The report, published by Marcus & Millichap Real Estate Investment Brokerage Co., points out that the average vacancy level for retail product here has risen only slightly this year and is not expected to jump much higher in 2003. The average vacancy rate is expected to stand at 6.5% by the end of 2002, just one percentage point higher than year-end 2001. Vacancy will continue to edge up over the next 12 months, which will raise the average to around 7% in 2003.

"Over the next year, a slowdown in new construction activity will help keep vacancy in check," says Jack E. Estes, regional manager of Marcus & Millichap's Portland office. The report points out that construction activity will decline over the upcoming 12 months, just as one million sf of new product enters the market. Construction on more than three million sf of retail space was put on hold or canceled in the six months between January 2002 and July 2002, due to the uncertainty of the current economic climate.

The flatness of the market will make for only slight increases in rents over the next year, but sales prices are expected to rise at a quicker pace due to the heavy demand for retail product here. "Demand for single-tenant properties will remain strong over the next year, as investors seek stability in lieu of riskier, but potentially more lucrative opportunities," the report points out. But the Portland retail market is not expected to improve dramatically in the near term, due to its heavy dependence on the currently sluggish manufacturing sector.