Average retail rents on O'ahu jumped 27.7 percent from last year to $3.23 per square foot per month, the highest level in more than nine years, according to a report by Colliers Monroe Friedlander.

"Retailers are facing increasing rents as landlords capitalize on the tightening retail market," said the report released yesterday.

Rennie West looked at O'ahu's major malls to open an International House of Pancakes restaurant and was stunned by the asking prices.

"I asked them, 'Are these places gold plated?' " West said. "The prices are very alarming."

West finally settled on a long-term lease at Windward Mall, where her IHOP is scheduled to open in late March.

O'ahu malls can charge premium rental rates because they provide value for retailers, West said.

"They offer a good environment," West said. "It is safe. It is clean. All of these malls are very well run. Because of that, they attract a lot of retailers ... which is what the customers want. So the malls can charge whatever they want right now."

Earlier this year, Michael Han, president and founder of The Wedding Ring Shop, moved out of a 1,000-square-foot spot in Ala Moana Center and into a temporary site on Kapi'olani Boulevard.

Rather than pay retail rental prices, Han plans to open a permanent, three-story, 7,200-square-foot store at 1181 Kapi'olani Blvd. in February.

Han will own the land and the property.

"We knew there would be no end, that landlords would be asking more and more for retail space," Han said. "We knew the only way to have it (improved) would be to own our own property."

IHOP owner West said should she face higher rents once her long-term lease expires, she doubts that she could pass the extra costs on to customers.

"You can only do that so much," West said. "Especially with a family restaurant, low prices are one of the things that draws customers."

Healthy demand for space at Ala Moana Center, Pearlridge Center and Royal Hawaiian Shopping Center resulted in 300,586 square feet of space being leased so far this year, according to the year-end retail market report by Colliers Monroe Friedlander.

The result is that Honolulu's retail shopping center vacancy rate has fallen to 3.38 percent, the lowest level in nearly a decade.

The departure of J.C. Penney's at Ala Moana Center and Pearlridge Center in 2004 created smaller spaces that attracted considerable interest from smaller retailers, according to the report.

Reach Dan Nakaso at dnakaso@honoluluadvertiser.com.