New tenants and higher rents sparking revival in suburban retail development.

Good times are here again as the real estate industry continues to enjoy the fruits of a national economic and retail recovery. The retail market is exceptionally strong in the TriState area, with heightened activity and development reported in the outlying areas as viable alternatives to the soaring costs and space crunch of Manhattan.

In particular, Westchester and Fairfield Counties, where rents and occupancy axe on the rise, have been experiencing a recent renaissance. In both areas, landlords are taking advantage and profiting by the revival in demand and asking prices by upgrading and leasing properties left vacant by the corporate downsizings of the 1990's.

For example, with vacancy rates falling to 16.8 percent, a recent low, and rents rising by about 5 to 10 percent each year, Westchester has become a very right market, with only a limited amount of land available. Some companies have begun developing environmentally tainted (brownfield) sites. To support the need for more retail, other owners are seeking zoning changes and converting their properties from warehousing and manufacturing space to retail use.

For example, R2D and The Hutensky Group will be building two state-of-the-art 65,000 square-foot Stop and Shop supermarkets in New Rochelle and North White Plains, which are scheduled to open in 18 months.

As for prime opportunities, Yonkers Raceway, a 97-acre parcel zoned for industrial use, is currently on the market. More than likely, the site will eventually be transformed into a combination of retail and commercial.

This trend toward increased retail and commercial development has repeated itself across the state line in Fairfield County, where there is over a million square feet of usable space and vacancy is down to 11 percent. The residential market is so hot now that a bidding war for houses similar to the '80s is in progress, which is affecting the quality of retail tenants and the kind of rents commanded. In fact, the demand for retail space in some downtown areas is so huge that New York-style rents of $40 to $50 a square foot are being achieved.

To bring in more profits, many owners are investing millions of dollars to renovate and make vacant single-tenant buildings attractive to multiple tenants. It's easier to fill the space with more than one tenant, and refurbishing costs far less than new construction.

The former 130,000 square-foot Dun & Bradstreet corporate headquarters building at 187 Danbury Road is a case in point. Today it is 100 percent leased, and the average price per square foot is $30.

Property owners are also coming up with more creative ways to re-engineer and reposition existing shopping centers. In the last two years, for example, along US-1 on Boston Post Road from Norwalk to Darien, all the warehousing and manufacturing facilities are gone and have been replaced by a new crop of retailers. These include such huge category killers as Barnes and Noble, Toys 'R Us, Comp USA and Home Depot.

Much of the renewed activity in retail development is centering on the densely populated inner cities. In downtown New Haven, for instance, R2D and The Hutensky Group are directing the construction of a 56,000 square-foot Shaws, the anchor tenant and the first major supermarket to be built in this urban community in several years.

As the nation's economy continues to flourish, the retail market in such locales as Westchester and Fairfield counties offer outstanding growth and investment opportunities that just may put to res the industry fears that dominated the beginning of this decade.