Hawai'i Commercial Real Estate: Cap Rate Trends & 2025 Outlook
By Benavente Group
How rising interest rates and constrained inventory are reshaping capitalization rates across Honolulu's office and retail sectors.
The Current Landscape
Rising interest rates have materially reshaped capitalization rates across Honolulu's commercial real estate sectors. What was once a compressed cap rate environment defined by yield-starved capital has given way to a period of price discovery, with buyers demanding wider spreads to compensate for higher financing costs and owners slower to recalibrate their expectations.
Inventory constraints continue to define much of the market. Class A office in the CBD remains tightly held, while well-located retail along primary corridors has held its value against the broader correction. Industrial product, particularly last-mile logistics near the airport, has shown remarkable resilience and in some cases compressed further against the macro trend.
What We're Seeing in 2025
Our appraisal team is observing three distinct patterns emerging in the current cycle: bifurcation between core and non-core assets, a return of disciplined underwriting, and a growing emphasis on in-place cash flow over speculative rent growth. For owners and lenders, the implication is that valuation work needs to anchor on durable income rather than peak-cycle assumptions.
Underwriting discipline has returned to Honolulu's commercial market — and with it, a healthier basis for long-term valuation.
Looking ahead, we expect cap rates across most commercial sectors to stabilize in the second half of 2025 as rate volatility moderates and transaction activity resumes in earnest. For properties undergoing appraisal in the current environment, the critical work is supporting cap rate selection with current, location-specific sales evidence rather than stale comparables from the prior cycle.
