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DENVER-The Denver area’s real estate market is showing a modest growth and a small decline in the overall vacancy rate, according to the 41st annual Colorado Business Outlook report for 2006 sponsored by Compass Bank and the University of Colorado at Boulder, Leeds School of Business.

Total retail sales are projected to hit a record $58.9 billion in the state this year, up 5.6% from the $55.8 billion in 2004. Broken down, it includes $14.3 billion in motor vehicles and parts and $9.8 billion in general merchandise sales.

“The retail real estate market is showing modest improvement,” according to the report. “Metro Denver’s new construction in early 2005 was minimal, and the vacancy rate posted a small decline. However, the Denver market has a reported five million sf of new projects under construction. This highly desirable new space in a period of limited growth put increasing pressures on older shopping areas.”

The report goes on to say despite the many negative developments, the continuing economic recovery in Colorado should limit any consumer retrenchment in the state. “Job and income growth in the retail sector for 2006 will be slightly better than in 2005,” the report says. “In addition, retail spending is expected to post gains similar to those in 2005, climbing about 5.8% in 2006.”

However, there are downside risks to the retail sector, the report cautions. “Another surge in energy prices, a decline in the national economy or increased concerns about security could bring about a pull-back by consumers,” the report notes.

Also, increases in the value of household assets has fueled a great deal of the rise in spending during the past two years, the report notes. “If consumers become less confident about continued increases in wealth, they will curtail big-ticket purchase that can be deferred,” the report notes.

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