Hawaii Industrial - Holding Strong?

Colliers Hawaii, who released their Q2 2022 industrial report last week, made it clear they are torn between celebrating another fantastic quarterly result, yet cautioning us all on the growing economic headwinds ahead. The good times keep rolling. Vacancy sits at an all-time low on Oahu of 1.28% and climbing rents are up nearly 10% YOY to $1.37 psf / mo. More encouragingly, Colliers reported on a different outlook issue - a lack of new warehouse supply on Oahu until 2024. The soonest of which will be two warehouse condo projects in Kapolei.

Maui and the other outer island markets don’t have the same new supply coverage, but the shortage is just as acute. This sets the stage for rent tension in the years ahead. A recession may soften rents while a supply shortage may keep rents steady or keep pushing them upwards. Further complicating the picture is a lack of quality small spaces for the typical user who needs 4,000 SF or less. This dynamic has started to bifurcate rents between nice and new and old and obsolete. The gap in rent is still relatively thin while market conditions remains tight. Whether this changes or not as the market conditions soften is something I’ll be keeping an eye on in the year ahead.