Albuquerque and Charleston, S.C. don’t immediately come to mind as retail strongholds. But a new research report finds that these and eight other cities hold the greatest potential for income growth over the next few years.

Last week, Irvine, Calif.-based investment sales firm Sperry Van Ness released its annual “Top 10 Markets to Watch” report. The report examines economic trends that directly lure future retail investment dollars. Unlike most research surveys that focus on current market data, the Sperry Van Ness report is highly speculative.

The top 10 retail markets to watch in 2007 include Albuquerque, Charleston, Raleigh/Durham, Salt Lake City, Dallas/Fort Worth, Houston, Phoenix, Tucson, West Palm Beach and Las Vegas.

“It’s important to review a matrix of forward-looking economic factors when deciding where to acquire property because they are key indicators for a property’s financial performance in the future,” says Jerry Anderson, president of Sperry Van Ness, adding that information such as employment growth, personal income and vacancy are used to generate this report. “These are more credible than merely the past analysis of cap rates,” he says. The Albuquerque retail market should benefit from a 1.63% population increase in 2007. The metro is also expected to post a 2.2% job growth rate. As for Charleston, which has one of the lowest costs of living in the nation, household income should jump by 5.36% in 2007. Like Albuquerque, Charleston should grow its population base by 1.63% this year.

Other findings from the report: Both Dallas/Fort Worth and Houston should absorb roughly 1.2 million sq. ft. of retail space despite being inundated with roughly 1.4 million sq. ft. of retail completions in both markets this year.

The market with the most impressive projected population growth is Las Vegas, where 72,000 new residents are expected move in this year. Another strong retail market is Phoenix. While 1.89 million sq. ft. of new retail space will debut in Phoenix this year, roughly 1.59 million sq. ft. is expected to be quickly absorbed.

“As they say in the business — retail follows rooftops,” says Joseph French, national director of retail out of Sperry Van Ness’ White Plains, N.Y. office. “A lot of these cities like Albuquerque and Charleston just aren’t on the big investors’ radar yet. But they might be on those screens soon.”