Hawai'i's robust economic growth led O'ahu businesses to expand by roughly the equivalent of a 25-story office building last year, according to a new report.

Local commercial real estate firm Colliers Monroe Friedlander said about 250,000 square feet of empty O'ahu office space was leased last year, the highest absorption since 2000.

The surge, primarily driven by job growth, pushed the island's office space vacancy rate down to 8.4 percent at the end of the year from 10.3 percent in 2004, Colliers said.

Mike Hamasu, company research and consulting director, predicts that low unemployment and rising wages will stifle office worker hiring this year, limiting office occupancy gains to 100,000 square feet to 150,000 square feet, or a vacancy rate under 8 percent.

"The pace of absorption that was experienced over the last three years will slow," he said.

Meanwhile, rising property values and office rents are expected to motivate businesses to move from fancier downtown high-rises into more modest digs in neighboring areas such as Kaka'ako and along South King Street and Kapi'olani Boulevard.

The Colliers report said that many businesses in the early 1990s took advantage of a glut of top-class downtown office space. Recent rent increases have prompted tenants to migrate back, filling 140,000 square feet of third-class office space in the past two years.

Colliers forecasts that rents this year will rise 8 percent to 12 percent, after rising 5 percent to 7 percent in the previous two years because of higher wages, construction costs and energy prices.

New office building construction remains infeasible because of rising land values and construction costs as well as limited available land and office rents that are still relatively low, Colliers said.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.