The Oahu office market began 2018 with a first quarter loss of 26,647 square feet of occupancy as vacancy rates rose to above 13%. This is the third consecutive quarter the office market posted negative net absorption and the highest vacancy rate since the end of 2016. Despite healthy economic conditions, the office market has yet to gain traction with nearly 114,000 square feet of tenancy lost since June 2017. After the Great Recession instigated a stark drop in net absorption in 2010, Oahu’s office market has struggled to recover as vacancy rates continually remain within a narrow band of 12% and 14%.
The Central Business District (“CBD”) has particularly struggled to find tenants. For the first quarter, this submarket posted a loss of 47,058 square feet of negative absorption as vacancy rates rose to the record high of 17.1%. The delivery of First Hawaiian Center to the market amid stagnant economic conditions in 1996 was the last time the CBD vacancy rate exceeded 16%. Large office tenants 5,000 square feet or greater should capitalize on these favorable market conditions by negotiating lease extensions and additional tenant improvement allowances.