POSTED: 6 OCTOBER 2005 - 1:30pm HST

Costco will likely pull plug on Kauai store

a rendering from Costco, presented 22 March 2005, of what we may not be getting

Thank God!
by Juan Wilson 6 October 2005

The Garden Island News reports that Costco is re-evaluating its plans to open a store on Kauai. The ostensible reason is the high bids they received when they put the project out to bid. They claim it came in ov er 30% above their expectations. One aspect of high prices has been due to distress on the supply side of meterials. As I understand it, since Katrina the cost of plywood on the mainland has doubled.

Another aspect of Costco problem is part of the reason why they thought it would be a good idea to come here in the first place... a booming real estate market. But when some people here can afford to pay builders $900 a square foot for residential construction getting any bid, much less a low one could be difficult. With a market like the kind on Kauai who is going to build a box for Costco on the cheap.

Costco appears to have considered an alternative plan to reduce the size of its store here. That would surely defeat the very business model that Costco has ridden to the top... the economy of scale.

It always seemed as if the decision to come to Kauai was marginal, simply based on the numbers of consumers on the island. I suspect that four things came together to make the spreadsheets numbers go into the red.

1) Local construction costs unrealistically high

2) Construction materials continuing a steep rise in cost

3) Higher energy costs and transportaton costs ahead

4) A projected bust in real estate balloon on Kajuai

The last two items may be not ony what Costco sees but something we can use as an indication to get ready for an economic slowdown on Kauai. Costco may be "the canary in the coal mine" with a better sense of our future than we have.

I am glad Costco is not coming to Kauai. Let's begin to prepare for that reality.

For more about this issue:
Costco on Kauai2
Costco on Kauai1


Costco future in doubt
by Andy Gross 4 October 2005 in The Garden Island

There is a strong possibility Costco may not be coming to Kaua'i, or at least not in the form it was originally planned.

Construction was to have begun last month on a 15-acre plot next to and including a portion of The Home Depot site.

"What happened was, after we put it out to bid, the bids (from construction companies) came in 30 percent higher than anticipated. Unless that comes down, things are not going forward," said Costco Wholesale Corp. Chairman Jeff Brotman.

"It's not dead, but it is on life-support," he said, giving no time frame for what the company has in mind.

Brotman said the bidders were representatives of both Mainland and Hawai'i companies. He said Costco officials have enough experience in the state to know the bids were uniformly high.

"This was way over the top," he said.

"We were stunned by the numbers. We couldn't believe they were justified," he said, adding that company executives are disappointed at the turn of events.
Brotman said Costco leaders were going to regroup and see what they could do to bring it into their budget range.

"It could be a bit smaller," he said. Brotman said this would not entail removing the self-serve gasoline station planned at the store.

In May, members of the Kaua'i Planning Commission unanimously approved zoning permits to allow a new Costco warehouse and gas station at Kukui Grove Village West, in the site where the Kukui Grove park and pavilion is now.
Costco Wholesale Warehouse leaders were required, however, to meet certain conditions, including making traffic improvements in the area, abiding by recommendations made by officials with state and county agencies, and following an original landscaping and lighting plan.

County planning officials could not be reached for comment Monday.
The original plan called for a 150,000-square-foot supply store and a self-service gas station. The site was expected to have eight entrances and exits, from Kalepa, Nuhou, and Ulu Maika streets.

Costco leaders had proposed to have both the gas station and warehouse facility opened for business by the end of this year.

Costco officials were also required to have a traffic plan approved by officials with the state Department of Transportation Highways Division and the county Department of Public Works, to minimize traffic delays around the store.


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