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SAN FRANCISCO-Numerous factors combined for the start of theyear, such as a slower housing market, less planned development,and a hold on interest rates, to push retail buyers into a flightto quality-only purchases, according to Marcus & Millichap's2007 Annual Retail Report. With slowed GDP growth and employment,people will spend less this year, but class A retail space willstill be hot for investors looking for a place to stash theircash.

According to the report, GDP growth is expected to slow to 2.6%this year, the Fed will likely maintain its "wait and see" approachto interest rates, and developers will bring about 120 million sfof new projects online, as opposed to the 130 million sf opened in2006. Even the big-box chains such as Wal-Mart have announcedreduced expansion plans for 2007. Retail demand is expected tocool, the report says, as homeowners stop pulling out home equityand are faced with adjustable rate mortgages shooting higher.