The local economy is struggling with job layoffs and reduced consumer spending, but you wouldn't know it looking at the amount of empty retail store space on O'ahu.

The year is ending with retail vacancies slightly lower, at 3.23 percent, than the 3.33 percent at the end of last year, according to a report by local commercial real estate firm Colliers Monroe Friedlander.

"Contrary to the barrage of poor economic news, Honolulu's retail market appeared relatively unscathed through year-end," Mike Hamasu, Colliers consulting and research director, wrote in the report. "In fact, most markets would envy the performance that we've had with solid positive absorption, low vacancy rates and rising rents."

However, Colliers forecasts that vacancies will rise next year, perhaps to 5.4 percent, as the recession takes its toll on retailers.

The flat vacancy rate this year belied major growth in retailing on O'ahu. Colliers said 509,511 square feet of occupied retail space was added to the market over the last 12 months.

Most of that — nearly 400,000 square feet — happened in the first half of the year, and was largely due to Ala Moana Center opening a new 300,000-square-foot wing anchored by Nordstrom. Because the Ala Moana wing was largely filled when completed, the addition left the island's vacancy rate little changed.

New retail space built around a Safeway store that opened in Kapahulu this year had a similar effect.

Significant existing vacant space also was filled at Pearlridge Center where J.C. Penney once operated, and at Royal Hawaiian Center in Waikiki following a major renovation.

The leasing activities offset retail closures that included two big-box CompUSA stores.

O'ahu's 3.23 percent retail vacancy represented 379,969 square feet of empty space out of nearly 11.8 million square feet of tenant space at shopping complexes ranging from strip malls to regional malls.

Five years ago, retail vacancy was about 8.5 percent, but it hit a low of 2.2 percent in 2006.

Colliers said it expects vacancies will rise after the holiday season. That should start to pull down asking base rental rates that have remained strong at an average $3.47 per square foot a month, compared with $3.34 a foot a year ago.

Part of the anticipated market crunch next year is expected from some retailers going out of business. They include KB Toys, which last week said it would liquidate and close all stores, including four in Hawai'i.

Plans for building more than 3 million square feet of new retail space, including two regional malls in the 'Ewa-Kapolei region, could also force up the vacancy rate if developers go through will all the plans.

One major project is Kapolei Commons, which is slated to open early next year anchored by Target, Sports Authority, Petco and Office Max.

Kapolei Commons is trying to lease its 600,000 square feet of space before it opens, but has faced challenges, such as Circuit City canceling plans for a 30,000-square-foot store.

Although electronics retailer Best Buy is being targeted to fill the Circuit City space, the weakening economy is making it harder to lease the entire mall.

Ka Makana Ali'i is another planned regional mall, though this project, announced more than two years ago, remains more tentative. The developer, Tampa, Fla.-based DeBartolo Development LLC, was initially expected to have a phase open next year, but has not announced tenants or started construction.

Colliers said many retailers are increasingly anxious about the recession and how it will affect business, but that strong companies can take advantage of expansion opportunities as weaker retailers vacate space and some landlords begin to offer tenant concessions.

"The lack of competition for these spaces coupled with a stronger likelihood that landlords would be willing to offer concessions make for attractive circumstances," Colliers said in the report.