Montecito SVP and development director Nick Hannon tellsGlobeSt.com that the company accumulated most of its developmentland more than a year ago, which means it hasn't been affected asmuch by the run-up in land prices over the past 12 months, only therun-up in construction prices. Currently, thanks in part tosingle-digit vacancy rates across the region, triple-net leaserates at his properties typically end up between $2 and $3. Hannansays those who are starting to develop retail on land acquired morerecently will need to achieve rents above $3 per sf to cover theirincreased costs."I think we will see a 20% to 30% increase inrental rates over the next 24 months, which exactly mirrors thesame increase we've all had on land and construction costs," hesays. "So if the average is $2.50, it will be at $3.25."Thefurthest along of Montecito's projects now under construction isMontecito Marketplace, a 215,000 sf multiphase community centerthat is 90% percent preleased. The center is located on 19.2 acresat the southeast corner of Durango Drive and Elkhorn Road. Tenantsinclude T.J. Maxx, FedEx Kinko's and Starbucks. Phase I includes111,000 sf of retail space anchored by a 65,000-sf Smith's Food& Drug. The $48-million first phase is complete, and stores arestarting to open.

The largest is Montecito Highlands, a 250,000-sf retail shoppingcenter that will be situated on the northwest corner of Horse Driveand US 95. The center will include grocery-anchor, junior anchor,home improvement, retail, office and restaurant pads. MontecitoHighlands is scheduled to break ground in the fourth quarter of2006. Anchor leasing is now under way.

Also scheduled to break ground in the fourth quarter isMontecito Pavilion, which likely will include 175,000 sf of retailspace and a 12-acre mid-rise residential development. The 30-acredevelopment site is off the northwest corner of Tropical Way andLamb Boulevard in North Las Vegas. Preliminary plans include agrocery anchored shopping center consisting of seven retailbuildings and eight stand-alone pads. The $75-million project isslated for completion sometime during the third quarter of nextyear.