Q4 2025 HAWAIʻI RETAIL & HOSPITALITY INSIGHTS
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Insights for Hospitality Investors
Executive Summary
Hawaiʻi’s retail and hospitality sectors closed 2025 with resilient property fundamentals despite growing macroeconomic headwinds.
Vacancy across Oahu’s retail sector tightened to 5.61%, marking a sixth consecutive quarter of occupancy gains and nearly 138,000 square feet of positive absorption in 2025. Retail sales reached record levels, unemployment fell to 2.2%, and visitor spending continued to rise even as total arrivals softened.
However, beneath these strong real estate metrics lies a structural economic challenge: Hawaiʻi’s long-term productivity and income growth have trailed mainland benchmarks, fueling sustained outmigration and constraining overall economic performance.
As we enter 2026, Hawaiʻi’s retail and hospitality industries are supported by constrained supply and landlord-favorable leasing conditions — but face rising operating costs, minimum wage increases, and a consumer increasingly focused on value.
The story of 2026 will not be demand collapse. It will be margin compression and economic bifurcation.
Retail Market Performance
Stability with Selective Strength
Oahu retail fundamentals strengthened throughout 2025:
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Vacancy declined to 5.61%, reflecting continued recovery and sustained demand for well-located retail space
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45,769 SF of net absorption occurred in Q4 alone
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Year-to-date absorption totaled 137,837 SF
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Asking base rents increased to $4.75 PSF/month (NNN)
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Operating expenses rose to $1.81 PSF/month
Regional malls led annual performance, contributing over 63,000 SF of net new tenancy, while grocery-anchored and necessity-based centers remained durable.
Strip centers were the only category to show negative quarterly absorption, reflecting pressure on smaller local operators and the continued shift toward stronger experiential and destination retail formats.
A primary factor supporting market stability is the constrained pipeline of new supply. With approximately 16.9 million square feet of total retail inventory islandwide, Hawaiʻi’s constrained development pipeline continues to support pricing power for well-positioned assets.
The decision by Alexander & Baldwin to take the company private is expected to meaningfully impact Hawaiʻi’s retail market, given its position as one of the State’s largest retail landlords. Private ownership is likely to provide greater decision-making flexibility and support increased retail market stabilityMarket conditions most strongly support the
Landlord in:
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Leeward Oahu (3.89% vacancy)
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West Oahu (3.41% vacancy)
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Regional centers (3.33% vacancy)
Even as tariff uncertainty persists and Japanese visitor arrivals have yet to fully recover, Waikīkī vacancy has improved to 10.92% from prior peaks, reflecting strong visitor spending and a stabilization in tourism-oriented leasing demand
Hospitality & Tourism
Fewer Visitors, Higher Spending
A critical trend shaping 2026 is the widening gap between visitor volume and visitor spending.
Visitor arrivals declined 1.3% year-over-year through October 2025, yet total visitor expenditures increased to $7.89 billion year-to-date, with average daily spending rising to $277 per person.
This reflects a structural shift in Hawaiʻi’s tourism strategy: prioritizing higher-spending travelers rather than maximizing visitor counts.
Luxury retail exposure in Waikiki remains vulnerable following the closure of key DFS locations, signaling an evolution in global duty-free shopping behavior and changing international travel patterns.
Implications for hospitality investors include:
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Continued support for ADR and premium resort pricing•
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High-end experiential retail expected to outperform commodity retail
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Properties aligned with premium traveler segmentation should maintain stronger pricing power
Despite these positive demand drivers, Hawaiʻi’s heavy reliance on tourism remains a long-term economic vulnerability and reinforces the importance of diversification beyond the visitor economy.
Hawaii’s Structural Economic Challenge
Recent UHERO research highlights a critical issue: Hawaiʻi’s economic stagnation is not primarily driven by cost of living — it is driven by lagging productivity and income growth.
Key findings include:
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Hawaiʻi ranks near the bottom nationally in real per capita GDP growth
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Tourism spending has not grown in real terms since 1989
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23 of the past 25 years have resulted in net outmigration
This has direct implications for retail and hospitality performance.
Retail sales may surge cyclically, but long-term organic income growth remains weak relative to the mainland. The true risk for Hawaii retail is not vacancy — it is wage stagnation and limited economic upward mobility.
Without meaningful diversification, Hawaiʻi’s retail and hospitality sectors will remain heavily tied to tourism cycles, federal spending, and broader national economic volatility.
