Hawaii stands out as a unique commercial real estate market defined by its world-renowned tourism, limited land supply, and strong investor appeal. The Aloha State has long attracted global interest as an investment destination due to its picturesque environment and steady demand for commercial properties in Hawaii. In 2025, Hawaii offers a mix of opportunities and challenges for investors: robust hospitality performance, tight industrial supply, and improving office fundamentals, counterbalanced by high costs and environmental considerations. Overall, the Hawaii real estate market continues to demonstrate resilience and long-term growth potential, making it essential to understand current trends and future outlook.
From the sun-drenched beaches of Waikiki to the business centers of Honolulu, Hawaii’s commercial property landscape is both vibrant and diverse. Investors are drawn to the state’s stable tourism-driven economy and the rarity of available land, which often translates to high property values and competitive rents. This Hawaii commercial real estate market update provides a comprehensive look at economic and demographic trends, sector-by-sector performance (hospitality, retail, industrial, office, and multifamily), infrastructure and development projects across all islands, as well as considerations like climate risks, quality of life, and the regulatory environment. Whether you're eyeing a resort hotel in Maui or an industrial warehouse in Honolulu, understanding Hawaii’s latest market dynamics will help identify the best investment opportunities in Hawaii.
Economic & Demographic Context
Economic overview: Hawaii’s economy in 2025 is on solid footing, rebounding from the pandemic-era downturn. Unemployment hovers around 3% statewide, consistently below the U.S. average, reflecting a near full employment situation amid the tourism recovery. Key economic drivers include tourism (which fuels hospitality, retail, and service jobs), the U.S. military presence (a stable source of federal spending), and construction. Hawaii’s GDP growth has resumed modestly (projected ~1.5%–2% for 2024–2025) as visitor expenditures rise and major projects inject capital (https://www.bizjournals.com/pacific/news/2025/01/28/hawaii-hotel-revenue-occupancy-2024.html#) (https://governor.hawaii.gov/newsroom/hawaii-january-unemployment-rate-at-3-0-percent/). However, high inflation and interest rates in the past year have tempered consumer spending and led to a slowdown in big-ticket real estate transactions, as investors reassess pricing and yields.
Population and demographics: Hawaii’s population is roughly 1.45 million and recently showed a slight uptick after several years of decline. From July 2023 to July 2024 the state gained about 4,700 residents, marking a small reversal of the outmigration trend (https://www.sfgate.com/hawaii/article/hawaii-population-rebound-20257372.php#). O‘ahu (home to Honolulu) leads this growth, while some neighbor islands like Maui and Kaua‘i saw minor population losses, partly due to economic shifts after the 2023 wildfires. In the longer view, Hawaii’s population is essentially flat since 2020 – a testament to both limited land/housing and residents moving to the mainland for affordability. The population is also aging; the state boasts the highest life expectancy in the U.S. at around 81 years (https://www.hawaiinewsnow.com/2023/02/28/hawaii-ranks-1-life-expectancy-spam-consumption-make-it-make-sense/), and seniors make up a growing share of residents. On the positive side, Hawaii’s median household incomes are among the highest in the nation (about $85,000+), supported by a mix of higher wages in tourism and government sectors. Yet, the high cost of living (especially housing, energy, and groceries) offsets those earnings – a challenge that influences both local consumer behavior and labor costs for businesses.
Hospitality & Tourism Sector
The hospitality sector is the cornerstone of Hawaii’s economy and has seen a robust recovery. By 2024, statewide hotel occupancy averaged around 73% for the year – still a few points below the ~80% occupancy of 2019, but significantly improved from pandemic lows (https://www.bizjournals.com/pacific/news/2025/01/28/hawaii-hotel-revenue-occupancy-2024.html). Travelers have returned in force from the U.S. mainland and slowly from international markets (Japan’s visitor count is growing again, though not yet at pre-pandemic strength). Importantly, hotels have driven record room revenues despite slightly lower occupancy: average daily rates (ADR) surged nearly 30% above 2019 levels, reaching about $360+ per night statewide. This pushed Hawaii’s total hotel revenue to about $5.5 billion in 2024, roughly on par with 2019 when adjusted for inflation. High-end resorts performed exceptionally well; for instance, luxury properties in Wailea, Maui achieved ADRs of $700+ with solid demand from affluent travelers(https://www.hawaiitourismauthority.org/media/13806/hta-november-2024-hawaii-hotels-performance-final.pdf).
Notably, each island’s hospitality market has its nuances. O‘ahu (Honolulu/Waikiki) saw hotel occupancy in the mid-70% range with strong domestic leisure travel and group bookings returning to the Honolulu convention market. Maui’s resorts faced a tougher year due to the August 2023 Lahaina wildfire disaster, which led to months of tourism slowdown in West Maui. Occupancy in Maui County dipped below 60% in late 2024 as parts of Lahaina closed for recovery (https://www.hawaiitourismauthority.org/media/13806/hta-november-2024-hawaii-hotels-performance-final.pdf). However, other Maui resort areas like Wailea have remained resilient, even outperforming 2019 in revenue. The Island of Hawai‘i (Big Island) and Kaua‘i benefited from diverted demand, with many visitors choosing these islands while West Maui rebuilds. A bright spot has been the reopening of iconic properties and new investment: for example, the historic Kona Village Resort on the Big Island reopened in 2023 after a $400 million redevelopment by Kennedy Wilson and Rosewood Hotels, instantly commanding some of the highest rates in the state. Likewise, projects such as the Mandarin Oriental Honolulu (a luxury hotel & residence tower) are in development, underscoring investor confidence in Hawaii hospitality. Overall, the outlook for hotels is positive – Hawaii remains a bucket-list destination, and the tight hotel supply (few new ground-up resorts due to land scarcity and regulations) supports high occupancy and pricing power. Investors interested in this sector can explore Hawaii hotel and resort listings on Brevitas to gauge current opportunities.
