The company's US Property Market Review found average vacancy rate for bulk distribution space across the country's top 30 markets increased to 7.8% at year-end 2007 from 7.6% at mid-year 2007. ProLogis' US Construction Pipeline Report found that thanks to a busy second half of 2007—new starts totaled 79 million sf in the second half of 2007 compared to 66 million sf the same year-earlier period—construction activity increased to 145 million sf for the year from 123 million sf in 2006. The total activity represents 2.7% of total existing inventory.

Leonard Sahling, with ProLogis' research division, says the bulk distribution property leasing markets held up well last year despite the global credit crunch, and that overall fundamentals through the first three months of 2008 are in better shape than during past downturns. That said, he adds, the future is always uncertain.

"Insofar as the economy slows, so will the demand for space, but sharp cutbacks in new supply are also in the offing, given the lack of financing," he says. "The interplay between these two market crosswinds will determine the relative strength of the bulk distribution property leasing markets during 2008."

Other facts from the reports:

  • There were 5.5 billion sf of distribution space at the end of 2007, up 2.3% from year-end 2006
  • New deliveries in 2007 totaled 125 million sf, up from 113 million in 2006.
  • There were 99 million sf of distribution space under construction at year-end 2007, up from 79 million sf at year-end 2006.
  • Net absorption totaled 60 million sf during the second half of 2007, virtually unchanged from the first half.
  • Asking rents rose at an 8.6% annual rate during the second half of 2007, and 7.6% on average for the four quarters ended December 31, 2007 – the same as the previous year.
  • Demand growth amounted to 2.4% for the four quarters of 2007, down from the 3.2% growth posted during the previous year.
  • Asking rents rose at an 8.6% annual rate during the second half of 2007 and 7.6% on average for the four quarters ended in Q4-07 — the same as in the previous year.

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