While the vacancy rate decreased slightly to 11.3% in the east part of the I-80 Corridor, it actually increased about a full percentage point to 16.7% in the western portion, according to NAI Hiffman's first quarter industrial market report. The I-80 Corridor is seeing land being grabbed up by developers. The proximity to interstates and, particularly, railway intermodal access will help this submarket fare well as companies try to reduce costs with gas prices continuing to climb, says Adam Roth, senior associate with NAI Hiffman. By having space at an intermodal center, "they save a tremendous amount of money on energy costs," Roth says. In one example, Bissell is having a 500,000-sf distribution center constructed on a build-to-suit basis at CenterPoint Intermodal Center in Elwood, IL, as previously reported by GlobeSt.com.

Construction starts are slightly down from a year ago, with 1.5 million sf for the first quarter of this year, compared to 2.2 million sf for the first quarter of 2007, says Tim Brauer, managing director of CB Richard Ellis. "It is down slightly (but) this is not a big time of the year for new construction to start, because of our weather conditions," he says. About 68% of the projects started in the first quarter are speculative construction, down from 85% of new construction projects in the first quarter of 2007 being constructed on a speculative basis, he says. Asking lease rates for newly constructed space are expected to increase as land and construction costs increase, Brauer says.

A significant amount of the space will be delivered at the same time, which is expected to cause an increase in the vacancy rate, Roth says. "People will have to be more aggressive to land a deal," he says.