Retail Sector
Hawaii’s retail real estate sector is on stable footing and even showing pockets of growth. Retail vacancy in Honolulu is low – around 5.0% availability as of Q4 2024, with essentially flat vacancy over the second half of 2024 (https://www.cbre.com/insights/figures/hawaii-retail-figures-q4-2024). Tourist-centric retail districts like Waikiki have rebounded along with visitor spending; foot traffic in 2024 approached pre-pandemic levels, benefiting luxury retailers and restaurants that cater to tourists. At the same time, suburban retail in local communities is buoyed by steady resident demand. In fact, commercial brokers report strong retailer interest in areas seeing housing growth, such as Central and West O‘ahu. Kapolei, dubbed O‘ahu’s “Second City,” and nearby communities (Ewa Beach, Mililani) have experienced a boom in new homes, which in turn fuels new shopping centers, grocery-anchored plazas, and restaurants. (https://www.hawaiipublicradio.org/local-news/2024-10-11/hawaii-commercial-real-estate-development. Local experts note that planned residential growth in West O‘ahu has directly led to more retail development to serve those neighborhoods (https://www.hawaiipublicradio.org/local-news/2024-10-11/hawaii-commercial-real-estate-development).
Rent trends for retail spaces are relatively flat, with Honolulu’s average asking retail rent around $3.25 per square foot per month (NNN) at end-2024. High-demand locations (e.g., prime Kalakaua Avenue in Waikiki or Ala Moana Center) command much higher rents and typically have waiting lists for tenants. Challenges in the retail sector include rising operating costs (utilities, maintenance) and labor shortages for retailers and restaurants – many businesses report difficulty staffing, which can limit hours or expansion plans. Additionally, the growth of e-commerce is more limited in Hawaii due to geographic isolation, meaning brick-and-mortar retail remains vital for everyday goods. The net absorption of retail space was slightly negative in 2024 (https://www.cbre.com/insights/figures/hawaii-retail-figures-q4-2024), partly due to a few store closures, but it was a vast improvement from deeper pandemic-era contractions. For investors, stable occupancy and the dominance of necessity retail (grocery, drugstores, etc.) make Hawaii’s retail centers attractive defensive assets. Cap rates for quality retail properties in Hawaii tend to be lower than mainland averages, reflecting this stability. Prospective buyers can find Hawaii retail properties on Brevitas, ranging from Waikiki storefronts to neighborhood shopping centers, to capitalize on the state’s consistent consumer demand.
Industrial Sector
The industrial sector in Hawaii is perhaps the most supply-constrained and high-performing asset class. With limited industrial-zoned land (especially on O‘ahu, the economic hub), vacancy rates are extremely low. On O‘ahu, the island-wide industrial vacancy hit a scant 0.93% in Q4 2024 – a drop back below 1% after a brief uptick earlier in the year (https://www.colliers.com/en/research/hawaii/oahu-industrial-market-report-q4-2024). This essentially means virtually full occupancy: warehouse and distribution space is at such a premium that larger tenants (over 40,000 sq ft) often find no options available for immediate occupancy. Rents for industrial space have climbed accordingly; average triple-net rents are about $1.45 per sq ft/month for base rent (with total gross rents around $1.85 including operating expenses) (https://www.cbre.com/insights/figures/hawaii-industrial-figures-q2-2024), and new leases often set record highs given the lack of alternatives. Small industrial units (2,000–5,000 sq ft) see brisk demand from local service businesses and distributors, and these spaces rarely stay vacant long.
Key drivers of industrial demand include logistics for consumer goods (virtually all products must be shipped to Hawaii), construction suppliers, and a growing e-commerce fulfillment presence. For example, Amazon opened a large distribution center near Honolulu’s airport in 2022, and companies like UPS and Matson have modernized facilities to handle sustained freight volumes. Industrial occupancy actually saw four quarters of slight declines in 2023 as a few older facilities emptied or tenants downsized, but by late 2024 the trend reversed and net absorption turned positive again (https://www.colliers.com/en/research/hawaii/oahu-industrial-market-report-q4-2024). With O‘ahu’s industrial availability hovering around 1–2%, any new space is immediately absorbed. This is why the state and private developers are investing in expanding capacity: a major project is the new Kapalama Container Terminal at Honolulu Harbor, a $500 million infrastructure expansion that will add 84 acres of yard space and improve port efficiency by 2025, indirectly freeing up some warehouse capacity elsewhere. On the Big Island and Maui, industrial markets are smaller but also tight in their main towns (e.g., Kona and Kahului have sub-5% industrial vacancy). For investors, Hawaii’s industrial properties offer low risk of vacancy and steady rent growth – though acquisitions are rare given owners’ reluctance to sell these cash-flowing assets. Those interested can browse Hawaii industrial listings on Brevitas, but should be prepared for competitive bidding and premium pricing reflective of this sector’s strength.
