DENVER-The Denver-area retail overall vacancy rate dropped to 7.22% in the third quarter from 7.54% in mid-year 2005, according to the latest report by the Frederick Ross Co. The report shows that slightly more than 250,000 sf was absorbed in the third quarter, pushing the vacancy down for the ninth consecutive quarter.

“While construction was moderate, with about 150,000 sf of new construction for the period, over six million sf remains in the ‘under construction’ inventory, according to the report. Included in the pipeline are several regional serving malls and lifestyle centers in their first phase of construction, consisting of several phases in multi-year build-out plans.

Investment activity, the report notes, remained strong, with eight retail properties totaling more than $3 million trading hands. Capitalization rates remain low, ranging to 7% to 8% for quality centers, the report notes.

The report, warns, however, that the retail market could be impacted by Mervyns, which plans to close eight of its nine Colorado locations in the near future as part of a national cutback. All six Denver-located Mervyns will be closed. “This should put a significant dent in the single-tenant sector, as Mervyn’s current buildings range from 50,000 sf to 80,000 sf,” according to Frederick Ross.

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