The Valley's overall vacancy rate for retail space at the start of the second half of the year is 6.1%, up a full percentage point from the mid-year mark posted in 2000, according to a new survey by Grubb & Ellis Co.'s Phoenix office. "The amount of leasing activity in the metro Phoenix area slowed considerably during the first half of 2001," says Donald D. Morrow, Grubb & Ellis' regional managing director.

The Valley had just 934,000 sf of net absorption of retail space thus far this year, a considerable drop off from the activity experienced in the first half of 2000. According to the report, four of the nine submarkets experienced negative net absorption. The hardest hit was west Phoenix, which had negative net absorption of more than 250,000 sf.

Vacancy rates rose during the two quarters in spite of the overall positive net absorption because more than two million sf of new space was brought onto the market during that time. "Contributing to the increase in vacancy rates was the closing of big-box tenants, such as Office Depot and Home Base and several major grocery chains shifting locations," Morrow says. "Retailers have been hesitant to take over this vacant space while waiting to see what will happen with the local and national economy."