Office Sector
Hawaii’s office market has faced challenges similar to the mainland (remote work, higher vacancies) but is showing signs of stabilization thanks to unique local factors. On O‘ahu, which contains over 80% of the state’s office inventory (primarily in urban Honolulu), the overall office vacancy rate was about 10.9% at the end of 2024 (https://www.cbre.com/insights/figures/honolulu-office-figures-q4-2024. This is up from pre-pandemic vacancy around 8–9%, but notably below many major mainland cities now seeing 15%+ office vacancies. In 2024, O‘ahu recorded two consecutive quarters of positive net absorption, meaning more office space was leased than vacated, a welcome rebound. A major reason for the improving metrics is the removal of some office inventory through conversions. Several older downtown Honolulu office towers are being redeveloped into residential or mixed-use, which “soaks up” excess space and prevents a glut. For example, the landmark Topa Financial Center towers were sold for $105 million in 2023 to a developer (Avalon Group) planning to convert one tower to condos; this single deal effectively will remove over 80,000 sq. ft. of vacant office space from the market and pushed the downtown Class A vacancy down to roughly 11%. Another tower, the Davies Pacific Center, is slated for partial residential conversion as well.
Current demand for office space is coming from government agencies, medical and education users, and some professional service firms that have returned to in-person work. According to local brokers, there has been a noticeable uptick in leasing inquiries in downtown Honolulu, with tenants committing to longer leases again. Average asking rents for Honolulu office space have inched up to about $3.46/sf per month (gross) in late 2024 (https://www.cbre.com/insights/figures/honolulu-office-figures-q4-2024), reflecting higher operating costs being passed through. Landlords are offering moderate concessions (like a month or two of free rent or modest TI allowances) to attract tenants, but nowhere near the levels of coastal mainland cities. In Waikiki and suburban submarkets, small office suites catering to local businesses (like medical practices, insurance agencies) remain in demand, whereas large corporate tenants are few. Looking ahead, the completion of the Honolulu rail transit project into downtown (see Infrastructure section) could make office buildings along the line more attractive, potentially boosting occupancy further. Investors considering office assets in Hawaii should focus on well-located, high-occupancy properties, or those with conversion potential. Given the evolving landscape, office cap rates have softened slightly, but prime assets still trade at relatively low cap rates due to limited supply. For up-to-date opportunities, check Brevitas for Hawaii office listings and note how properties with a residential conversion angle are gaining interest as a backstop strategy.
Multifamily Housing Sector
Multifamily real estate in Hawaii is characterized by chronic undersupply and strong demand, though the sector is somewhat smaller in scale compared to mainland markets. Much of Hawaii’s “multifamily” stock consists of condominiums (often individually owned) rather than large rental apartment complexes. Nevertheless, the rental apartment market – especially on O‘ahu – is tight. Statewide rental vacancy rates are around 7–8% (https://www.nar.realtor/sites/default/files/2024-09/2024-08-commercial-real-estate-market-insights-report-08-29-2024_0.pdf) (this figure includes many small rentals and multifamily homes), but in professionally managed larger apartment properties, effective vacancy is often low-single-digits. Honolulu consistently sees occupancy above 95% for stabilized rental communities, and any new apartment lease-up garners waitlists of tenants due to pent-up housing demand.
Rents for apartments have been climbing steadily. According to Zillow and other indices, Hawaii’s median rents rose roughly 20–30% from 2020 to 2024 (https://www.fanniemae.com/media/54646/display), partly due to demand from returning workers and an influx of remote professionals. In urban Honolulu, a basic one-bedroom can easily command $1,800–$2,200 per month, while newer luxury high-rise units in Kaka‘ako or Ala Moana area fetch well above $3,000 for two-bedrooms. The development of new multifamily rental projects is limited by high construction costs and scarce entitled land. However, there have been some recent efforts to increase housing: transit-oriented developments (TOD) along the new rail line are incorporating apartments (e.g., projects near stations in Waipahu and Kapolei), and the state and counties have offered incentives like fast-tracked permits and tax abatements for affordable rental projects. For example, Honolulu’s Ordinance 19-8 provides property tax breaks for owners of newly built rental housing that meets affordability criteria. As a result, a few new mid-rise rentals aimed at local workforce housing have opened in Honolulu’s urban core, and more are planned.
Investment in multifamily is very competitive despite the limited inventory of large complexes. Institutional investors have shown interest in Hawaii apartments as stable long-term holds – evidenced by some notable transactions of late (such as BlackSand Capital’s acquisition of a portfolio of Honolulu apartment buildings). Cap rates for multifamily are low (around 4% or even sub-4% for prime assets pre-interest rate hikes), and while rising interest rates have put pressure on valuations, owners often hold out knowing the scarcity value. Rent control is not present in Hawaii, but there is heavy regulation on short-term rentals which has funneled more units back to long-term rental use in Honolulu. Looking forward, multifamily fundamentals remain strong: Hawaii’s high housing costs keep many residents renting by necessity, and any economic growth or population gain quickly translates into rental demand. For investors looking at this sector, Brevitas offers a range of Hawaii multifamily listings – from small walk-up apartment buildings to high-rise developments – presenting an opportunity to tap into Hawaii’s enduring housing need.
Infrastructure and Transportation Upgrades
Several major infrastructure projects are underway or recently completed in Hawaii, enhancing the long-term appeal of the commercial real estate landscape. The most transformative is Honolulu’s new rail transit system, called Skyline. In mid-2023, the first segment of the Skyline rail opened, becoming Hawaii’s first ever metro rail line. This initial 10-mile segment connects East Kapolei to Aloha Stadium (west of Pearl Harbor) with nine stations, significantly improving transit access for the growing communities of West O‘ahu (https://honolulutransit.org/construction/). Construction continues on the remaining phases that will extend the line to Daniel K. Inouye International Airport and ultimately into downtown Honolulu and Ala Moana Center. When fully completed (expected by the early 2030s), the rail will span 20 miles with 19 stations, linking key employment and residential centers. Already, the rail is catalyzing transit-oriented development: areas around stations are seeing new mixed-use projects, higher-density zoning, and interest from investors banking on the rail’s ridership. For example, Kapolei and Waipahu have designated TOD zones where developers are planning projects like affordable rentals, retail villages, and offices to capitalize on the rail line.
