Interest rates, rising operating costs, and economic uncertainty are reshaping Hawaiʻi’s industrial real estate market. Discover what landlords, tenants, and investors should consider before year-end 2026.
Interest rates, rising operating costs, and economic uncertainty are changing the decisions facing Hawaiʻi's industrial property owners, tenants, and investors. Here's what to consider before year-end.
At the beginning of 2026, our Hawaiʻi Industrial Forecast described a market caught between two competing forces: limited industrial supply supporting property values and rental rates, and mounting economic pressures causing tenants and investors to become more cautious.
Ten months later, that push-pull dynamic remains, but the pressures have intensified.
With the midterm elections, continued geopolitical uncertainty, elevated borrowing costs, and persistent fuel and construction expenses, we’re seeing more market participants pause to reassess their plans.
This doesn’t mean Hawaiʻi’s industrial market has stopped moving. Attractive opportunities still generate interest, and well-positioned buyers and tenants continue to act. But transactions are becoming more complicated, financial approvals are taking longer, and the economics of moving, expanding, or acquiring property deserve closer scrutiny.
As we enter the final two months of 2026, here’s what we’re seeing on the ground and what it means for your next move.
One of the most significant shifts we’re seeing is the impact of borrowing costs on commercial property acquisitions.
Higher financing costs reduce purchasing power and put downward pressure on property pricing. Investors borrowing at rates in the high sixes or sevens need sufficient returns to justify their acquisitions, which can make previously acceptable valuations difficult to support.
We're also seeing greater attention to buyers’ financial qualifications. Sellers increasingly want confidence that a prospective buyer can close, even if lending terms change during the transaction.
For financed buyers, this means demonstrating not only the ability to secure a loan but also sufficient capital reserves to overcome potential financing challenges.
Cash buyers, meanwhile, are in a particularly advantageous position. They can offer sellers greater certainty, move quickly when desirable properties become available, and potentially benefit from pricing adjustments if financing conditions tighten further.
Our advice for investors: Stay in close communication with your lender, and don’t limit yourself to one financing source. Compare options, understand your borrowing capacity, and be prepared to demonstrate your financial strength. For cash buyers, this may be an especially favorable time to monitor opportunities and act decisively when the right property becomes available.
We’re also seeing a slowdown in expansion activity, particularly among businesses that require corporate approval for major real estate commitments.
Even when a company’s Hawaiʻi operations are performing well, national or international financial pressures may prevent headquarters from approving additional investment.
The cost of occupying a new space is another significant consideration: A property that requires extensive tenant improvements can be difficult to justify when construction costs are elevated and capital is expensive. Shell-condition spaces, particularly those requiring office buildouts or significant improvements, may face additional challenges attracting tenants.
This is changing how businesses evaluate their options. A move that made financial sense two years ago may no longer pencil out under today’s conditions.
Our advice for tenants: Start planning early, ideally nine to twelve months before your anticipated move or renewal — longer if you have unique or strict requirements. Before touring properties, establish a realistic budget and understand what your company will approve for rent, improvements, relocation, and other expenses. Consider whether renewing, relocating, or modifying your existing space provides the strongest financial and operational outcome.
Hawaiʻi’s limited industrial inventory continues to support the market, but scarcity alone doesn’t guarantee that a property will lease quickly.
Tenants are scrutinizing their commitments more carefully, and approvals are taking longer. Properties requiring substantial improvements may be particularly challenging to lease when prospective occupants are reluctant to invest significant capital.
For landlords, the ability to help a qualified tenant overcome these financial hurdles can make the difference between completing a transaction and extending a vacancy.
That may mean considering free-rent periods, tenant improvement allowances, flexible lease structures, or other concessions that improve the economics of occupancy.
These strategies don’t necessarily require lowering the asking rent. Instead, they can help bridge the gap between a landlord’s objectives and a tenant’s financial constraints.
Our advice for landlords: Understand the total cost of occupancy from the tenant’s perspective, not simply the asking rent. Evaluate which improvements or concessions could make your property more competitive, and be prepared for a longer decision-making process. Flexibility, supported by a clear understanding of your property’s financial objectives, can help keep negotiations moving.
Earlier this year, we identified tariffs, fuel prices, and global economic conditions as significant concerns for Hawaiʻi’s industrial businesses.
Some companies have since adjusted their operations and pricing to account for tariffs, reducing the immediate disruption from those changes. However, uncertainty remains as trade policies continue to evolve.
Fuel costs are proving especially consequential. Hawaiʻi depends heavily on goods transported by sea and air, making fuel a significant component of operating expenses. Petroleum costs also affect construction materials, manufacturing inputs, and distribution operations.
These pressures extend beyond transportation budgets. They can influence inventory costs, construction feasibility, supply availability, and ultimately the financial capacity of businesses to expand or relocate.
For industrial occupiers, location decisions increasingly require evaluating the full cost of operations, including transportation, labor, utilities, and improvements — tenants can’t simply compare rental rates.
As we approach year-end, it’s tempting to wait for greater certainty about interest rates, economic policy, or the direction of the broader market.
For some businesses and investors, waiting may be appropriate. Others may find that the right opportunity warrants action now, particularly in our supply-constrained industrial market.
The important distinction is understanding which strategy makes sense for your circumstances.
A tenant approaching lease expiration may have more negotiating options than during the exceptionally tight market of recent years. A landlord may need to reconsider concessions or property improvements. An investor may discover that financing conditions have materially changed what they can afford, while a cash buyer may uncover attractive opportunities that don’t pencil out for leveraged competitors.
None of these decisions should rely on assumptions from the last transaction cycle.
The Hawaiʻi industrial market of late 2026 is different from the market we entered at the beginning of the year, and very different from the market many owners and tenants experienced when they last signed a lease or purchased a property.
Our team works daily with industrial landlords, tenants, buyers, and investors throughout Hawaiʻi. These conversations give us firsthand insight into what properties are available, what (and why) transactions are actually getting done, where negotiations are stalling, and which strategies are proving successful.
If you’re considering renewing a lease, relocating, expanding, buying, selling, or repositioning a property, let’s have a conversation about what’s realistic in today’s market. We’ll help you evaluate your options against current market conditions, understand the financial and operational tradeoffs, and identify a practical path forward.
Contact our team to discuss your options before year-end.
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