Yield Range
4.0-5.5%
Vacancy Rate
11.8%
Active Deals
1
Outlook
Positive
Honolulu's commercial real estate market delivered its strongest transaction year since 2021, with Hawaii CRE sales volume reaching $2.9 billion across 279 deals in 2025. Office vacancy edged down modestly to 11.8% overall in Q4 2025, while the industrial sector remains exceptionally tight at 2.3% availability. The most significant deal of early 2026 is the $2.3 billion take-private acquisition of Alexander and Baldwin by a Blackstone-led consortium, underscoring continued institutional conviction in Hawaii's high-barrier-to-entry island markets.
Yields & Returns
Vacancy & Supply
Vacancy Rates
Office overall vacancy was 11.8% in Q4 2025 (up 20 basis points quarter-over-quarter), with Class A at 12.2% and Class B at 11.0%. An earlier Q2 2025 reading placed urban office vacancy at 12.3%. Industrial availability was 2.3% in Q4 2025 (down 10 basis points quarter-over-quarter), with direct availability at 2.1% - among the tightest in the nation.
Supply Pipeline
Kakaako continues to generate significant residential mixed-use completions: Aalii Tower (mid-2025), Victoria Place (late 2025), Koula Innovation Center (Q3 2025), Ulana Ward Village (mid-2025), Kalae (early 2026), and Kali'u Our Kaka'ako (late 2025). The Honolulu Rail Transit Skyline Segment 2 (airport link) opened in October 2025; Segment 3 is targeted for 2031. A 750-unit affordable housing project is planned for Kapolei.
Competitor Activity
The defining transaction of early 2026 is the $2.3 billion all-cash take-private acquisition of Alexander and Baldwin by Blackstone Real Estate, DivcoWest, and MW Group. The 37-property, 3.8 million square foot portfolio spans four Hawaiian islands and is weighted toward retail (75.6% of net rentable area) and industrial (22.3%). A $1.24 billion CMBS single-asset single-borrower loan (BX 2026-ALOHA) underpins the financing.
| Firm | Activity | Asset | Detail | Value |
|---|---|---|---|---|
| Blackstone Real Estate / DivcoWest / MW Group | Acquisition (Take-Private) | Mixed-Use (Retail / Industrial / Office) | Blackstone-led consortium acquired Alexander and Baldwin in an all-cash take-private valued at $2.3B. Portfolio comprises 37 properties totaling 3.8M SF across four Hawaiian islands, financed with a $1.24B CMBS loan (BX 2026-ALOHA). | $2.3B |
Demand Drivers
Rental Market
Employment & Economy
Migration & Demographics
Transport & Connectivity
Key Risks
Hawaii's isolation and island geography constrain supply but also limit the depth of occupier demand, making the market sensitive to shifts in tourism and military spending. Elevated construction costs and long permitting timelines restrict new supply responses. The Alexander and Baldwin take-private concentrates a significant share of the state's commercial inventory with a single institutional consortium, which could affect market pricing and availability. Macroeconomic slowdowns affecting discretionary travel would impact the tourism-dependent local economy.
Outlook 12–24 Months
The Honolulu market is well-positioned for the next 12 to 24 months on the back of record 2025 transaction volume, exceptionally tight industrial availability, and major institutional validation via the Blackstone-led Alexander and Baldwin acquisition. The Skyline rail expansion is expected to support transit-oriented residential and commercial development. Industrial rents, rising at 16.9% year-over-year, are likely to moderate but remain elevated given structural supply constraints. Office fundamentals are slowly improving from a moderate vacancy level. The overall outlook is positive, supported by high barriers to entry, institutional interest, and continued infrastructure investment.
Sources