Apart from transit, Hawaii’s airports and ports are undergoing significant upgrades. Honolulu International Airport recently completed a $270 million modernized concourse and a consolidated rental car facility to streamline the visitor arrival experience. Plans are in place for further terminal upgrades and runway improvements to increase capacity for direct overseas flights. On Maui, Kahului Airport has received enhancements to its gates and baggage facilities, and there’s discussion of extending the main runway to accommodate larger aircraft in the future. The Big Island’s Kona Airport (Ellison Onizuka Kona International) has re-opened its refurbished customs facility, allowing for more international flights from Japan and elsewhere, which bodes well for tourism and related development on the island’s west coast. Meanwhile, as mentioned earlier, Honolulu Harbor’s new Kapalama Container Terminal, the largest port expansion in decades, will boost cargo handling efficiency for the state (https://www.hirono.senate.gov/news/in-the-news/harbor-cargo-capacity-expansion-slated-for-2024-completion). This expansion is critical for Hawaii, where virtually all goods arrive by ship – a more efficient port reduces shipping costs and can indirectly moderate the high cost of goods, improving business conditions for retailers and distributors.
Road and utility infrastructure are also seeing investment. The state continues to widen sections of the H-1 freeway (Honolulu’s main artery) to ease congestion, and on Maui the recently completed Lahaina bypass road provides needed relief to West Maui traffic (and served as a crucial alternate route during the 2023 wildfire disaster). Broadband and tech infrastructure are improving as well: new undersea fiber-optic cables now link Hawaii to the Pacific Northwest and Asia with greater capacity, enhancing internet reliability. Additionally, clean energy infrastructure is a major focus – Hawaii is aggressively installing more solar farms, battery storage facilities, and grid upgrades as it pursues a mandate of 100% renewable electricity by 2045. Notably, on O‘ahu, the 185 MW Kapolei Energy Storage system (one of the world’s largest battery projects) is coming online to support the island’s power grid as it transitions off fossil fuels. These improvements in transportation, utilities, and energy systems collectively make Hawaii a more robust and sustainable environment for commercial investment. Modern infrastructure not only supports current economic activity but also opens the door for new development projects (for instance, better transportation may allow new housing in West O‘ahu, and reliable energy supports high-tech facilities). Investors should monitor how these upgrades might affect property values; for example, land near new rail stations or improved airports could see increased interest and appreciation in the coming years.
Major Developments and Construction Projects
Despite Hawaii’s careful land-use laws and community sensitivities around development, there are a number of significant commercial developments in progress across the islands. In urban Honolulu, the most noteworthy is the ongoing build-out of Ward Village in Kaka‘ako. Ward Village is a 60-acre master-planned neighborhood by The Howard Hughes Corporation, representing a multi-phase, multi-billion dollar investment. As of 2025, six residential towers (housing condominiums and ground-floor retail) have been completed, and several more are under construction or in planning (https://www.hiestates.com/blog/the-ward-village-master-plan/). This development is creating a vibrant live-work-play district between downtown Honolulu and Waikiki, complete with a new central plaza (Victoria Ward Park) and hundreds of thousands of square feet of retail and dining. The success of Ward Village’s luxury condo sales (often selling out well before completion) highlights strong demand from both local buyers and off-island investors for Hawaii residential product. Commercial investors benefit from Ward’s retail components and the overall uplift it brings to the Kaka‘ako area, which also includes separate projects by local developer Kamehameha Schools (Our Kaka‘ako) blending affordable housing, retail and creative office spaces.
In West O‘ahu, large-scale mixed-use communities are expanding. The Ho‘opili project in Kapolei/Ewa—led by D.R. Horton—is a master plan set to deliver 12,000 homes over two decades, along with schools, parks, and commercial centers. Already, new retail like the Ka Makana Ali‘i shopping mall (opened a few years ago) serves the growing population, and more neighborhood retail and office space is in the pipeline as Ho‘opili’s phases progress. Nearby, Koa Ridge (a Castle & Cooke development in central O‘ahu) is another master-planned community under construction, slated for about 3,500 homes plus a medical center and commercial village. Each of these projects is effectively creating new sub-markets, with opportunities for investors to partake in building out the “town centers” that will include grocery stores, eateries, and services for tens of thousands of future residents.
On the neighbor islands, development is more constrained but still active in niches. On Maui, a major focus moving forward will be the rebuilding of Lahaina and West Maui after the fires. While much of that will be residential, there is discussion of a more resilient town design including updated commercial spaces and perhaps a memorial. Elsewhere on Maui, planned projects include the Wailea Hills development (a luxury residential resort community with some retail) and expansions at Maui Business Park near Kahului for light industrial and commercial use. The hospitality sector is also seeing reinvestment: for instance, Maui’s iconic Grand Wailea Resort is undergoing a $100+ million renovation, and entitlements are being sought for a new hotel in South Maui (though community opposition is careful to ensure responsible growth).
