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Kakaako Businesses Face 5+ Years of Major Disruption from Rail Construction

·Updated ·8 min read·⚡ Act Now

Executive Summary

Construction for Honolulu's rail project is now entering Kakaako, initiating a period of significant, long-term disruption lasting through 2029. Small business operators and real estate owners in the area must develop contingency plans immediately to mitigate impacts on operations and customer access.

  • Small Business Operators: Expect reduced foot traffic, access challenges, and potential revenue decline.
  • Real Estate Owners: Property values may be temporarily impacted; leasing strategies need adjustment.
  • Tourism Operators: Visitor experience and accessibility to Kakaako attractions may be affected.
  • Entrepreneurs & Startups: Scaling and operational logistics will require careful planning.
  • Action: Develop a detailed disruption mitigation plan before June 30, 2024.

Action Required

High PriorityThrough 2029

Businesses in Kakaako need to plan for significant ingress/egress challenges, potential customer loss, and operational adjustments for the next five years.

Small business operators should develop a comprehensive disruption mitigation plan by June 30, 2024. This plan must detail customer communication strategies, logistics adjustments, and budget contingencies for at least the next five years of persistent construction in Kakaako.

Who's Affected
Small Business OperatorsReal Estate OwnersTourism OperatorsEntrepreneurs & Startups
Ripple Effects
  • →Reduced economic activity in Kakaako → potential rise in commercial vacancy rates → impact on property tax revenues.
  • →Increased commute times for affected areas → exacerbation of island-wide traffic congestion → reduced overall productivity.
  • →Diversion of resources to rail project → potential delays in other critical infrastructure upgrades or skilled labor availability for other developments.
  • →Logistical challenges for businesses → increased operating costs → potential for higher consumer prices in Kakaako.
Three railway workers inspecting train tracks at an outdoor station with covered platforms.
Photo by Pew Nguyen

Kakaako Businesses Brace for 5+ Years of Rail Construction Disruptions

Construction on Honolulu's long-anticipated rail project has officially moved into the Kakaako district, signaling the start of significant, multi-year disruptions for businesses and residents. This phase, expected to persist through 2029, will fundamentally alter access, traffic flow, and the general operating environment for a wide range of commercial entities and property owners in this vital economic hub.

The Change

The Honolulu Rail Transit project's Western Extension is now active in Kakaako, encompassing sections of Ala Moana Boulevard and other key arteries. While the rail aims to provide future transit solutions, the immediate impact is a profound disruption to daily commerce. Road closures, reduced lane availability, noise pollution, and altered pedestrian pathways are becoming the norm. These conditions are projected to continue for at least the next five years, significantly impacting businesses that rely on consistent customer access and smooth logistical operations. The precise nature and duration of specific disruptions will evolve as construction progresses, requiring ongoing vigilance and adaptation.

Who's Affected

Small Business Operators (Restaurants, Retail, Services)

Businesses located within or near the actively constructed zones will experience direct impacts. Reduced vehicle and pedestrian traffic will likely lead to decreased sales, particularly for businesses reliant on walk-in customers like restaurants, cafes, and retail shops. Delivery and supply chain logistics will become more challenging and potentially costly due to detours and traffic congestion. Staffing could also be affected if commute times for employees increase significantly.

Real Estate Owners (Landlords, Developers, Property Managers)

Property owners in Kakaako will grapple with the potential for decreased rental demand or pressure to offer concessions due to the construction inconvenience. While long-term property values may benefit from eventual rail access, the interim period could see temporary dips or slower appreciation. Developers planning new projects will face extended timelines and increased pre-construction planning requirements to navigate the active construction zones. Property managers must proactively communicate with tenants and address concerns regarding access and potential business impacts.

Tourism Operators (Hotels, Tour Companies)

While Kakaako is not a primary tourist accommodation hub, it is a significant destination for dining, shopping, and entertainment. Hotels that refer guests to Kakaako establishments, or tour operators including it in their itineraries, will need to advise clients of potential access issues and longer travel times. The overall visitor experience in the district could be diminished by construction, impacting reputation and repeat visitation.

