According to a market study by Marcus & Millichap Real Estate Investment Brokerage Co., a cutback in new development combined with an improving economy and an increase in population will make for improved market conditions next year as investors take advantage of low financing rates to shore up sagging sales.

"Although the economic recovery has been slow to materialize during 2002, a more pronounced improvement is expected with the addition of thousands of new jobs during 2003," said David A. Wetta, senior vice president and regional manager of the firm's Phoenix office. "After several quarters of rising vacancy, improved employment growth and a reduction in new completions will allow vacancy to decline and rents to realize positive growth in 2003." The creation of 42,000 new jobs and an influx of new residents to this Sun Belt state will help fuel the region's economic development.

A slowdown in retail construction, which resulted in two million sf of completions in 2002, will spur retail absorption in the coming year, causing vacancy rates to decline a half point to an overall rate of 10.2%. That figure is in sharp contrast to 2002 when vacancy rates increased to an overall average of 10.7%.