The Island of Hawai‘i (Big Island) has several resort and mixed-use developments progressing on the Kohala Coast. Besides the aforementioned Kona Village Resort reopening, developers are looking at new projects in Waikoloa and North Kona, such as a proposed mixed-use resort community at Waikoloa that would include a hotel, residences, and a small commercial center. Hilo, the population center of the Big Island, remains fairly quiet on new construction – efforts there are more about revitalizing and filling existing commercial spaces in the quaint downtown. On Kaua‘i, development is minimal by design, but there are a few projects like the revitalization of Princeville Resort (now 1 Hotel Hanalei Bay, rebranded and upgraded in 2022) and talk of redeveloping the long-shuttered Coco Palms Hotel on the east side. Most new construction on Kaua‘i tends to be public facilities or small retail to serve local needs, as the island prioritizes preserving its rural charm.
Importantly, public sector projects also present opportunities. One such project is the planned New Aloha Stadium Entertainment District in central O‘ahu. The state is in the process of replacing the aging Aloha Stadium (demolished in 2023) with a modern, smaller 35,000-seat stadium. Surrounding it, a broader mixed-use development is envisioned, potentially including retail, hotels, housing, and entertainment venues on the 98-acre site. The project, estimated at over $400 million for the stadium alone, is pursuing a public-private partnership model. When it moves forward, it could create a new hub of activity in the Halawa area, spurring additional private developments and services (similar to how sports arena districts have grown in other cities). Private developers and investors will likely have opportunities to partner or bid on parcels in this district, making it a closely watched initiative.
Overall, while Hawaii’s development pipeline is not as voluminous as fast-growing Sunbelt states, the projects underway are significant in value and impact. They signal confidence in Hawaii’s future and are addressing pent-up demand in housing and newer commercial space. Investors working in Hawaii should note developer names like Howard Hughes, D.R. Horton, and local players like Alexander & Baldwin and Stanford Carr Development, as they are behind many of these projects. The value of these developments ranges from tens of millions for individual buildings to billions for the master plans, indicating the scale of investment pouring into the islands. Monitoring these projects through resources like local business journals and the Brevitas platform can help investors stay ahead of where new commercial nodes – and thus future investment hotspots – will emerge.
Climate & Environmental Resilience
Hawaii’s natural beauty comes with environmental risks that the state is actively addressing to protect communities and investors’ assets. The tragic Maui wildfires of August 2023 underscored the growing threat of wildfire even in tropical islands. In that disaster, fueled by drought and high winds, over 2,200 structures were destroyed in Lahaina and surrounding areas, causing an estimated $5.5 billion in damages and devastating the community (https://www.usfa.fema.gov/blog/preliminary-after-action-report-2023-maui-wildfire/). In the aftermath, Hawaii’s government and utilities have accelerated efforts to mitigate wildfire risk – from improving vegetation management (clearing dry brush, especially invasive grasses that act as fuel) to hardening power lines and enhancing emergency alert systems. Commercial property owners are increasingly incorporating fire-resistant landscaping and emergency plans, particularly on the leeward (dry) sides of the islands that are more fire-prone.
Volcanic and seismic risk is another consideration, though generally localized to the Big Island. Kīlauea Volcano on Hawai‘i Island has frequent eruptions (most recently in 2021 and 2023), and Mauna Loa had a major eruption in late 2022. These events can impact air quality (vog) across the state and, in rare cases, directly threaten built areas. The 2018 Kīlauea eruption destroyed hundreds of homes in a rural part of the Big Island. Since then, the state has improved lava flow hazard mapping and has been cautious about permitting new development in high-risk lava zones. Most commercial development remains in areas considered low risk for lava flows. Earthquakes are infrequent but can occur, so Hawaii’s building codes include seismic standards (as well as stringent wind standards for hurricanes). Notably, Hawaii’s modern buildings have generally performed well in natural disasters due to these strong codes – a plus for investors concerned about physical climate resilience.
Sea level rise and coastal erosion pose long-term challenges to this island state. Sea levels in Hawaii have risen about 5–8 inches since the 1960s and are projected to rise several more feet by end of century (https://climate.hawaii.gov/hi-facts/sea-level-rise/). Low-lying coastal areas – including parts of Waikiki, Honolulu’s Kaka‘ako district, and Kahului Maui – face increased flooding risk over time. The state and counties have been proactive: Hawaii was one of the first states to mandate sea level rise disclosures in real estate transactions (sellers must inform buyers if a property lies in a projected sea level rise inundation area). Honolulu has a Climate Action and Resilience plan which recommends not building new critical infrastructure in flood-prone zones and exploring adaptation measures like sea walls, elevating roads, and even managed retreat in some cases (https://www.resilientoahu.org/climateadaptation). For example, sections of Honolulu’s famed Ala Moana Boulevard are being studied for elevation or floodproofing, and on Maui the highway near Kaanapali is slated for relocation inland to escape erosion zones. Commercial property owners along the coasts are beginning to elevate building systems or use berms and landscaping to provide buffers against king tides and storm surges.
Hurricanes are another environmental consideration. While direct hits are relatively rare (the last was Hurricane Iniki in 1992 on Kaua‘i), the islands are in the Central Pacific hurricane basin. Structures built after the early 1990s adhere to strict wind load requirements, meaning newer commercial buildings are generally well-prepared to withstand hurricane-force winds. Insurance costs, however, have been rising for properties in high-risk zones (windward coastal areas especially) due to global reinsurance trends. Investors should factor in insurance availability and costs; fortunately, Hawaii still has a functioning insurance market (unlike certain disaster-prone mainland states facing carrier pullouts), and insurers are closely evaluating mitigation efforts by owners.
