by Rees Jones in 2008— will also see significant improvements.

68 New Beachfront Condos Now Selling at Mauna Kea Resort A private developer has completed a conversion project, transforming the former oceanfront north tower of the Westin Hapuna Beach Hotel into 68 condominiums priced between $1.79 and $8.99 million. All three phases were slated for completion in September 2020. As of this writing, they are selling quickly. Six of the 68 units have already closed escrow, and another 21 condominium units are under contract. The Hapuna Beach Residences at Mauna Kea Resort are whole-ownership condominiums designed in a variety of floor plans with one to four bedrooms. Some condos have private pools, and all the new units offer incredible ocean and coastline views. The new residences are located within a stone’s throw of the most beautiful crescent white sand beaches in Hawai’i.

Hawai‘i Continues Transition to Renewable Energy

Mauna Kea Resort’s $100 Capital Investment

In 2015, the State of Hawai‘i signed the Renewable Portfolio Standard into law, leading the nation with a goal of reaching 100% renewable energy generation by 2045.

The Mauna Kea Resort is planning a substantial capital improvement project valued at $100 million. Resort ownership is proceeding on a fast track and expects to complete the improvements by the end of 2021. The investment will result in a new Mauna Kea Resort spa, a modern fitness center, and a refresh to the historic resort’s already remarkable guest rooms.

On June 2, 2020, Hawaiian Electric Company (HECO) announced it had selected two projects in the district of South Kohala on the Big Island, in addition to 14 other solar-plus-storage or standalone battery storage projects across the state. This announcement marked the latest phase in its clean energy transition for the islands.

The two South Kohala projects on the Big Island will be located above Queen Ka‘ahumanu Highway in the Puako area and at Waikoloa Village. They will produce 206 gigawatt-hours annually—enough to power 36,000 average Hawai‘i Island households. Further, the projects will prevent the release of 144,000 tons of carbon emissions that would have been produced, making the same amount of electricity using fossil fuels. “It’s like taking 32,000 cars off the road,” the company said in a statement following HECO’s June announcement.

Hawai‘i Island Notable Listings *See photos on following page

73-4746 Aukai Place, Kailua-Kona - Priced at $19.5 million, this distinctive, custom-designed residence is pure Hawai‘i elegance, located in the private club community of Kohanaiki.

68-1025 Pauoa Way, Kamuela - Priced at $17.9 million, this award-winning, contemporary, beachfront residence is within a gated enclave at Pauoa Beach, within the iconic Mauna Lani Resort.

32-1056 Old Mamalahoa Highway, Ninole Priced at $9.95 million, this unique clifftop estate sits on more than nine acres and is flanked by two natural waterfalls that cascade into the ocean.

Hawai‘i Island Forecast On Hawai‘i Island, as elsewhere in the state, the expectation is that a deep bench of demand and constrained supply will push prices up through the fall—especially while the coronavirus remains controlled in Hawai‘i, relative to many West Coast cities. Inventory has seen a consistent drop throughout this year. Buyers and sellers getting used to the scarcity of residential homes. While the market is somewhat balanced now, we expect a shift to a seller’s market through the fall and winter, as prices rise, and strong demand continues. For those people who want to sell their properties, this is an excellent time to place your home on the market.

Top-Tier Hawai‘i County SingleFamily Home Inventory First/Top 90-Day 325 300 275 250 225 200 175 Oct ‘17

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Hawai‘i Island Notable Listings by HL1 (see previous page)

Maui

Luxury Market Overview Q1-Q3 2020 Kahakuloa *

Kualapuu

1 2

Pauwela Kahului

Maunaloa *not to scale

Lahaina

Makawao

Lanai City Kihei

Hana

Kipahulu

Kahoolawe *

Heat Map # of Sales over $3M

Sales over $10M 0

10+

4% Land • 2 sales 31% Condo • 15 sales 65% Res • 31 sales

TRANSACTIONS $3M+

WEST MAUI 20 West Maui luxury homes sold this year, including two Hawai’i Life listings priced above $10M

Source: MLS records (a third party source) deemed reliable, but not guaranteed.