Labor, AI, and the Future of Hawaiʻi’s Workforce
AI adoption is accelerating rapidly across the U.S. economy.
Key national indicators show:
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72% of workers report using AI in at least one job function
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•AI-related job postings rose 134% year-over-year in 2025
Hawaiʻi is seeing similar momentum, with job postings requiring generative AI skills rising approximately 120% year-over-year. However, Hawaiʻi ranks 32nd among U.S. states in AI exposure due to its tourism-heavy employment base.
Retail and hospitality occupations tend to have lower AI substitution risk, but also lower wage growth and limited productivity upside.This reinforces Hawaiʻi’s structural challenge: the state is insulated from AI-driven displacement, but also less positioned to capture AI-driven productivity acceleration.
Over the next decade, Hawaiʻi’s competitiveness will depend on whether it can develop higher-productivity industries that support wage growth, retention of skilled workers, and broader economic resilience.
Retail real estate performance will ultimately follow workforce income trends.
Housing & Consumer Sentiment
Oahu’s housing market began 2026 with muted activity, reflecting a typical seasonal slowdown and continued buyer caution.
January 2026 data showed:
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Single-family median: $1,122,500 (+0.2%)
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Condo median: $529,000 (-1.9%)
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Transaction volume declined slightly year-over-year
Mortgage rates around 6.1% improved affordability compared to 2025, but borrowing costs remain restrictive relative to pre-pandemic levels.
Consumer sentiment remains soft, reflecting inflation fatigue and economic uncertainty.
Oahu’s retail market enters 2026 with strong fundamentals, supported by limited new supply and steady demand for well-located retail space.
Forecast expectations include:
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Vacancy expected to remain in the mid-5% range
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Rent growth projected at 2%–4%
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Operating expense growth projected at 3%–5%
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New supply constrained by permitting timelines and high construction costs
However, rising costs will be a defining theme of 2026. The January 2026 minimum wage increase, higher insurance and maintenance expenses, and broader macroeconomic uncertainty will pressure tenant margins — particularly among small businesses and food-service operators.
We expect:
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Strong assets to strengthen further as capital concentrates in high-performing centers
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Weaker strip retail to experience higher turnover and leasing volatility
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Targeted landlord concessions to re-emerge in buildout-heavy categories such as restaurants
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Grocery, medical, service-based tenants, and experiential concepts to lead leasing demand
Hawaiʻi’s hospitality industry should remain stable with premium positioning, but broader economic diversification remains the long-term structural priority. Hawaiʻi continues to attract capital from a diverse, global investor base, and we do not anticipate a material slowdown in investment activity given its supply constraints, long-term demand drivers, and global gateway status.
Strategic Conclusion — Hawaiʻi at an Inflection Point
Hawaiʻi’s retail and hospitality real estate are performing better than Hawaiʻi’s underlying economy.
Property fundamentals remain solid. Supply is constrained. Leasing conditions remain favorable.
But income growth and productivity continue to lag the mainland.
The next decade will hinge on whether Hawaiʻi evolves into a more diversified, higher-productivity economy - or continues relying on tourism
and federal spending as its primary engines.
For investors, operators, and developers, the strategic playbook is clear:
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Prioritize well-located, necessity-based assets
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Underwrite operating expenses conservatively
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Focus on tenant credit strength and concept durability
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Align hospitality investments with premium traveler demand and experiential spending trends
About Fong Kazama Institutional Properties is a cross-market hotel, retail, and investment brokerage platform operating across multiple markets.
With more than 40 years of combined transactional experience, we advise institutional owners, private investors, developers, family offices, and national retailers on complex real estate strategies that drive long-term asset performance and capital growth.
Our practice is built on three core disciplines:
Institutional Retail Landlord Representation
We represent shopping center owners, portfolio landlords, developers, and pad site operators in maximizing occupancy, strengthening tenant mix, and enhancing long-term asset value. Our work includes stabilized centers, redevelopment projects, ground-up developments, and structured tenant retention programs designed to protect NOI and improve credit quality.
Institutional Retail Tenant Representation
We advise national, regional, and global retailers on market entry strategy, multi-unit rollouts, anchor renewals, relocations, and ground leases. Our cross-market perspective allows us to secure high-visibility, high-performing locations while aligning real estate strategy with brand growth objectives.
