Oahu Office Vacancy Rate Reaches Four-Year Low Amid Market Uncertainty

Oahu’s office vacancy rate has decreased to a notable 12.59% as of the end of 2025, marking the lowest level in four years. This decline has provided a glimmer of optimism for landlords and investors in downtown Honolulu. The tightening vacancy rate stems from a combination of lease renewals, targeted office conversions, and a limited number of new construction projects. Despite the positive trend, experts caution that broader economic factors and fluctuations in the technology sector could quickly alter this landscape.

According to a report from Colliers Hawaii, detailed in Pacific Business News, the fourth-quarter vacancy rate reflects a cautious outlook heading into 2026. The report highlights the potential risk of an AI-driven leasing bubble and rising cost pressures, which could lead both landlords and tenants to hesitate before committing to long-term leases.

The recent dip in vacancy rates continues a slow tightening trend that Colliers has been monitoring. Just a year prior, in the fourth quarter of 2024, the vacancy rate stood at 12.73%. This gradual improvement can be attributed to ongoing conversion activities, which have been effectively reducing the available office space. Transforming older or underutilized buildings into residential or mixed-use projects has played a significant role in decreasing Oahu’s office vacancy rate.

Market Dynamics and Future Outlook

Developers have actively engaged in adaptive reuse projects and outright sales, helping to alleviate excess supply. Notable efforts, such as the conversion of the Davies Pacific Center, have been covered by local media, including Hawaii News Now. These initiatives have contributed to a gradual recovery in demand across different submarkets, although the pace of recovery varies.

Despite the positive indicators, Colliers has emphasized the potential for an AI “leasing bubble” and escalating costs to hinder market momentum as 2026 approaches. This means that a lower vacancy rate does not necessarily equate to a robust market.

In examining broader trends for 2025, real estate firm CBRE reported fluctuations in net absorption rates, with both negative and positive quarters. The variations in asking rents suggest that landlords are testing different pricing strategies while tenants explore their options. These dynamics indicate that the current gains in the market may be temporary unless sustained demand from larger office users emerges.

Key Factors Influencing the Office Market

As 2026 unfolds, three key factors will significantly impact the office market in Oahu. First, the timely completion of conversion projects is vital for permanently reducing office inventory. Second, the commitment of tech and professional firms to sign leases will be crucial in maintaining momentum. Lastly, fluctuations in financing and operating costs could either ease or pressure the market.

For landlords, tenants, and employees in Honolulu, the declining vacancy rate signals positive change, but it should not be viewed as a definitive recovery. Cautious leasing practices, selective conversions, and close monitoring of major corporate decisions will characterize the office landscape as the new year progresses.