Second, an abatement in construction financing combined with higher construction costs has sharply reduced the construction pipeline, preventing the type of overbuilding that hindered the last period of recovery. On the other hand, speculative construction has left certain key logistics submarkets with excess capacity that will be difficult to burn off before late next year.

The report says average asking rents, which had remained flat from Q2 '07 through Q3 '08, began to trend slightly downward at the end of the year, dropping from about $5.05 a square foot to $4.95 a square foot. But real rents have probably dropped further, with deals being done at discounts of 10% to 20% of the quoted rent. Rising vacancy levels and lowered demand have resulted in increased competition among available product, which threatens to push rents lower this year. Despite rising lowered demand overall, JLL researchers say demand remains comparatively strong for sites and submarkets that provide efficient multi-modal access, especially rail-served projects near higher population densities.

In the opinion of JLL researchers, the industrial real estate market will have the opportunity to recover sooner than other real estate sectors provided manufacturing, production and distribution operations continue to seek greater efficiencies and remove friction from worldwide supply chains. They predict the current year will nonetheless be challenging, with leasing activity continuing to weaken and additional consolidation driving vacancy higher.However, they add, as the market bottoms there will be opportunity for well-positioned occupiers as well as investors. They say port cities and markets located on major national distribution networks may be particularly well positioned to immediately profit once consumer demand picks up momentum.