By LEAH WEATHERSBY

When Jo Rekhi embarked on building a six-story mixed-use complex on the corner of NE 125th and Lake City Way four years ago, he believed in the "Field of Dreams" adage: build it and they, as in commercial tenants, will come.

More than a year after his building was completed, Rekhi is still waiting for his retail and office spaces to get filled up.

About 40 percent of the office space on the second floor of the Rekhi Building remains empty and as is much of the retail space on the ground level.

Even so, Rekhi said last month, thing are looking better than they did at the beginning of the summer.

A Subway sandwich shop recently opened its doors in the prime ground-floor corner space of the building, after a several month wait, and two other ground-floor spaces have been leased to a restaurant management company and a wireless phone store. In August, two more prospective tenants signed letters of intent to lease ground floor spaces in the Rekhi Building: a convenience store and a fitness center for women. The addition of those tenants would leave Rekhi with only one space left to fill out of his building's five street-level retail spaces.

On the second floor, Rekhi has only leased one office space, which is currently occupied by a marketing firm. Nevertheless, he's encouraged because he's finally starting to get calls again from prospective tenants. He believes it may be a sign that the economy is starting to bounce back from the recession that the Puget Sound region has been mired in for more than a year now.

Rekhi said he plans to start construction of "Phase Two" of his Rekhi Building this fall. The new six-story building would be built as an addition to the current Rekhi Building, immediately to the north. The addition would include 45 apartment units, four street-level retail spaces and underground parking for 110 cars - well in excess of the number the City is requiring Rekhi to include. At the City's request, the new building would have a different exterior than the Phase One portion of the building, he said. He hopes to have the second building ready for occupancy by the end of 2003.

Rekhi said he wants to begin construction of the Phase Two portion of his building as soon as possible because he believes the economy will have fully recovered by that time the project has been completed.

He isn't the only developer thinking that way.

Kent Angier, president and CEO of Kauri Investments, said his company has two buildings with ground floor retail in the works of Lake City. He plans to start construction on the first of his projects next spring. The construction is expected to take more than two years to complete. By that time, Angier expects the market will have picked up again. When it does, he believes Lake City will be viewed as a prime location because of its close proximity to downtown Seattle, abundant bus connections and convenient access to the freeway. Nevertheless, he acknowledges, leasing his buildings' retail spaces may be a challenge.

The operators of Northgate North can attest to that.

The shopping complex, which was completed across the street from Northgate Mall a couple of years ago, is only now starting to fill up with retail tenants. While it opened with a couple of anchor tenants, a Target store (followed later by a Best Buy store) on the west end of the building, the majority of the rest of the complex has remained vacant until recently.

Now there are several new tenants including Quizno's sandwich shop (which opened this last summer), an Olive Garden restaurant (which will open this fall) and a Qwest phone store. Susie Detmer, the leasing agent for Northgate North, said she is in talks which two most prospective tenants. If those negotiations go well, she said, the shopping center will have only a 4 percent vacancy rate.

Around North Seattle, she said, the vacancy rate for retail spaces is approximately 4.75 percent.

Detmer said it took lowering the rent to lease Northgate North which she called an unusual property for the area. The shopping center's vertical rather than horizontal structure can make stocking shelves more difficult logistically and can increase operating costs, she said. Around the country, the situation isn't much different than it is here in Seattle, say local retail experts. With more spaces available than there are retailers to fill them, right now the leasing market is tilted in favor of retail tenants.

"It's one big opportunistic land grab," says retail strategist J'Amy Owens, whose clients include several major retail chains. "If you're a tenant, you're in the driver's seat."

This is a sharp contrast from the situation in the early '90s, when tenants had to compete for available space, Owens said. Now, some rents have dropped 10-20 percent, and landlords are willing to make special accommodations, even paying permitting, design and architecture fees, to get the right business into their buildings.

Owens cautions landlords from simply leasing retail space to whoever will take it, despite the current market conditions. It's important to sign the right retail tenants from the get-go, otherwise it could hurt your chances to attract the tenants you really want, she said.

An upscale boutique, for example, isn't going to want to be located next to a discount store, or vice versa.

"Miscasting (a property) from the beginning is certain death" for a commercial building, Owens said.

Even landlords in some of North Seattle's most fashionable shopping areas are finding it more difficult to lease vacant commercial spaces.

Suzie Burke, whose family owns several buildings in the artsy Fremont neighborhood, said things have changed since the economic boom ended.

"The economy has made it so that people have to think many, many times" before agreeing to lease a commercial space, said Burke. While there may be more than one business interested in a given space, she said the leasing business these days isn't about who can offer the landlord the most money. It's about "who is going to be gutsy enough to sign."