On the sustainability front, Hawaii is a leader in environmental policy. The state aims for 100% renewable energy by 2045 and has already exceeded 30% renewable electricity. Solar panels are ubiquitous on commercial rooftops, often reducing operating costs for properties. Additionally, commercial developments are increasingly incorporating green building practices – some new projects are pursuing LEED certification or using innovative designs to reduce water and energy usage (important on islands where resources are finite). These efforts dovetail with Hawaii’s image and regulatory incentives. For example, there are state tax credits for installing EV charging stations, solar water heaters, and other sustainable infrastructure on commercial properties.
In summary, while Hawaii faces serious climate risks – from wildfires to rising seas – it is also taking serious steps to mitigate and adapt. For investors, due diligence on a property’s specific risk exposure is key (e.g., checking flood maps, lava zone maps, wind zones). The good news is many Hawaii properties, especially newer builds, are engineered for resilience, and government actions are continually improving the islands’ defenses. A resilient Hawaii means protected long-term value for real estate. The events of recent years have only reinforced that focus, ensuring that “paradise” remains viable for generations to come.
Quality of Life and Cultural Highlights
One cannot assess Hawaii’s real estate market without appreciating the quality of life and cultural factors that make these islands extraordinary. Hawaii consistently ranks at or near the top for health and happiness among U.S. states – it has been named the “happiest state” in multiple studies (https://www.hawaiinewsnow.com/2023/02/28/hawaii-ranks-1-life-expectancy-spam-consumption-make-it-make-sense/) (https://www.hawaiinewsnow.com/2023/02/28/hawaii-ranks-1-life-expectancy-spam-consumption-make-it-make-sense/) and has the nation’s lowest rates of preventable illness and highest life expectancy). For residents and relocating professionals, this translates into a lifestyle that is a powerful draw: warm tropical climate year-round, abundant outdoor recreation (surfing, hiking, diving, golf), and a famously friendly local community that embodies the “Aloha Spirit.” These factors support the real estate market by attracting people and businesses who want to be in Hawaii not just for profit, but for lifestyle. Many companies find that offering Hawaii postings or offices can be a perk that helps recruit talent, despite the higher costs.
Cultural richness is another asset. As a melting pot of Native Hawaiian, Asian, Pacific Islander, and mainland American influences, Hawaii offers a unique social and cultural environment. The native Hawaiian culture, with its emphasis on community and respect for the land (“malama ‘aina”), influences development patterns – there is strong public sentiment to protect historic sites and natural landscapes. Festivals and cultural events occur throughout the year, such as the Merrie Monarch Festival (a world-renowned hula competition in Hilo each spring) and the Aloha Festivals. These not only preserve cultural heritage but also draw visitors and nurture a sense of place that enriches daily life. Honolulu’s urban core has a thriving arts scene, from the Honolulu Museum of Art to the Hawaii Theatre, and hosts events like the Honolulu Festival and Spam Jam that celebrate both local and global cultures (yes, Hawaii’s love of SPAM is part of its charm!). For commercial real estate, this means spaces that can host cultural activities – galleries, music venues, community centers – are in demand, and developers often integrate cultural elements (like murals, gardens, or design motifs honoring Hawaiian history) into projects to resonate with the community.
Hawaii’s educational and research presence adds to quality of life and economic stability. The University of Hawai‘i system, especially UH Mānoa in Honolulu, is a major institution that anchors innovation in oceanography, astronomy, and biotechnology relevant to the islands. Areas near UH and other colleges (like Hawai‘i Pacific University downtown) have a reliable student and faculty population supporting rental housing and retail. In addition, the large military population (with several bases on O‘ahu) contributes to a sense of community and provides cross-cultural interaction, as servicemembers and their families integrate into local life during their station period. Healthcare in Hawaii is generally high-quality – the state boasts some of the best healthcare outcomes nationwide, underpinned by long-standing laws requiring employer health coverage (https://www.investopedia.com/articles/personal-finance/102015/7-best-states-property-taxes-and-why.asp). Excellent hospitals (Queen’s Medical Center, etc.) and a strong emphasis on preventive care ensure residents feel well-cared for.
Major attractions and sports events further enhance Hawaii’s allure. Tourists and locals alike enjoy attractions such as Pearl Harbor’s historic sites on O‘ahu, the surfing mecca of the North Shore (which hosts the Triple Crown of Surfing competitions every winter), the otherworldly landscapes of Hawai‘i Volcanoes National Park on the Big Island, and the breathtaking Nā Pali Coast on Kaua‘i. Honolulu hosts one of the world’s largest marathons (the Honolulu Marathon in December), which draws over 30,000 participants globally each year, filling hotels and restaurants. The Ironman World Championship triathlon has its roots on the Big Island, showcasing Kona each October to international audiences (though it’s now rotating locations, Kona remains iconic for Ironman). These events not only boost hospitality and retail sectors during their course but also strengthen Hawaii’s brand as a vibrant, healthy destination. Even professional sports are on the horizon – while Hawaii doesn’t have a major league team, the University of Hawai‘i’s teams (like UH Warriors football and Rainbow Wahine volleyball) have passionate followings, and the new Aloha Stadium project envisions attracting more exhibition games or even a pro soccer/rugby team to the islands. All of this contributes to a dynamic lifestyle that makes people want to live, work, and invest in Hawaii.
In essence, Hawaii’s quality of life is a competitive advantage. Clean air and water (ranked #1 in the nation), spectacular nature, and a culture that values community and balance help ensure that demand for property here remains robust. Many investors themselves are enamored with Hawaii – it’s not uncommon for someone to purchase a commercial asset and also maintain a residence on the islands. This emotional connection and pride of ownership often lead to well-maintained properties and stable ownership trends. For anyone considering entering the Hawaii market, understanding and respecting the local culture and lifestyle is key – it’s not just about the numbers, but about being part of a community that treasures its home. And that, ultimately, is what keeps Hawaii’s real estate market so enduring: people truly love this place and strive to keep it special.
