It's good to be a commercial tenant when it comes to finding office space in Honolulu, according to a new report.

Office rents have fallen 2.6 percent from 12 months ago, CB Richard Ellis said in its first-quarter MarketView report. The drop was due to prices adjusting to the slowing economy.

“;The news continues to be good for tenants as landlord incentives to win tenants are improving,”; according to yesterday's report. “;Free rent and more generous improvement allowances are becoming more tempting to tenants as landlords do more to attract new tenants to their properties.”;

Average asking office rents on the island now range from $2.79 to $3.05 per square foot per month.

The report said tenants are likely to continue to benefit from favorable market conditions for the rest of the year, and that “;deals are better today than at any time in the past four years.”;

“;The numbers I'm looking at ... they're very lethargic,”; said Jeffrey Hall, senior director of research at CB Richard Ellis' Hawaii office. “;Until something happens on a grander scale with the economy, I'm not expecting any changes. Something would already have to be happening now.”;

There was 1.3 million square feet of vacant office space, or 11.4 percent of the market, by the end of the first quarter. There was 88,635 square feet of sublease space.

CB Richard Ellis expects the pendulum to swing back in the landlords' favor once there is job growth.

State unemployment last year was at 6.9 percent, a figure that held during February.

“;It's about who has the upper hand in negotiations,”; Hall said. “;With higher vacancies, landlords are anxious to fill their buildings. They're willing to make more concessions, which means lesser rent.”;

Hall said when businesses begin to hire again, landlords will have more bargaining power.

“;When people are hiring, the tenants are going to be anxious to do more business, the buildings are more full,”; Hall said.

A resurgence of Japanese interest in office space, particularly in Waikiki, is encouraging, Hall said. The report also states that mortgage companies are re-entering the market. Isle real estate should also see benefits come from federal stimulus dollars expected to flow in this year.