Year-to-date high-end sales on Maui are down by both number of transactions (-15) and total dollar value (-28%) this year, for a total dollar volume of almost $250.6 million.

$15.5M

A Kapalua home sold in September

All West Maui SF homes

HIGHEST SALE IN 2020

TRANSACTIONS $10M+

DATA :

Maui

Maui is primarily a second home market. Initially, travel restrictions proved a hindrance through the spring. The balancing act of keeping infection rates down and allowing travelers to return hit a critical juncture in June. fallen nearly as much. All signs point to a flood of new buyers swooping in to capture quality properties from Maui’s tight inventory, as they come to market.

Following a fantastic first quarter and slow spring, inquiries from our clients scaled up significantly in June—some calls coming in the middle of the night. Since July, buyer activity has been humming and smart buyers realize that the time is now.

The mandated quarantine remains in effect, though the state’s pre-travel testing program was launched in mid-October. We are now seeing the initial effects of that reopening.

While Maui brokers were aware of pent-up demand from off-shore buyers, we didn’t expect that to translate into substantial market activity until flights resumed and travel restrictions eased. We anticipated a slow re-energizing through summer and fall.

Sales Volume Above $3M

As flights resumed, some traveled and adhered to the quarantine requirements, while other buyers purchased virtually or sought out long-term rentals to wait out this unprecedented crisis. But as the third quarter kicked off, Maui highend activity became frenetic, despite the 14-day quarantine that was still required for all visitors and returning residents. It became obvious that people were craving the Maui lifestyle, safety, and sense of community. While the number of trades at all price points dropped significantly from last year, property sales above the $3 million benchmark haven’t

Maui saw a total of 48 sales above the $3 million luxury benchmark in the first three quarters of 2020, compared to 63 sales in that market segment during the same period last year. Properties selling above $3 million on Maui in 2020 included 31 residential homes, 15 condominiums, and two pieces of land. Property sales were more or less evenly distributed between South Maui and West Maui, with one significant upcountry Kula land sale for $9.83 million at the end of July and an $8 million land sale in Kapalua, in West Maui. Hawai‘i Life’s Dave Futch was the selling agent for a residential property Haiku that sold for close to $4 million at the end of April.

The preponderance of South Maui high-end sales took place in the Wailea/Makena area, though there were five sales above $3 million in Kihei. In West Maui, a total of 20 high-end transactions above $3 million closed in the first three quarters of this year.

Hawai‘i Life’s Market Share Hawai‘i Life agents took part in just over 7% of the sides of business above $3 million on Maui this year. Those transactions accounted for almost 20% of the island’s total sales dollar volume in the market’s luxury segment.

Sales Volume Above $10M One reason for Maui’s lagging performance compared to last year is that 2019 was an extraordinary year of high-value sales transactions. Only three of Maui’s high-end sales closed north of $10 million this year, compared to eight in the first three quarters of last year. Two of this year’s sales that closed above $10 million were Hawai‘i Life listings in West Maui that sold for $10.5 million and $14.5 million, respectively. In midSeptember, a third West Maui property in Kapalua closed at $15.5 million—the highest sales transaction on Maui year-to-date.

$200M

2020 2019

$100M $50M 0 Q2 Maui

By dollar volume, year-to-date sales in Maui’s luxury market are down 28.1% in dollar volume compared to the first three quarters of 2019. The second quarter was particularly quiet in closings, but high in buyer interest, inquiries and showings.

