Developers are responding to more modest retailer demand by reducing deliveries. Completions are forecast at 125 million square feet this year, down from 145 million square feet in 2007. Builders remain active in the large shopping center arena, however, where openings will total 10 million square feet in 2008, similar to 2007 but two times the total delivered in 2006.

Overall vacancy is expected to rise 50 basis points in 2008 to 10.2 percent, following a 90 basis point increase last year. Approximately two-thirds of the space scheduled for completion this year is already pre-leased.

Asking rents are forecast to rise 2.6 percent this year to approximately $20 per square foot. With vacancy pushing higher, owners are expected to increase concessions in an effort to attract and retain tenants, limiting effective rent growth to a modest 2 percent.

Click here for the Dumes Falk Group's 2007 Retail Investment Forecast

Request Marcus & Millichap's Retail Report