"Leasing market conditions have tightened to the point where property owners are now in the driver's seat, with enough leverage to begin pushing rents higher," says Sahling. "Our projections call for the national vacancy rate to recede below 8% by year end, paving the way for sustained, broad-based rent increases."

ProLogis says the two reports are based on market data compiled from a variety of sources, including ProLogis market officers, brokerage companies and data vendors. Here's a bulleted look at the highlights of the reports:

• 18 of the top 30 markets posted vacancy-rate declines in the first half of 2006;
• Net absorption totaled 67 million sf during the first six months of the year, which translates to a 2.8% annual growth rate in total occupied space;
• The Los Angeles Basin remains the nation's healthiest distribution market, with an overall vacancy rate of about 3.5%. Other key markets that posted improvements during the period were Chicago, Northern New Jersey and Eastern Pennsylvania;
• Speculative building accounted for 72% of total starts in the first half of the year, compared with 77% in the second half of 2005;
• Construction outlays are rising as a result of broad-based run-ups in prices for steel, concrete, asphalt and copper. In aggregate, they will add as much as $3 per sf to the shell cost of a typical distribution facility over the course of the year.