Maui Market News Inquiries for rentals have exploded this year, especially from Silicon Valley, Los Angeles, Seattle, Vancouver, and New York. Clients were looking to stay for one or two months, initially. Once people began to understand the quarantine and leasing challenges1, many were motivated to lease for a longer-term, spending their initial months on Maui shopping for the right home, and making the leap to purchase over the coming year. While new inventory isn’t being built right now, demand for high-end Maui properties is massive and people are paying full market price for properties. Buyers coming in with low offers this year are likely to be disappointed. Following a softer Q1 and Q2 in sales (but not rentals), we began seeing a significant uptick in market activity and became keenly aware of pent-up demand building in the market. The market began moving at a quickened pace as early as June. Since July, many agents have been inundated with inquiries from buyers looking for the ideal property to fit their needs. They report that high-end market activity on Maui kicked right after the 4th of July celebrations.

$150M

Q1 Maui

Performance by Quarter

Q3 Maui

2020 Maui Buyers This year’s affluent buyers are young, smart, and decisive. Many are frustrated by travel restrictions

1 Since March, new arrivals to the State of Hawai‘i were required to quarantine for their first 14 days here. While they were free to roam after two weeks, they were required to lease a property for six months and stay in it.

and quarantine challenges. As a result, many are choosing to invest on Maui, anxious to resolve the obstacles the pandemic has put in front of them. Some are enthusiastic about the opportunity to leave behind their busy corporate lives and make Maui their primary residence for a time. Many are acquiring second homes simply to avoid having to plan future vacations. They plan to ride out the pandemic in the short-term and secure a desirable vacation home for their family in the long-term. With hotels and resorts shuttered, they are securing a place to visit on very short notice— a property that provides safety (read: no elevators or shared high-density spaces). While this may seem impulsive, these buyers are already familiar with the Maui travel experience and are making informed decisions with the help of trusted partners at Hawai‘i Life. For buyers from L.A., Seattle, and the Bay Area, the Hawaiian Islands hold enormous appeal. They are seen almost as a “green zone” for healthy living due to low infection rates and the relative normalcy of daily life. Inquiries about farmers’ markets, mountain bike trails, home gyms, good internet speeds, yoga studios, and health food stores have increased this year.

property to purchase, or they’ve found a temporary home to live in while their more permanent residence is under construction. Many buyers are interested in private estate compounds that offer an all-inclusive experience. Homes with pools, gyms, guest houses, and gardens are in demand. Many agents are fielding inquiries for South Maui beachfront estate properties, with a particular interest in the Makena area. In addition to estates, low-density luxury condominium communities such as Wailea Point have seen a surge in sales. There are currently two pending sales in Wailea Point; 11 closed sales since March, including five that closed above $4 million, with a high of $7.5 million. Prior to COVID, more urban lifestyles were trending. Los Angeles and New York, in particular, were having very robust markets. But due to the seismic shifts in recent months in the way we work and live, interest in island living has skyrocketed. Maui offers a respite from the mainland chaos as the virus continues to spike.

Due to the seismic shifts in the way we work and live, interest in island living has skyrocketed.

Maui buyers are intending to use their properties for longer periods than they did before. We are excited to nice to welcome new residents who will enjoy the island in new ways. Some buyers are upgrading from investment or vacation condominiums to estate homes, where one sale is dependent on the sale of the other. The activity level is the best we have seen in a long time, but there are moving parts to get sales to happen. We have oceanfront, rural, and upcountry inventory, including estates and vacant land.

The market is trending towards robust activity this fall and winter. A pre-travel testing option launched in October will exempt visitors from a 14-day quarantine, easing travel to the state.

Many Silicon Valley buyers are showing more interest in land and building custom homes than before the pandemic. Some have opted for longterm rentals in the relative safety of Maui this year. They are spending their time on Maui shopping for a

There has been steady, active trading through September and October, and we fully expect that trading will ramp up even further as travel restrictions are eased. Although some buyers have been waiting, many others are proceeding

Maui Forecast

and purchasing virtually using Google Earth, live-streamed tours, 3-D matterport tours, and leaning on local contractors and property inspectors to evaluate prospective properties. There has been no sign of property owners fleeing the market. There were listings pulled from the MLS in the early days of the pandemic, and some owners are holding back until flights and travel resume. Brokers in the know are aware of these pocket listings, and some are exceptional ranch or beachfront properties. We expect many sellers who have been holding back to bring their listings back on the Maui market after mid-October. However, savvy buyers are acting now to acquire their first choice of Maui properties, recognizing that the quarantine lift will likely bring a rush of new buyers to the islands.