Tax Environment and Government Incentives
Hawaii’s tax environment has some distinct features that investors should note. On one hand, the state offers incredibly low property tax rates – the lowest in the United States, in fact. Effective property tax rates in Hawaii average around 0.27% to 0.31% of assessed value, which is a fraction of what is seen in many mainland markets (for comparison, the U.S. average is about 1.1%). This means holding real estate in Hawaii can incur a relatively small annual property tax expense relative to the asset’s value. For commercial owners and especially owners of high-value assets like resorts, this is a significant financial advantage. It’s not uncommon that an oceanfront hotel in Honolulu, worth tens of millions, might have a property tax bill far lower than a similarly valued hotel in, say, California or Texas. Low property taxes can help offset some of Hawaii’s other high costs and improve an investment’s net operating income margin.
On the other hand, Hawaii compensates with other taxes. The state general excise tax (GET) is 4% statewide (4.5% on O‘ahu with the surcharge) and applies to nearly all business transactions, including rents. This is essentially a broad sales tax that even hits B2B transactions, so investors will find that their commercial tenants effectively pay tax on their rent (often passed through in gross leases). Additionally, Hawaii has a high state income tax (top bracket 11% for individuals) which can affect pass-through income for investors and developers. There is also a Transient Accommodations Tax (TAT) of 10.25% on hotel and vacation rental revenues, plus new county-level TAT add-ons (~3%), which is important for hospitality investors to factor into revenue projections. In essence, while “Hawaii property taxes” are low, the overall tax burden comes in other forms.
Regarding incentives and regulations: Hawaii’s government, at both state and county levels, uses a combination of incentives and strict regulations to guide development. To encourage certain types of projects, there are targeted programs such as:
- Enterprise Zones: Hawaii offers an Enterprise Zones program that provides state tax incentives (income tax credits, GET exemptions) for companies doing business in designated areas in industries like manufacturing, agriculture, or tech. Commercial real estate developments that bring in such businesses can indirectly benefit from the improved economic activity in those zones.
- Opportunity Zones: As part of the federal Opportunity Zone program, several census tracts in Hawaii (including parts of urban Honolulu, Hilo, Waipahu, and Wailuku) are designated OZs. Investment in these areas through qualified funds can yield federal capital gains tax deferrals or reductions. This has spurred interest in redevelopment projects – for instance, some investors are targeting aging industrial areas in Kalihi (Honolulu) that lie in OZs for new projects like self-storage or creative office, aiming to capture the tax benefits.
- Renewable Energy and Green Building Credits: Hawaii’s aggressive renewable energy goals mean there are state tax credits for installing solar panels, battery storage, and EV chargers. Commercial property owners can receive tax credits (or rebates) that lower the cost of solar photovoltaic systems, which are very popular across the islands. Many hotels and shopping centers have added solar arrays to take advantage of these incentives, thereby cutting electricity bills and marketing themselves as sustainable.
- Affordable Housing Incentives: To combat the housing shortage, counties offer incentives to developers who include affordable housing. This may mean fast-tracked permitting, fee waivers, or density bonuses. For example, Honolulu’s TOD zoning around rail stations offers greater height/FAR for projects that include affordable rental units. Commercial investors might encounter these if they consider mixed-use projects.
An important aspect of the tax environment is the treatment of real estate investment trusts (REITs). Hawaii for several years debated (and ultimately passed in 2022) a requirement that REITs registered in Hawaii pay the state corporate tax on their retained earnings (removing what was previously a 100% deduction for dividends paid). This was aimed at capturing tax revenue from large mainland-based REITs owning Hawaii properties. Investors using REIT structures should be aware of this nuance as it slightly changes the tax calculus of owning Hawaii assets via a REIT. Meanwhile, local authorities often use property tax differentials to influence use: for instance, Honolulu County sets higher property tax rates for hotels/resorts and for vacant residential properties valued over $1M (to discourage empty luxury homes), whereas primary residences have extremely low rates. This is relevant if converting usage of a property (say from apartment to hotel) because the tax bill could change accordingly.
Overall, Hawaii’s tax climate is a mix of very investor-friendly elements (low property tax, stable governance) and high operating taxes (excise tax, high wages partly due to mandated healthcare coverage, etc.). When underwriting deals, it’s important to get local tax expertise to navigate these specifics. Engaging with Hawaii’s economic development agencies can also be fruitful – they often assist investors in understanding available incentives. The state’s Department of Business, Economic Development & Tourism (DBEDT) publishes regular reports and sometimes provides grants for projects aligned with state goals (like clean energy or film/TV production facilities). The bottom line is that while costs in Hawaii are high, the government does provide offsets where it aligns with policy objectives, and the exceptionally low property tax is a boon for long-term asset holders looking at the Hawaii property market outlook with patient capital.
Investment Outlook and Strategic Takeaways
In 2025, the outlook for Hawaii’s commercial real estate is cautiously optimistic, with strong fundamentals in several sectors and unique opportunities shaped by the state’s characteristics. Investors considering Hawaii should weigh the following strategic points:
- Resilient demand meets limited supply: Across hospitality, housing, and industrial, Hawaii often sees demand outstripping supply. This tends to support property values and rents even when broader economic conditions soften. The constrained geography (islands with strict land use) creates a natural moat around the market – one can’t just build endlessly outward or quickly add inventory. For investors, this means assets in Hawaii often hold value and recover faster after downturns. For example, hotel revenues have nearly fully rebounded post-COVID, and industrial space is virtually full despite economic ups and downs. Limited supply can, however, make entry tricky (few listings and high prices), so patience and local networking are key to finding the right deal.
