Retailers considering a Hawaii location must adjust their financial models for occupancy costs that run structurally higher than on the mainland, according to Erin W.J. Mitsuyoshi, CCIM, of The Bratton Team at Colliers International Hawaii. The gap is not a hidden fee but a cumulative result of several cost categories that behave differently in the islands, and failing to account for all of them can lead operators to misjudge what a Hawaii location actually costs to hold.
The most overlooked variable is freight. Every unit of inventory arrives by sea or air, adding both cost and lead time that mainland operators rarely plan for. “It’s not a standard worry that they deal with on the mainland,” Mitsuyoshi said. Freight is not rent, but it consumes the same margin, directly shaping what a tenant can afford to pay for space. Recent shifts in tariff schedules have moved landed costs substantially on goods sourced through Asia, and the variability itself has been the harder part. Operators can plan around a known cost far more easily than around a fluctuating one.
Several other costs also run materially above mainland equivalents. Utilities are roughly double to triple the national average. Insurance has risen sharply. Hawaii requires employers to provide healthcare coverage, a statutory obligation rather than a discretionary benefit, and mainland operators frequently model it as the latter. Rents sit above comparable mainland locations as well. None of these is hidden, but operators often model two or three correctly and omit the rest.
Labor presents another adjustment. Hawaii’s labor pool has been tight since the pandemic, so wage floors are not the binding constraint. The state minimum wage rose to sixteen dollars an hour on January 1, a two-dollar increase, with a further rise to eighteen dollars scheduled for 2028. Hawaii applies no tip credit, so tipped staff receive the full rate before tips. For restaurant operators, Mitsuyoshi’s assessment is that this changes less than the headline suggests, because competitive employers already pay above minimum. In a market where experienced staff is scarce, compensation has been set by competition rather than by statute, and well-run operations have used bonus and tip pools to retain performers. The implication is that labor should be budgeted at market rather than at minimum.
These factors converge in occupancy cost as a percentage of sales. Standard retailers in Hawaii generally run occupancy costs in the range of seven to twelve percent, depending on use and category, compared with a mainland band of six to ten percent. Luxury goods and jewelry, with higher margins, can carry more; grocery runs well below. Rents, utilities, insurance, and the freight component embedded in getting goods to the islands each push the ratio up. For landlords and operators alike, that means a mainland rent-to-sales benchmark applied directly to a Hawaii location will understate what the position actually costs to hold. Assets across current Hawaii commercial inventory price accordingly.
None of this argues against the market. Hermès, Harry Winston, Tiffany and Louis Vuitton all operate successfully in Hawaii, having built models that accounted for the real cost structure and judged the position worth it, because a flagship address here carries global weight. Hawaii also delivers strong retail sales, genuine customer loyalty, and a visitor base layered on top of resident demand. Mitsuyoshi’s summary is that the market rewards preparation: go in with eyes wide open, plan for the time and the cost, and the numbers work. The operators who struggle are generally the ones who modeled Hawaii as a mainland market with better weather.
