The amount of empty warehouse space on O'ahu spiked in the first three months of this year, rising by the rough equivalent of two Costco stores, according to a new report.

Nearly 300,000 square feet of vacant industrial space was added to the market in the first quarter, according to a survey by local commercial real estate firm Colliers Monroe Friedlander.

The amount of new vacancies in the three-month period was more than half the amount of empty space added during all of last year, when vacant space grew by 529,396 square feet.

At the end of March, O'ahu's industrial vacancy rate was 5.1 percent, up from 4.4 percent at the end of last year. The last time the vacancy rate was above 5 percent was 1999, Colliers said.

"The industrial sector reflects the overall malaise being experienced among the business marketplace," Colliers said in the report.

Adding to much of the vacancy have been contractors and distribution businesses cutting back on warehouse use as they adjust to the economic downturn.

Colliers said several large industrial real estate deals are in the works that could lower the vacancy rate below 5 percent by mid-year. Still, the contraction among warehouse users has left some large industrial projects struggling.

One project, the roughly 210,000-square-foot second phase of Kapolei Spectrum business park delivered to the market in late 2007, is mostly empty and for sale after lender iStar Financial foreclosed on the developer Low Archibald Real Estate Group of California.

Colliers also said a planned industrial lot complex slated for the former Hawaii Raceway Park in Kapolei was also foreclosed upon by iStar.

Much of the empty space on the market represents new warehouse projects built in the past few years where the developers intended to sell units as fee-simple industrial condominiums but had to dump them on the rental market after the recession and hobbled credit market inhibited businesses from buying warehouse space.

Colliers said 25 percent of the industrial vacancy is from such condo projects, which include Kapolei Spectrum and Waipio Business Center, which is advertising special incentives to fill up vacancies, including a lease-to-own plan.

Despite the steep rise in vacancies, O'ahu's market had the third-lowest vacancy rate among 54 industrial markets nationwide, according to a survey from Colliers International.

The lowest rate was in Los Angeles at 4.2 percent. The highest rate was in Bakersfield, Calif., at 21.6 percent. The national average was 9.6 percent.

Another commercial real estate firm, CB Richard Ellis, compiled a report on Hawai'i industrial space that pegged the amount of first-quarter vacancy loss on O'ahu at 245,274 square feet for a vacancy rate of 4.9 percent.

The CBRE vacancy rate represents 1.7 million square feet of vacant space out of 35.6 million square feet. The Colliers report tracks 37.7 million square feet, of which it said 1.9 million square feet was vacant.

The CBRE report also assessed the Neighbor Islands, and said those markets filled vacant industrial space in the first quarter.

Maui filled 37,224 square feet of vacant space in the quarter. The vacancy rate there was 0.6 percent, with 63,157 square feet empty out of 10.5 million square feet.

The Big Island filled 13,280 square feet. The vacancy rate there was 10.4 percent, with 41,103 square feet empty of 394,211 square feet.

Kaua'i filled 2,162 square feet. The vacancy rate there was virtually zero, with 3,196 square feet empty of 8.7 million square feet.

CBRE said the statewide industrial vacancy rate in the first quarter was 3.3 percent, up from 2.9 percent at the end of last year.

On O'ahu, the biggest submarket for industrial space, Kalihi-Sand Island, had a 6.3 percent vacancy rate, with 386,471 square feet empty of 9.1 million square feet, according to the Colliers report.

Some 185,296 square feet of empty space was added in the first quarter.

O'ahu's second largest submarket, Airport-Mapunapuna, had a 1.8 percent vacancy rate, with 152,879 square feet empty of 8.4 million square feet, Colliers said. Some 39,387 square feet of empty space was added in the quarter.

Colliers said the average monthly rental rate landlords are asking per square foot of space in the first quarter was $1.06, down from $1.24 at the end of last year.

The company said it expects rents and vacancies to decrease this year and next year, but said the vacancy rate at which landlords and tenants typically have equal negotiating power is 7 percent to 8 percent.