Entrepreneurs & Startups

Startups and growth-stage companies operating in Kakaako face unique challenges. Logistics for shipping and receiving goods, client meetings, and employee commutes can become unpredictable. The operational overhead might increase due to longer delivery times or the need for alternative solutions. For businesses seeking to scale, the construction environment adds a layer of complexity to expansion plans and talent acquisition, as a challenging commute can deter potential hires.

Second-Order Effects

The prolonged construction in Kakaako will inevitably create cascading effects throughout Honolulu's already constrained economy. A primary concern is the potential for reduced economic activity within Kakaako, leading to decreased demand for support services and increased strain on businesses that are already operating on thin margins. This could lead to a rise in commercial vacancy rates, potentially impacting property tax revenues for the city and county. Furthermore, increased commute times for residents and workers entering or exiting the affected areas could exacerbate traffic congestion issues across the island, impacting overall productivity and quality of life. The diversion of public and private resources towards the rail project may also delay other critical infrastructure upgrades or impact the availability of skilled labor for other development projects. [City & County of Honolulu Rail Transit Project](https://www.honolulutransit.org/projects/ That said, the long-term goal of enhanced transit could eventually reduce some of these pressures and improve overall economic connectivity.

What to Do

For Small Business Operators:

  1. Develop a Communication Plan: Inform your customers well in advance about potential access issues, suggest alternative routes or parking, and highlight your business's resilience and continued operation. Use social media, email newsletters, and in-store signage.
  2. Optimize Delivery & Logistics: Renegotiate terms with suppliers if necessary to account for extended delivery times. Explore alternative delivery routes and times. Consider centralizing delivery points or coordinating with neighboring businesses for shared logistics solutions.
  3. Enhance In-Store Experience: With potential foot traffic decline, focus on improving the experience for customers who do visit. Offer loyalty programs, special events, or enhanced services to incentivize visits.
  4. Explore Temporary Relocation or Pop-Ups: If feasible, consider temporary shifts to less affected areas or explore pop-up opportunities to maintain visibility and sales.
  5. Budget for Increased Operating Costs: Factor in potential increases in utility usage (if more indoor time is needed for staff/customers) or marketing expenses to counteract reduced visibility.

For Real Estate Owners:

  1. Proactive Tenant Communication: Engage in transparent and frequent communication with current tenants. Discuss potential impacts and explore mutually beneficial solutions, such as temporary rent adjustments or lease extensions with favorable terms.
  2. Revise Leasing Strategies: For new leases, clearly outline the expected construction environment and its potential impact on business operations. Adjust rental rate expectations accordingly. Consider offering tenant improvement allowances that account for construction-related modifications.
  3. Focus on Property Enhancements: Invest in improving property aesthetics and accessibility where possible, despite the surrounding construction. This can include enhanced landscaping, clearer signage, and improved interior amenities.
  4. Monitor Market Trends: Keep a close watch on commercial real estate trends in Kakaako and surrounding areas to understand valuation shifts and adjust investment strategies.

For Tourism Operators:

  1. Update Visitor Information: Revise all client-facing materials (websites, brochures, pre-trip advisories) to reflect current construction-related access information for Kakaako. Provide clear directions and estimated travel times.
  2. Diversify Itineraries: If Kakaako is a standard stop, explore alternative attractions or adjust the timing of visits to mitigate the impact of peak construction hours or road closures.
  3. Partner with Kakaako Businesses: Collaborate with Kakaako businesses to create package deals or promotions that encourage visits despite the challenges. Offer incentives for groups willing to navigate the area.

For Entrepreneurs & Startups:

  1. Scenario Planning: Develop detailed operational contingency plans that account for various levels of disruption, including severe traffic congestion, temporary road closures, and utility interruptions. Model the financial impact of these scenarios.
  2. Flexible Work Arrangements: Implement flexible work policies for employees, such as staggered start times or remote work options where possible, to help them navigate commute challenges.
  3. Supply Chain Redundancy: Identify and vet alternative suppliers or logistics partners who may be less impacted by the Kakaako construction zone.
  4. Aggressively Manage Cash Flow: Build a larger cash reserve to weather potential dips in revenue or unforeseen increases in operating expenses due to construction-related inefficiencies.

All stakeholders should consider establishing a direct liaison with the Honolulu Authority for Rapid Transportation (HART) to stay informed about construction schedules and potential mitigation efforts.

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