Maui Notable Listings *See photos on following page

588 Kulaiwi Dr., Wailuku - Priced at $12.8 million, this award-winning, gated estate perched on 5.75 mountaintop acres offers stunning views of Maui’s central isthmus, north and south coastlines.

7155 Makena Rd., Kihei - Priced at $12 million, this lush, two-acre Makena estate features seven modern, oceanfront structures connected by private pathways for seamless indooroutdoor living.

5490 Makena Rd., Kihei - Priced at $11.75 million, this South Maui private estate compound boasts some of the island’s most remarkable view planes— from Pu‘u to the West Maui mountains.

9 Bay Dr., Lahaina - Priced at $37.5 million, this gated, legacy oceanfront estate on Hawea Point spans almost 10 acres of conservation land and sits adjacent to a 13-acre vacant parcel.

20 Kai Ala Dr., Lahaina - Priced at $24.5 million, this 8-bedroom, superbly crafted, Indonesianstyle home sits on almost an acre of hotel-zoned beachfront property with sunset views.

4039 Lower Honoapiilani Rd. Lahaina - Priced at $11.5 million, this elegant, plantation-style oceanfront residence features designer finishings and west-facing ocean and sunset views.

We expect current and new listings to sell rapidly once travel restrictions are eased, and constrained supply will likely follow.

Top-Tier Maui Single-Family Home Inventory First/Top 90-Day 150 140 130 120 110 100 90 80 Oct ‘17

Mar ‘18

Jul ‘18

Nov ‘18

Mar ‘19

Jul ‘19

Nov ‘19

Mar ‘20

Jul ‘20

Maui Notable Listings by HL1 (see previous page)

Kaua‘i

Luxury Market Overview Q1-Q3 2020

Kilauea

Hanalei

Anahola

Kapaa

Lihue

Kekaha

Kalaheo

Heat Map Sales over $10M

# of Sales over $3M 0

10+

21% Land • 4 sales 0% Condo • 0 sales 79% Res • 15 sales

TRANSACTIONS $3M+

HANALEI 10 properties in Hanalei sold for more than $3M each, with 5 additional high-end sales within Kuku‘iula, on the South Shore

Source: MLS records (a third party source) deemed reliable, but not guaranteed.

The number of high-end sales transactions on Kaua‘i have kept pace with last year, but the total dollar value is up 39%, for a cumulative total of $121 million in sales year-to-date.

$36.75M HIGHEST SALE IN 2020

A North Shore estate on Weke Road

TRANSACTIONS $10M+ Listed & sold by Hawai‘i Life

DATA :

Kaua‘i

2019 was a relatively soft year after an amazing 2018, due to the 100-year flooding event on Kaua‘i that drove some buyers to pump the brakes during the first part of last year. This year got off to a great start with several large transactions that closed in January and February. 2020 was shaping up to be the best year ever when business suddenly stopped on a dime in March.

Despite the pandemic, and perhaps due to it, the Kaua‘i real estate market has kept pace with recent years deemed to have strong sales performance at the high-end, despite a pause in the spring. Any adverse impacts to Kaua‘i’s luxury market following the pandemic’s onset have been negligible, in no small measure due to a solid start to the year and the state’s highest priced property sale, which closed in April.