Institutional Hotel & Investment Sales
We broker portfolio and single-asset transactions across hospitality, retail, multifamily, mixed-use, and land. Our team has been involved in many of Hawai‘i’s most significant recent hotel and investment sales, combining local market intelligence with global capital connectivity to deliver competitive outcomes for sellers and investors.
Our approach integrates real-time market research, disciplined underwriting, and strategic advisory services. We operate at the intersection of brokerage and capital markets insight — helping clients navigate evolving economic conditions, demographic shifts, tourism cycles, and capital flows.
Fong Kazama Institutional Properties is committed to delivering institutional-level execution with entrepreneurial intensity, cross-market intelligence, and long-term partnership alignment.
Q3 2025 - Strategic Horizons: Hawaii Retail & Hospitality Opportunities 2026+
Insights for Hospitality Investors
Executive Summary
As the second half of 2025 unfolds, Hawai'i's real estate story is shifting from recovery to forward positioning. Retail markets have stabilized, but escalating costs are reshaping tenant strategies. Hospitality is moving beyond simple recovery and redefining itself through sustainability, eco‑luxury, and hybrid extended‑stay formats.
At the global level, more than $350 billion of institutional “dry powder” is waiting to be deployed into real estate. Hawai'i is poised to benefit as pricing resets and cap rates stabilize, creating a narrow window for investors to act ahead of the institutional wave.
Macro Risks & Local Stability
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Tariffs could drive consumer goods prices up 10–17 percent.
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Inflation in Hawai'i stands at 2.7 percent, above the national average.
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Construction costs remain elevated.
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Military and government spending continue to provide a stabilizing base of demand.
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Strong U.S. dollar reduces inbound tourism from Japan, Canada, and other foreign markets that are historically vital to Hawaii's visitor base.
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Current interest rates increase financing costs for acquisitions and development.
Hospitality Outlook
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Occupancy and ADR are anticipated to improve as international arrivals from Japan, China, and Korea steadily rebound.
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Despite fluctuations in arrival counts, per-visitor spending remains elevated, providing stability for Hawaii's hospitality sector
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Waikiki remains the institutional anchor, consistently outperforming state averages.
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Maui is regaining momentum post‑wildfires, with eco‑luxury projects drawing long‑term interest.
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The Big Island continues to attract eco‑tourism and high‑end resort demand.
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Kauai benefits from boutique, sustainability‑focused offerings appealing to experiential travelers.
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Extended‑stay and hybrid hotel formats are gaining traction, aligning with both leisure and corporate demand.
Hawaii Visitor Expenditures (April YTD, 2019 - 2025)
Capital Deployment Outlook
Local investors will continue to dominate in the near term, leveraging market familiarity.
Institutional and foreign investors are likely to re‑enter in late 2025 or 2026.
Strategic focus will center on:
– Industrial, benefiting from logistics and defense.
– Select retail, especially repositioned value or experience‑driven centers.
– Eco‑hospitality, aligned with ESG mandates and global capital flows.
– Strategic land plays, entitled low risk development sites.
Fong Kazama's Playbook for 2026+
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Reposition retail centers into value‑driven and experiential formats.
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Back eco‑hospitality and sustainability‑aligned developments in Maui, Kauai, and the Big Island.
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Bank strategic land positions before institutional pricing returns.
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Pursue mixed‑use projects combining retail, residential, and hospitality in growth submarkets.
Conclusion:
Hawai'i is entering a new phase: stabilization is complete, and the horizon is about strategic growth. The next 12–18 months represent a decisive opportunity to secure advantaged positions before global capital accelerates into the market.
Fong Kazama Institutional Properties stands ready to guide investors through this window, ensuring capital is deployed where it compounds resilience, captures growth, and delivers institutional‑grade returns.
About Fong Kazama Institutional Properties:
Fong Kazama Institutional Properties is a cross‑market hotel, investment, and retail brokerage with an emphasis in Hawai'i, Southern California, and Asia. With more than 40 years of combined experience, we specialize in:
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Institutional Retail Landlord Lease Brokerage – portfolios, shopping centers, new developments, pad sites, and tenant retention programs that drive high occupancy.
-
Institutional Retail Tenant Lease Brokerage – new market entries, multi‑store rollouts, anchor renewals, and ground leases, with a proven track record of securing prime locations for national and global retailers.
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Institutional Hotel & Investment Sale Brokerage – portfolio, hotel, shopping center, multifamily, and land sales, including many of Hawai'i's most significant recent transactions.
