Local retail chain Price Busters going bust in January continues to be a drag on retail space occupancy on Oahu this year, according to a recent industry report that said the market remains healthy with significant expansion plans and tenant demand.

The report from commercial real estate firm Colliers International said 4.4 percent of leasable retail space on the island was empty at the end of May, up from 4.3 percent in the first quarter and 4.2 percent at the end of last year.

The uptick in vacancy this year from the end of last year represents about 40,000 square feet of empty space.

That is about the size of Macy’s and Ross stores in Waikiki, City Mill in Ewa Beach or the former CompUSA in Kakaako.

Some of that vacant space added this year remains from the shutdown of Price Busters, which closed eight stores in January and dumped 90,000 square feet of empty space on the market, according to Colliers. 

Oahu’s total market for retail space is about 15.7 million square feet, of which 695,319 square feet was vacant through May, the report said.

Colliers said the growing Hawaii economy and near-record tourism is helping generate good demand for space among retailers, and that developers are responding with plans to build several small centers ahead of much bigger projects slated for delivery over the next couple of years.

"Optimism abounds,"Kim Scoggins, a Colliers vice president and retail broker in Honolulu, said in the report. "The surge in development activity will fuel retail growth well beyond 2014."

Planned big development projects include a new International Market Place in Waikiki, major expansion at Ala Moana Center, a Kapolei outlet mall and Kapolei regional mall Ka Makana Ali’i 

Among the planned small retail centers are a 22,000-square-foot project called 808 Center next to the Keeaumoku Street Walmart, 29,000 square feet of retail space planned in Haleiwa by Kamehameha Schools and 12,000 square feet at Hoakalei Resort in Ewa Beach.

In March, Swedish fashion retailer H&M helped fill the retail void when it opened a 31,000-square-foot store, its first in Hawaii, at the Waikiki Business Plaza on the corner of Kalakaua and Seaside avenues. 

Colliers projects that about 90,000 square feet of new retail space will be added on Oahu this year. "Market conditions remain favorable for new retail development," the report said.

Even with the new space coming online, Colliers expects that there should be a small reduction in the amount of vacant retail real estate on Oahu by the end of the year, leaving the vacancy rate near 4 percent for a fifth consecutive year.