At 9.4% so far this year, capitalization rates have dropped for three consecutive years, Marcus & Millichap reports.

However, the report also notes construction is expected to slow 45% next year to 1.9 million sf in 2003, as developers continue to pull projects off the drawing boards. This year, according to Marcus & Millichap, retail construction is down 24% from 2001. Even so, the supply may still be outpacing demand, as more the number of retailers in the market for new space is off 15% to 20%, according to Marcus & Millichap.

While overall vacancy is expected to close the year near 12%, Marcus & Millichap predicts a 1.2-percentage point drop over the next 12 months. In addition, rents should increase by 3%, the company forecasts.

Marcus & Millichap reports recent sales have ranged from an $18.56-million sale of the 193,000-sf Thatcher Woods Shopping Center in west suburban River Grove to ubiquitous Walgreens outlets from from $4.5 million to $5.8 million in Park Ridge, Mundelein, the Northwest Side of the city and Des Plaines.

The priciest deal remains the $753 per sf paid for a 22,900-sf storefront at 701 N. Michigan Ave. while the best price per pound was $55.36 per sf for an 83,100-sf Alamo facility at 3800 N. Mannheim Rd. in Franklin Park, less than a mile from O'Hare International Airport.