Sales Volume Above $3M Kaua‘i saw the same number of sales above $3 million this year as last year (19) but experienced a sales volume increase of 39%. Aggregate Kaua’i luxury sales exceeded $121 million in the first three quarters of 2020, up from $87 million during the same period last year. This year’s sturdy Kaua‘i performance can be attributed, in part, to one significant sale of an estate property along Hanalei Bay that closed in April. Hawai‘i Life represented both the buyer and seller in the sale. The property included three adjacent beachfront homes on Weke Road, one of the most desirable destinations in the entire state. While the buyer had several opportunities

to back out after the start of the pandemic, they saw Kaua‘i as a safe haven.

Hawai‘i Life’s Market Share Hawai‘i Life represented 31.5% of the sides of business above $3 million on Kaua‘i this year. Hawai‘i Life brokers represented both the buyer and seller in many of Kaua‘i’s high-end sales. They participated in transactions that constitute forty-nine percent of the island’s total sales dollar volume in the market’s luxury segment— what we consider to be transactions greater than $3 million.

Sales Volume Above $10M An extraordinary North Shore estate property traded for $36.75 million—the highest-priced property sale in the state and the only transaction on Kaua‘i to exceed $10 million this year. There were no MLS sales recorded above $10 million in 2019 on Kaua‘i. Hawai‘i Life holds the record for the highest-priced sale in the state’s history for a property sold in 2018 for $46.1 million.

Performance by Quarter The largest transaction in the state closed in April, elevating second-quarter total sales on Kaua‘i. By dollar volume, year-to-date sales in the luxury market on Kaua‘i are up 39% or just over $34 million. The first quarter also saw significant gains in volume (if not the number of transactions) over the same period last year. $50M

2020 2019

$40M $30M $20M $10M 0 Q1 Kaua‘i

Q2 Kaua‘i

Q3 Kaua‘i

Kaua‘i Market News After a pause in the market at the height of economic shutdowns through April and May, pent-up demand began to increase in June. Beginning in July, we began seeing more requests for listing info than ever before, coupled with other market signals such as increased requests for high-end, long-term rentals. Since then, Kaua‘i’s North Shore began supporting a full-fledged long-term rental market with many new arrivals from the U.S. mainland. Many people flourish here and love the lifestyle, and long-term renters eventually opt to purchase a more permanent home on Kaua‘i. We expect some attrition from amongst these newcomers and, ultimately, a net gain of new residents who will choose Kaua‘i as their permanent primary residence.

Pandemic Unleashes New Priorities This year’s increased time spent at home has created a reshuffling of real estate priorities for both

homeowners and buyers. Early on, some Kaua‘i homeowners pulled their second homes off the market with a renewed desire to spend time here this year and a reevaluation of their home as an essential asset to hold onto during a time of such widespread economic uncertainty. This reshuffling began manifesting itself at the entry-level of Kaua‘i’s luxury market. Buyers who had previously been on the sidelines started reprioritizing owning property on Kaua‘i. Those who had previously hesitated to purchase a second home on Kaua‘i began taking the leap,in early July. We began seeing interest and movement in properties at the lowest end of Kaua‘i’s luxury market first. However, in the very highest tiers of the market, some buyers began contacting Hawai‘i Life in anticipation of the lifting of travel restrictions in mid-October. They were waiting for Hawai‘i’s quarantine rules to lift before jumping in, a strategy that may be ill-advised. At the highest end of the Kaua‘i market, demand for larger homes began to rise in the spring and summer, with buyers looking for features like expansive kitchens, pools, workspaces, and gyms. These desires are also being expressed in new construction projects, according to some of our architect colleagues. A light switch turned on at the end of September. It started with a few buyers looking to buy lowerpriced homes on the North Shore. Suddenly there was a bidding war for a $1 million home, and others soon followed. For the first time in several decades, we began experiencing a seller’s market on Kaua‘i.

Buyers Purchasing Sight Unseen We didn’t entirely expect to sell high-priced homes sight unseen, but 2020 has been surprising in many ways. This year has produced an unprecedented number of deals transacted without the buyers ever setting foot on Kaua‘i. If you’ve never visited before, that proposition becomes a little bit of a hurdle.

