PHOENIX-Retail vacancy in metropolitan Phoenix has dropped below 5%, the first time it’s been that low in more than a decade.

At the start of the fourth quarter, retail vacancy in the Valley hit 4.54%, more than a full percentage point lower than the start of the year when the vacancy rate was 5.52%, according to a new survey by CB Richard Ellis.

Even though more retail space has been built and put on the market in 2000 than in any year during the past decade, demand has continued to outpace new development.

Through the third quarter, more than three-million sf of retail space has been absorbed, while approximately 2.85-million sf of new space was brought to market.

The retail space built this year, along with another few hundred thousand expected to come on line in the fourth quarter, marks a new modern high for retail development. Just over two-million sf of new retail space came on line in both 1996 and 1997, the most active years for new development until this year.

The steady influx of 100,000 new residents annually into the Valley and residential housing in new areas has pumped up retail development. With the East Valley nearing build-out in several suburbs, new housing development has moved to the West Valley, North Scottsdale and further south into Chandler.

Next year could be even more active, according to the CB Richard Ellis study, which reports that nearly six-million sf of new retail space is under construction.

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