Industrial real estate tenants on O'ahu filled nearly 70,000 square feet of warehouse space during the third quarter, but lots more inventory hit the market to push up vacancies to their highest point since 2002, according to a new report.

The closure earlier this year of local hardware giant Kilgo's in Sand Island, created 250,000 square feet of vacant warehouse space that helped increase O'ahu's industrial vacancy rate to 3.34 percent at the end of September from 2.28 percent at the end of last year, said the report by Colliers Monroe Friedlander.

Colliers, a local commercial real estate firm, also said the new Kapolei Spectrum Phase II business park added nearly 200,000 square feet of industrial space available for rent or purchase.

The net result was 383,551 square feet more empty industrial space in the third quarter, increasing available space in the market to 1.2 million square feet.

Colliers said it expects the vacancy rate to end the year between 3 percent and 3.5 percent, still relatively low. In 2001, the vacancy rate was 4.42 percent.

"For warehouse and distribution tenants seeking expansion or relocation space to lease, the market still remains very tight," Colliers said in the report.

Colliers said the average net asking rent is up 13 percent from the end of last year to $1.24 per square foot per month.

The big addition of inventory during the third quarter isn't likely to be repeated in the near future, according to Colliers, which said higher land prices and construction costs make it hard for developers to build new warehouse space for lease.

However, several warehouse projects are either planned or under construction in which space is being sold as condominiums to users. Colliers said nearly 600,000 square feet of industrial condo space is in the works with premium sale prices above $300 per square foot.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.