For most clients who have experienced all that Kaua‘i has to offer, the pandemic has been a significant motivator. It’s as if the entire market is like a private club that everyone wants to get into. By the end of the third quarter, he was already witnessing multiple buyers vying for properties in the higher market segments—north of $5 million. A seller’s market, indeed. We have been fielding more inquiries than ever for our highest-end properties, especially those that can serve as self-contained sanctuaries. At a time when quarantining at home is a real and persistent undertaking, buyers are showing interest in properties that provide the utmost in privacy, along with all the best of Hawai‘i’s outdoor lifestyle.

Kaua‘i Forecast Kaua‘i’s high-tier inventory above $3 million is dwindling quickly. Buyers and brokers looking to find a property on Kaua‘i—especially on the coveted North Shore—need to be diligent and tenacious. Massive absorption of existing inventory is occurring, and sales activity has been very active through August and September. More than 50 contingent deals were in play at the end of September—during quarantine and with travel restrictions firmly in place—when typically there are only about ten or twelve happening at any given time. We expect that high-end market segments on Kaua‘i should see even more significant activity in the coming months, particularly following the state’s pretravel testing program launched on October 15, 2020. Assuming the logistics of the pre-travel testing program work well, we expect that with pent-up demand and the reckoning that crises seem to engender, Kaua‘i will benefit from even more new buyers entering the market.

looking extremely rare properties, we advise buyers not to hesitate. There are more buyers active in the marketplace than ever before, and they may have similar goals and tastes. As these buyers pick up more inventory, we also believe that similar sentiments may keep sellers on the sidelines, further constraining supply. Whether supply contracts or generally holds steady, the push in demand is set to put upward pressure on prices. Colleagues in other luxury markets like Jackson Hole, Aspen, and Lake Tahoe have all expressed surges in buying, reductions in inventory levels, and rising prices. All Kaua‘i market signals, along with the trends in comparable markets, give us confidence that the Kaua‘i high-end market will follow a similar path once travel becomes more accessible. We expect to see some very significant sales in balance of 2020.

Top-Tier Kaua‘i Single-Family Home Inventory Inventory First/Top 90-Day 75

50 Oct ‘17

Mar ‘18

Jul ‘18

Nov ‘18

Mar ‘19

Jul ‘19

Nov ‘19

Mar ‘20

Jul ‘20

Well-priced Kaua‘i properties are moving quickly and, in many cases, they’re receiving multiple offers. It’s fair to say that inventory is plummeting. If you’re

Kaua‘i Notable Listings *See photos on following pages

5121 Hanalei Plantation Rd., Princeville - Priced at $27.75 million, this home’s functional elegance and thoughtful design invite exceptional views of Hanalei Bay into its exquisite living spaces.

4200 Anini Vista Dr., Kilauea - Priced at $33 million, this 10,000 sq. ft. private compound residence overlooks Anini Beach and blends elegant contemporary design with a Hawai‘i design sensibility.

3630 Anini Rd., Kilauea - Priced at $13.95 million, Wailana Malie is a timeless Polynesian estate featuring spectacular ocean views, lush tropical landscaping, and 240 linear feet of beachfront.

3292 Kalihiwai Rd., Kilauea - Priced at $8.9 million, this 3-acre ocean bluff estate was thoughtfully designed for privacy, functionality and to capture stunning ocean and mountain views.

4228 North Waiakalua St., Kilauea - Priced at $19 million, this 4-bedroom oceanfront estate offers ridgetop ocean views and a secluded sandy beach reached by a private access road.

7534-B Kuhio Highway, Haena - Priced at $8.95 million, this contemporary beachfront residence blends impressive high-tech features with breathtaking views, luxe design and amenities.