- Diversification within Hawaii’s market: While tourism is king, Hawaii’s economy is more multifaceted than it might appear. The military, government (including University of Hawai‘i), and a growing tech/research sector provide stability. O‘ahu’s leasing activity for offices and retail in areas like West O‘ahu is tied to local population growth and less to tourism, which can be a counterbalance during tourist slowdowns. Thus, investors can diversify within the state by asset class and location – for instance, a portfolio of a Waikiki hotel (tourism-driven), a Honolulu industrial property (economy-wide goods distribution), and a residential rental complex for locals would have exposure to different demand drivers. Such diversification can hedge seasonality and sector-specific risks.
- Interest rate and capital markets impact: Hawaii was not immune to the 2022–2024 global rise in interest rates. Transaction volumes slowed significantly in 2023-24; Colliers reported that Hawaii CRE sales in the first half of 2024 were down ~34% from the prior year (https://www.colliers.com/en/research/hawaii/oahu-investment-market-report-q2-2024), and there were no mega-deals over $100M in that period. This indicates that some institutional investors hit pause, and pricing had to adjust (cap rates rose slightly) especially for properties like office and lower-tier retail. However, high-quality assets still found buyers, often local or long-term owners, albeit at a more measured pace. Going forward, if interest rates stabilize or fall, we may see pent-up capital re-enter the Hawaii market looking for those rare trophy assets. Investors now might find slightly better cap rates than the ultra-compressed pre-2022 era, which could be an attractive entry point if financing costs improve. It’s a good time to be diligent: focus on properties that have strong current cash flow, and underwrite with conservative assumptions, but know that Hawaii’s historically low cap rates are supported by genuine scarcity and stable NOI growth.
- Community and cultural due diligence: In Hawaii, how you invest is as important as what you invest in. Success often hinges on working collaboratively with the local community and respecting cultural norms. Projects that engage with residents, honor Hawaiian culture (for instance, incorporating Hawaiian names, art, or even blessing ceremonies), and address local needs (such as providing some affordable space or community benefit) tend to encounter fewer hurdles. The flip side is that insensitive development attempts can face protests, permitting delays, or even failure. Therefore, investors should include in their strategy an element of corporate social responsibility – perhaps supporting local charities, environmental conservation efforts, or workforce development. This not only builds goodwill but can make your property more attractive to tenants and customers who value community-minded landlords. Essentially, a long-term investment horizon in Hawaii works best when you invest in relationships, not just real estate.
- Leverage technology and the Brevitas platform: The commercial real estate brokerage community in Hawaii is tight-knit, and many deals are done off-market. Platforms like Brevitas are bridging the gap by providing a modern way to discover Hawaii properties and connect with brokers worldwide. Investors should utilize these tools to supplement local broker relationships. Brevitas, for example, allows one to search for commercial properties Hawaii-wide by asset type, set up alerts for new Hawaii listings, and even access confidential offerings if you’re a qualified buyer. This can give a strategic advantage in spotting opportunities early, whether it’s a boutique hotel for sale on Kaua‘i or a portfolio of small retail centers on O‘ahu. Moreover, technology can aid in due diligence – using GIS mapping for flood or lava risks, tapping into Hawaii’s open data for demographics – ensuring smarter investment decisions.
In conclusion, Hawaii’s commercial real estate market in 2025 presents a blend of stability and excitement. The state’s enduring appeal as a tourist haven and a place people love to live underpins real estate values. Economic and demographic trends are mostly positive, with recovery and modest growth on the horizon. New infrastructure and developments promise to unlock further opportunities, even as they reshape certain submarkets. Investors who navigate Hawaii’s unique challenges – higher entry costs, thorough due diligence requirements, and the need to engage sincerely with local context – can find that the rewards are well worth it. After all, investing in Hawaii is not just about financial return; it’s about being part of a truly special market that offers a slice of paradise alongside your profit. As you plan your next moves, keep an eye on the islands’ latest listings and market news. When you’re ready to take the next step, the tools and connections available through Brevitas can help you turn these market insights into actionable deals. Investment opportunities in Hawaii await those prepared to embrace the aloha spirit and the dynamic future of these islands.
Browse Hawaii Commercial Listings on Brevitas
References
- SFGate – Hawaii’s population breaks longtime trend (Apr 2025)
- State of Hawai‘i DBEDT – Press Release: January Unemployment Rate at 3.0% (Mar 2025)
- CBRE – Hawaii Retail Figures Q4 2024 (Jan 2025)
- Colliers – Oahu Industrial Market Report Q4 2024 (Jan 2025)
- CBRE – Honolulu Office Figures Q4 2024 (Jan 2025)
- Pacific Business News – Hawaii hotels revenue nears $5.5B in 2024, occupancy at 73%
- Hawaii Public Radio – Experts call it an ‘interesting time’ for Hawai‘i CRE (Oct 2024)
- FEMA/USFA – Preliminary After-Action Report: 2023 Maui Wildfire (Feb 2024)
- Hawaii News Now – Hawaii ranks No.1 in life expectancy, air quality, and happiness (Feb 2023)
- Investopedia – States with the Lowest Property Taxes (Hawaii at 0.31% effective rate)
