According to the firm's research, shopping centers here "are currently boasting some of the lowest vacancy rates in the country." And with positive net absorption continuing throughout the year, the San Diego retail market is expected to wind down 2002 with an average vacancy rate of 4.9% - a figure that is actually slightly higher than year-end 2001.

With such high occupancy levels, it's no wonder that rents here have been on the rise. The average rent jumped by 3.5% in 2002 and is expected to hit $1.68 psf triple-net by year-end 2002, says the Marcus & Millichap report. More increases are on the horizon, as the average rent is expected to increase to $1.74 psf in 2003.

With such high demand for retail space, development activity has kept an even pace throughout 2002. Mixed-use product, in particular, has gained increasing popularity, the report points out. "A number of mixed-use projects are entering the market due to their growing popularity among city governments," says Marcus & Millichap's researchers, who add that in 2002 there were a total of 10 mixed-use projects completed and another seven projects scheduled for build-out in 2003.