San Diego was beaten out by only two other markets in this year's National Retail Index, a "snapshot analysis" compiled by Marcus & Millichap Research Services. First place went to Washington, DC and second place to Orange County. The rankings are chosen based on a number of different indicators, including forecasted employment and household growth, vacancy, construction, personal income, new home construction and rent growth.

Although its retail market is still holding strong, San Diego did actually slip one place from 2002, when it placed as number two on the NRI. The city actually traded places with Orange County, which was ranked as number three last year. "The two markets are equally attractive in practically every regard, but Orange County's slightly higher forecasted rent growth helped it to edge out San Diego," according to Marcus & Millichap's researchers.

As the researchers warn, the NRI is not designed to predict the performance of individual investments, as a "carefully chosen investment in the bottom-ranked market could easily outperform a poor choice in the top-ranked market." They also point out that a market's ranking may change from one year to the next, "even if its fundamentals remain unchanged."