But Why Pay More

View from a $36 million penthouse (WSJ photo)

We try to rationalize the irrational price of Bay Area real estate by pointing toward the trillions(!) of dollars worth of companies located there.

But what explains what's going on in Honolulu's formerly run-down Kakaako section? [bold added]

This city’s Kakaako district—long overlooked amid the development of Waikiki Beach on one side and downtown skyscrapers on the other—has become the center of a building boom of luxury condominiums and townhomes with asking prices upward of $20 million. A 10,000-square-foot penthouse atop the 36th floor of Waiea tower—featuring floor-to-ceiling views of Waikiki and Diamond Head—is listed for $36 million, believed to be the highest ever for a condo in Hawaii.

The area's got nice restaurants and stores, but the streets and sidewalks still need fixing, traffic is horrible, and the air is dusty from construction. The Hawaiian company with the largest market cap is Hawaiian Electric at $3.6 billion, so most of the buyers aren't local entrepreneurs who hit it big with an IPO. The Hawaii Visitors Bureau deserves an A+ for marketing the islands, especially to wealthy Asians.

Meanwhile, the old man and I walk along the parks in the neighborhood, and it doesn't cost us a cent.