O'ahu's office vacancy rate rose for a fourth straight quarter to its highest level in two years, a further sign that the state's economy is weakening.

Honolulu commercial real estate firm Colliers Monroe Friedlander reported there was 1.27 million square feet of vacant office space on O'ahu in the second quarter, as 64,070 square feet of vacant space was added to the market.

The added space pushed the vacancy rate to 8.12 percent, the highest since the second quarter of 2006 when the rate was 8.25 percent.

Over the past 12 months, Colliers reported about 190,000 square feet of lost occupancy. The forecast for the rest of the year isn't very optimistic, as Colliers projects a year-end vacancy rate of 8.5 percent.

"We've had about six quarters out of the last seven quarters of negative absorption, which means that we are definitely on a downward trend in terms of growth in the office sector," said Mike Hamasu, director of research and consulting for Colliers in Honolulu.

Just a year ago, office vacancy was at a 15-year low of 6.5 percent. But Colliers said business optimism and consumer confidence have fallen to record lows, and increasing fuel, commodities and food prices have increased office building operating expenses.

Hamasu said the declining tourism industry also will affect office space vacancies.

"If the tourism market is in a downturn, the construction market is anticipated to slow and be hit from the inflationary standpoint by fuel oil costs. All of that is putting a significant damper on our economy, which will eventually impact our office sector," Hamasu said.

Although more office space became available in the second quarter this year, rents haven't come down. The average full-service asking rental rate sought by landlords for vacant space was $3.06 per square foot per month, a 1 percent increase since the end of 2007, the report said.

Hamasu said the higher asking prices reflect the increase in costs to operate a building. Colliers is projecting that higher costs will push landlords to raise rents by 15 cents to 25 cents per square foot per month.

"Operating expenses are anticipated to increase and that's definitely true because of fuel oil prices, which generally are what fuel our electricity rates," he said. "You have a significant spike in that and office rates go up from the tenant's perspective because office buildings use a lot of electricity."

Compared with major Mainland metropolitan areas, office vacancy in Downtown Honolulu was 9.7 percent, the 14th lowest among 56 cities surveyed by Colliers International, of which the local Colliers office is an affiliate.

Colliers said the shift in the market will likely drive other changes in the market place, making property manager efforts more important.

"Taking care of existing tenants and an increase in awareness of customer service is more evident as a greater emphasis is placed on tenant retention," Colliers said in a report.