Retailers considering a Hawaii location must account for a cost structure that diverges sharply from the mainland, according to Erin W.J. Mitsuyoshi, CCIM, of The Bratton Team at Colliers International Hawaii. The same revenue line on the mainland and in Hawaii can produce very different profits because expenses beneath the top line behave differently, a gap that often surprises mainland operators evaluating their first Hawaii location.
Logistics is the variable mainland operators least expect to matter. Every unit of inventory arrives by sea or air, carrying freight costs and lead times that must be planned around. Recent trade policy has sharpened the point, with shifting tariff schedules moving landed costs substantially on goods sourced through Asia. Freight is not rent, but it consumes the same margin, directly shaping what a tenant can afford to pay for space.
Several other costs 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. Rents also sit above comparable mainland locations. None of these is hidden, but operators often model two or three correctly and omit the rest.
Hawaii’s labor market has been tight since the pandemic, so wage floors are not the binding constraint. The state minimum wage rose to $16 an hour on January 1, with a further rise to $18 scheduled for 2028. Hawaii applies no tip credit, so tipped staff receive the full rate before tips. Mitsuyoshi notes that competitive employers already pay above minimum, meaning labor should be budgeted at market rather than at minimum.
The combined effect shows up in occupancy cost as a percentage of sales. Standard retailers in Hawaii generally run occupancy costs of 7% to 12%, depending on use and category, compared with a mainland band of 6% to 10%. Luxury goods and jewelry can carry more, while grocery runs well below. A mainland rent-to-sales benchmark applied directly to Hawaii will understate what the position actually costs to hold, and 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. Hawaii 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. Operators who struggle are generally those who modeled Hawaii as a mainland market with better weather.