Q2 2025 - Hawaii Retail Resiliency & CRE Investment Recovery
Insights for Hospitality Investors
Executive Summary
Hawai‘i’s retail and commercial real estate markets have crossed an important milestone. As of Q2 2025, O‘ahu’s retail vacancy has returned to pre‑pandemic levels, while commercial investment activity has recorded its first year‑over‑year gains in both sales volume and transaction counts since 2019. This rebound underscores the resilience of Hawai‘i’s economy, supported by strong job growth, renewed consumer confidence, and a tourism sector that continues to anchor local spending.
At the same time, the market faces new challenges. Rents and occupancy costs are climbing, operating expenses are rising, and trade policy uncertainty looms. These forces are reshaping the competitive landscape and pressuring tenants to adapt. For investors, the lesson is clear: the market is stabilizing, but disciplined strategy and local expertise will separate winners from laggards.
RETAIL MARKET PERFORMANCE
Vacancy has fallen to 5.33 %, marking four consecutive quarters of positive absorption.
Retail sales, after contracting sharply in 2024, rebounded in early 2025 to record levels.
Employment added 12,400 jobs year‑over‑year, with the retail sector leading at
+3,400 positions.
Tourism welcomed 1.9 million arrivals through April 2025, with visitor expenditures up 13 percent compared to the prior year.
Despite these gains, tenants face intensifying cost pressures. Average asking base rents have risen to $4.79 per square foot per month, a 10.9 percent increase since 2023, while triple‑net operating expenses continue to climb.
Although Hawaii’s retail fundamentals remain strong, with healthy consumer spending and steady tenant performance, new market entries continue to be limited. Most national and regional retailers are maintaining a cautious approach, focusing on optimizing existing stores rather than expanding into new locations. This has been especially evident in the mid-box segment.
CRE INVESTMENT MARKET RECOVERY
The investment market has finally turned a corner. In the first half of 2025, Hawai‘i recorded:
+44%
$876 million in sales volume,
a 44 percent increase year‑over‑year.
+40%
137 transactions, up nearly 40 percent compared to 2024.
Local investors were the primary drivers, accounting for nearly three‑quarters of transactions and more than half of dollar volume. Mainland and foreign buyers remain cautious, constrained by exchange rates and financing headwinds, but are expected to re‑emerge as pricing stabilizes.
Notable transactions included:
• $216 million acquisition of resort land in Ko Olina by Newage Ko Olina I LLC.
• $42 million sale of the Star‑Advertiser industrial facility in Kapolei.
• Multiple stabilized retail center trades in the $20 million range.
STARTEGIC IMPLICATIONS
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Retail repositioning will be essential for underperforming centers.
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Industrial remain the most attractive institutional asset classes.
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Hospitality continues to provide stability, with Waikiki outperforming, while outer‑island assets remain selective but opportunistic plays.
FONG KAZAMA'S VIEW
Q2 2025 marks a genuine inflection point for Hawai‘i’s retail and investment markets. Investors who act now — while institutional capital is still cautious — can capture favorable entry positions. With more than 40 years of combined cross‑market experience, Fong Kazama Institutional Properties provides the local expertise and institutional strategy necessary to identify resilient subsectors and execute with confidence.
ABOUT FONG KAZAMA INSTITUTIONAL PROPERTIES
Fong Kazama Institutional Properties is a cross‑market hotel, investment, and retail brokerage with an emphasis in Hawai‘i, Southern California, and Asia. With more than 40 years of combined experience, we specialize in:
-
Institutional Retail Landlord Lease Brokerage – portfolios, shopping centers, new developments, pad sites, and tenant retention programs that drive high occupancy.
-
Institutional Retail Tenant Lease Brokerage – new market entries, multi‑store rollouts, anchor renewals, and ground leases, with a proven track record of securing prime locations for national and global retailers.
-
Institutional Hotel & Investment Sale Brokerage – portfolio, hotel, shopping center, multifamily, and land sales, including many of Hawai‘i’s most significant recent transactions.
Q1 2025 - KEY INSIGHTS
Insights for Hospitality Investors
Fong Kazama Insights: Hawaii Hotel Market Overview
Key Insights for Hawaii Hotel Real Estate and Hospitality Investments
Fong Kazama Institutional Properties recognizes that the Hawaii hospitality market offers significant opportunities for institutional investors, albeit with some challenges. The post-pandemic recovery is progressing, with Hawaii’s YTD through October 2024 hotel occupancy rates reaching 74.0%, with a RevPAR of $266.65 and an ADR of $360.50. Understanding the complexities of Hawaii's hotel real estate remains critical, particularly in high-demand areas like Waikiki, Oahu, and the outer islands such as Maui, Big Island, and Kauai. As a firm with decades of experience in Hawaii hospitality investment, we provide insights to navigate this dynamic landscape.
