LIHUE, Kauai — Kauai County Councilmember Derek Kawakami comes from a supermarket family and has retail in his blood. As a boy, he lived within easy bicycle range of Kukui Grove Shopping Center in Lihue, Kauai’s only so-called regional mall.
It was the island hub, especially for teenagers on Friday nights. “It was vibrant. It was safe,” Kawakami said. “It will always hold a very, very special place in my heart.”
But today, Kawakami, a former member of the Hawaii House of Representatives who has filed to run for mayor of Kauai this year, looks with distress at what has become of Kukui Grove. Counting all of the empty spaces, the mall has an apparent vacancy rate hovering near 40 percent — a figure the mall’s management does not dispute. Everywhere, there are papered over storefronts with pleading “for lease” signs in the front windows.
“It breaks my heart to see the vacancies,” Kawakami said.
Jan Rogers Kniffen, a New York-based shopping center expert, took note of Kukui Grove’s occupancy the way a doctor evaluates symptoms. “That’s a dead mall,” he said. “Once a mall falls below 60 percent occupancy, we describe it as potentially failed. Very few of them make it.”
It’s all a result of market forces, and the death of the regional shopping mall is not confined to Kauai or the state. This is a national death spiral.
Kukui Grove is owned by the Alaska Permanent Fund, a $60 billion state savings account fueled by oil revenue that disburses interest earnings to Alaska residents. About 10 percent of the fund’s assets are in real estate investments throughout the country, including Hawaii. The fund owns the Maui Marketplace near Kahului, which, like Kukui Grove, is widely seen as distressed.
“What’s happening on Kauai is a great litmus test,” said Stefany Sofos, a Honolulu real estate appraiser known as a shopping mall expert. “People are shopping online more and the brick and mortar retailers are going away. To survive, they are going to have to reinvent themselves.”
Kawakami recognizes that it’s probably impossible to restore Kukui Grove to its status as a regional shopping powerhouse. After all, hundreds of malls across the country have already failed and experts project that 275 more will close between now and 2025.
He also knows that Kauai faces an acute housing shortage — at least 1,000 affordable units, according to a new county general plan. The island’s towns and communities must stop growing outward and focus on in-fill housing and creating a wider variety of housing types in quasi-urban settings.
In many communities across the country, shopping malls are being repurposed as housing. Kukui Grove, he said, may offer an ideal opportunity.
But it will have to accomplish its repurposing within bounds of Kauai’s building codes, which currently limit structures to 50 feet high. Where many failed regional shopping centers grow vertically with housing units atop, Kukui Grove likely would have to take advantage of its acres of parking lots, which are largely unused.
Kawakami said he serves on the boards of three smaller Kauai shopping centers — a legacy of his family’s business, which included the Big Save supermarket chain.
He chooses his words carefully because Kauai’s mayor is the most powerless chief executive among the four Hawaii counties. He knows he can’t dictate to the private sector. No decree can force Kukui Grove to morph into affordable housing mixed with retail, arts centers and restaurants — the formula that is proving successful for many failed malls.
It would also be consistent with Kauai’s nascent effort to reestablish fading Lihue as a more densely populated core that is pedestrian friendly and lures people back into town.
Lihue was largely sucked dry starting when Kukui Grove opened in the 1980s. The later arrival of Walmart and Costco finished the job. There is irony in the state of things today, with Kukui Grove in trouble and Lihue trying to come back.
Kukui Grove is down to just five large tenants and two of them — Macy’s and K-mart — are owned by companies that have closed hundreds of stores in the last few years and announced intentions to keep on closing locations. Losing either could well be the death knell of Kukui Grove.
“I do fear Kukui Grove could fail,” Kawakami said, “and if they ever approached me to ask about affordable housing, I’d encourage it.”
Kawakami has a 14-year-old daughter, Hailee, who has followed in her father’s footsteps in her frequent bike trips to Kukui Grove, especially on Friday nights, when it remains a teen hangout — if a faded one.
“Kukui Grove is very important because there are not a lot of things to do for kids my age,” Hailee said. “It’s a great way to hang out and talk story. It’s a very safe place.”
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