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PHOENIX-An uptick in the economy will help the local real estate market turn the corner in 2004, as increased jobs, productivity and spending bolster the Valley’s sagging industrial, retail and office sectors.

“Investment activity has been very strong in Phoenix in this down cycle,” Grubb & Ellis/BRE Commercial senior vice president David Folger tells GlobeSt.com of the Valley’s multifamily investment sector during a forecasting summit at the firm’s Phoenix office. Low interest rates and an influx of 1031 Exchange buyers from California could keep the market heated in 2004, driving up prices in all sectors.

Overall, the Valley’s investment market was dominated by the private investor last year, a trend that is expected to continue as out-of-state buyers look to the city for low-cost deals, says Eric Wichterman, Grubb & Ellis’ senior marketing consultant with its investment group. An upswing in both the stock market and interest rates, however, could lure some of that investment money away from the Valley next year.

In the retail sector, historically low interest rates are fueling speculation that Arizona’s retail market could grow by 6% next year as more power centers and strip malls go vertical, particularly in the booming West Valley.

“It’s going to be an exceptional year because we’re going to have at least 19 new shopping centers coming on line in 2004,” John Applebee, a specialist in retail development for Grubb & Ellis, says of the retail boom. Speculative building is expected to be sharply curtailed, however, as a glut of big box stores stand vacant on the market.

The industrial market, which suffered from overbuilding, should see a stabilization in the vacancy rate and a decline in concessions by 2005, Grubb & Ellis industrial specialist Pete Klees predicts. But look for continued industrial growth in the West Valley, where land prices have risen as the area’s residential growth outpaces the rest of the Valley.

The office market will continue to develop along the region’s freeway system as companies look to move businesses closer to their employee base. And, the Valley’s suburban growth will impact the CBD, leaving high-rises languishing with even more unfilled space and fewer major tenants, says J. Michael White, senior vice president of Grubb & Ellis’ office group.

Barring any major economic shocks, all market sectors in Phoenix should show continued improvement in 2004 as the Valley digs its way out of a recession, the Grubb & Ellis team concludes.

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