Waikiki, Oahu: The Heart of Hawaii’s Hotel Market
Waikiki continues to dominate Hawaii hospitality investments. As the state’s busiest tourist hub, Waikiki saw an occupancy rate of 81.4% YTD through October 2024, with a RevPAR of $219.64 and an ADR of $269.92, primarily driven by domestic travelers from the U.S. mainland. While international tourism, particularly from Japan, has shown slow but steady recovery, emerging markets from Australia, South Korea, Canada and New Zealand continue to fill the gap.
For investors, Waikiki hotel real estate presents a stable option with consistently high demand due to its proximity to Honolulu’s Daniel K. Inouye International Airport and a strong year-round visitor influx. Properties in this region continue to see occupancy rates that outperform state averages, making Waikiki a prime location for Hawaii hotel real estate investments.
Outer Islands: Opportunities and Risks for Hospitality Investments
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Maui: Maui’s tourism industry faced significant challenges following the 2023 Lahaina wildfires, but its recovery is gaining momentum. YTD through October 2024 occupancy stood at 62.0%, with a RevPAR of $332.23 and an ADR of $535.99, a sign of resilience as travelers return. Long-term investors in luxury and sustainable projects stand to benefit as the island rebuilds.
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Big Island: The Island of Hawaii, commonly known as the “Big Island” offers a relatively stable investment environment, with occupancy rates of 66.7% in YTD through October 2024, with a RevPAR of $280.43 and an ADR of $420.48. Known for its eco-tourism and high-end resorts, the island appeals to niche luxury markets, presenting growth opportunities for hospitality investors.
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Kauai: Known for its nature-centric appeal, Kauai’s hotel occupancy reached 74.0% in YTD through October 2024, with a RevPAR of $307.73 and an ADR of $415.73. With the rising demand for boutique hotels and resorts that emphasize sustainability, Kauai continues to attract investors targeting experiential and eco-conscious travelers.
Beyond Waikiki, the outer islands present diverse opportunities and challenges for Hawaii hospitality investors. Each island offers a unique mix of risks and rewards:
Visitor Demographics and Market Trends
Visitor demographics remain pivotal to Hawaii’s hospitality market. Domestic tourism remains robust, and the slow recovery of international visitors, particularly from Japan, continues to impact overall spending. However, arrivals from Australia, South Korea, Canada and New Zealand are steadily increasing, diversifying the visitor base. Investors should focus on properties and strategies that cater to a mix of international and domestic visitors for long-term profitability.
Development Trends
Limited Service/Extended Stay Product
The profitability of extended-stay hotels continues to rise nationally due to their lower operational costs and longer guest stays. In Hawaii, several new developments embrace this trend, combining traditional hotel rooms with extended-stay options. This versatility appeals to both tourists and business travelers, making it a profitable segment for developers and investors.
Economic Factors Impacting
Hotel Real Estate Investments
Up until September 2024 interest rates and inflation continue to affect Hawaii’s hotel investment market. Higher borrowing costs challenged financing, but Hawaii’s enduring tourism appeal offers opportunities for strategic investments. The convergence of declining interest rates, positive market performance forecasts, and favorable supply-demand dynamics suggests a robust uptick in hotel investment sales. Investors are strategically positioning themselves to capitalize on these trends, anticipating enhanced returns in the near to mid-term. Sustainability trends are also gaining traction, with eco-friendly hotels and resorts in high demand, particularly on the Big Island and Kauai. Investors aligned with these trends are poised for long-term growth.
Conclusion: Fong Kazama's Investment Outlook
Fong Kazama Institutional Properties believes that the Hawaii hospitality real estate continues to present significant opportunities for institutional investors who understand the market’s complexities. Waikiki remains the strongest market for hospitality investment, while the outer islands provide unique opportunities for those willing to take calculated risks.
As Hawaii’s hospitality market evolves, focusing on sustainable and luxury developments will be critical for maximizing returns. With our expertise and deep understanding of the Hawaii hotel market, Fong Kazama Institutional Properties is your trusted partner for informed investment decisions aligned with the state’s dynamic tourism trends.