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TUCSON-A new report has indicated that retail construction ticked up in the second quarter despite a sluggish housing market and softening fundamentals in the sector. Developers are poised to deliver 1.7 million sf before the year ends, a vast increase over the 200,000 sf that came on line in 2007.

Marcus & Millichap Real Estate Investment Services’ research team says the construction is centered in the north-upper west submarket, where the bulk of the new housing is located. The new space is projected to boost the region’s vacancy to 11.3% by year end or 220 basis points higher than 2007′s closing rate.

Nancy McClure, first vice president with CB Richard Ellis in Tucson, tells GlobeSt.com that there are two primary reasons for the construction increase for retail. First, Tucson is playing catch-up to meet the demands of newer housing in the past decade. As a result, much of the new construction involves grocery-anchored neighborhood centers, with bank and restaurant pad site development.

The second reason is a matter of timing. “Most of these projects were on the drawing boards three or even four years ago,” McClure says. “By the time they buy the land, secure the retailers then go through the entitlement process, it can take awhile.”

McClure says that doesn’t mean that Tucson demand for retail isn’t a factor. “I think, on the whole, if you ask a lot of retailers, they’ll tell you they’re hanging in there very well in the market,” she explains. “They’re doing well in the market because we haven’t been overbuilt.”

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