About 1.8 million sf was absorbed by year-end 2003, more than the three previous years combined. The vacancy level has also improved, dropping to 8.7% from 8.9% in 2002. Even with that improvement, there is still 11.6 million sf of vacant space on the market, notes Kimberly Kaiser, a market research coordinator at Colliers Arnold.

"Like residential housing, low interest rates have had an impact on the industrial lease market," Kaiser says. "Many tenants chose to buy smaller buildings during the last one to two year, driving prices markedly higher." Still, she says, investors purchased "many larger buildings, in spite of the tenant drought in the area." Kaiser predicts new construction starts should begin by the third quarter "if the economic upturn continues."

Asking base rents have remained flat since 2000 when they averaged $4.75 per sf. Gross average rents ended 2003 at $4.99 per sf. "Looking at the three major market types, flex/service, manufacturing and distribution/warehouse, only flex/service experienced a significant jump in price between 2000 and 2003," Kaiser says. Flex/service ended 2000 average $4.86 per sf and climbed to $6.37 per sf at the end of 2003.