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PHOENIX-A surge in housing starts along with the expansion of the Valley’s freeway system is fueling a demand for more retail development, particularly in the area’s booming, high-growth suburbs, a study of the Valley’s retail market found.

“In the outlying areas, growth is really strong,” Brian Kocour, senior associate with Grubb & Ellis/BRE Commercial, which commissioned the study, tells GlobeSt.com. Kocour says rapid residential growth is spurring a rapid rise in retail development, particularly in areas west of the city.

The Southwest Valley, once largely ignored by developers, has become the latest growth “hotspot.” One out of every four homes sold in the first three months of this year were located in the Southwest Valley so it’s not surprising that a spurt in retail development would follow. Developers soon will bring at least four power centers to the area along with a Westcor regional mall at McDowell Road and Bullard Avenue.

In the Southeast Valley town of Gilbert, housing growth is prompting developers to unveil plans for two power centers and a regional mall.

But even as the Valley’s retail market seems to be humming, vacancy rates in the metro area inched up slightly during the first half of the year to 7.7%, the report notes. Kocour attributes that increase to the closing of several “big box” retailers who have left empty shelf space and vacant buildings that have become ever increasingly difficult to fill. Developers will have to do some creative thinking to fill failed big boxes, but a turnaround can be accomplished, he asserts.

The increase in vacancies been good news for tenants who have seen concessions mount as building owners offer lower rates, longer free-rent periods and other perks. All those concessions haven’t scared off developers, however. They’re planning to open 10 new neighborhood centers and two power centers in the Valley by the end of this year.

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