2818 Kamooka Rd., Kilauea - Priced at $40.5 million, Wai Kala Ranch encompasses five adjacent properties and 372 spectacular acres connected by waterways, private roadways, and bridges.

5741 Ka Hookui Place, Koloa - Priced at $10.9 million, this contemporary, elegant residence within the private club community of Kukui’ula features 180° ocean views from a terraced lanai.

Kaua‘i Notable Listings by HL1 (see previous page)

Kaua‘i Notable Listings by HL1 (see page 39)

Down 28% from Q2 2019

DATA :

Summary

A 2020 (Pandemic) Timeline • The year began with an incredible first quarter in high-end sales statewide, up 10.4%, or $30.8 million in sales (inclusive of transactions above $3 million Transactions in escrow continued to close through the first quarter. • In March and April, we experienced a lull in new activity. Despite the abrupt global economic halt, travel restrictions, and stay-at-home orders precipitated by the pandemic, a few new buyers continued to initiate a purchase.

Up 10.4% from Q1 2019

• There was a precipitous drop in high-end sales over Q2 of 2019. Hawai‘i sales transactions above $3 million dropped 28% or $105.6 million versus the second quarter of 2019. • The State of Hawai‘i maintained very low infection rates through May when the virus was relatively under control on all islands. However, at the beginning of June, numbers on O‘ahu began to rise significantly, while most other islands in the state fared far better. • Initially, there were supply constraints. Some sellers, unsure what the future held, pulled their homes off the market. Existing Hawai‘i homeowners suddenly placed a higher premium on the safety, enjoyment, healthy lifestyle, and relative seclusion that Hawai‘i provides. Those in a position to hold pulled their listings off the market or held back from listing their property. Inventory was in short supply for these reasons. • Many families began arriving in the spring -demonstrating a willingness to travel and adhere to the 14-day quarantine period mandated by the Hawai‘i State government. Others conducted transactions by virtual means. • We began to see buyers with different goals. Rather than home shopping with the intent of visiting over the summer and winter holidays, transplants from West Coast urban centers wanted to work from the islands while enjoying clean air, low infection rates, and Hawai‘i’s healthy lifestyle and climate.

• August usually marks the start of a busy fall season. This year, mainland buyers were anxious to secure property in Hawai’i’s relative safety as early as June. As a result, trading in the highest end of the market began to pick up in late June on all islands, leading to very robust summer activity. Closings on properties above $3 million were up 15.6% statewide or +$67 million over the third quarter of 2019. • While many Americans make Hawai‘i their second home, we noted a substantial uptick in new property buyers looking to purchase a second Hawai‘i home that they could occupy full-time, at least for the foreseeable future. Whether they were escaping the pandemic or realizing that a permanent move fit their lifestyle, buyers increasingly chose a Hawai‘i home as their primary residence.

• Overall sales above $3 million have kept pace with the first three quarters of 2019 due to a strong first and third quarter in 2020, resulting in $1.09 billion in property sales year-to-date – compared to $1.10 billion in the same period last year (counting all closed transactions above $3 million). • Hawai‘i Life is outpacing 2019, and therefore, the market as a whole, which was flat to last year by the end of the third quarter. By the end of October, we surpassed our company’s total 2019 sales volume of $1.6 billion, with more than two full months of sales ahead of us. In the luxury market above $3 million, we have also surpassed last year’s performance as a company. • Released from the strictures of sending children to a brick-and-mortar school in the fall, many families opted for distance learning from the 50th state’s relative safety. The ease of working remotely and the corporate embrace of working with a distributed team have impacted the type of buyer coming to Hawai‘i in 2020.

Up 15.6% from Q3 2019

• Despite the travel restrictions that have impeded visitors since the springtime, high-end trading of Hawai‘i properties has been very brisk this fall, following a period of pent-up demand in the spring that still exists.

2020 (Q1-Q3) HAWAIâ&#x20AC;&#x2DC;I LUXURY MARKET REPORT

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