PHOENIX-Retail space here is so tight that some prospective tenants are trying to outbid each other before construction of new complexes even begins, local brokers and real estate analysts say.

The area’s retail vacancy rate was just under 4.6% at the start of the third quarter, more than one-half a percentage point lower than at the start of the year and almost one full point below the fourth quarter of 1999, according to some new brokerage reports.

“The retail market in the Phoenix metro area is verystrong,” Darren Pitts, a senior associate at the local office of CBRichard Ellis, tells “We are seeing retailers who have neverhad a presence here opening new shops, while a lot of companies that already have a presence are looking for places to expand.”

Recent examples include Lowe’s Home Improvement,which opened its first store in the Phoenix area earlier this year but plans seven locations by mid-2001; UltimateElectronics, which opened its first of two stores thismonth; and Gateway Country Stores, which has openedseveral stores in the city this year and plans to open even more.

The city’s fast-growing population, along with an increase in better-paying jobs, has retailers gobbling up available space anywhere near new rooftops. The vacancy rate hascontinually dropped since reaching a peak of nearly 28% in 1990.

Clearly, today’s 4.6%-vacancy rate has put retail developers and landlords in control of the market. “Before the dirt is even turned, the tenants arecompeting for their space,” Pitts tells

Retail tenants shouldn’t expect relief anytime soon. Though more than 4.6 million sf of new space is under construction, most of it is pre-leased and willdo nothing to raise the area’s vacancy rate, Pitts says.

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