"Tucson is a good, solid market," Tim Rios, client services manager for Marcus and Millichap, tells GlobeSt.com. "It's not a high-profile market, but it's one where people find good product and hold onto it."

Because that buy-and-hold strategy has left little available for sale, retail investment activity remains slow in Tucson, the report notes. But retail space in this city two hours south of Phoenix is growing. In 2002, developers added 250,000 sf in the first three quarters, representing less than a 1% increase in inventory. Retail construction is expected to soar to 750,000 sf during 2003, however, largely due to the opening of big box stores such as Wal-Mart, Lowe's and Home Depot. Those three chains will account for more than half of all retail completions during 2003.

The news is mixed for building owners, however. Even though absorption rates experienced a marked improvement in the first three quarters of 2002, vacancy rates are expected to rise 0.4 percentage points over the next 12 months, to 6.5%. Vacancy levels had dropped to 6.1% during 2002, but still remained 0.7 percentage points above a year earlier.