“The US manufacturing sector, which for the past couple of years has been on the upswing, has recently been reported by Bloomberg.com to show the slowest expansion pace in two years as new orders shrank and production eased,” Dieter tells GlobeSt.com. “US manufacturing relies heavily on consumer demand of various products and most of the recent demand has come from outside the US, especially with the devalued dollar driving increased exports.”

Although he says it’s clear that the recovery is picking up momentum, Dieter remains cautious. He points to the Institute for Supply Management's factory index, which shows a slight drop that is most likely due to weak consumer spending and continued high unemployment.

“The shipping of goods to meet demand is connected to the building of inventories and the building of inventories is tightly tied to absorption of distribution space,” Dieter says. “Thus, this latest report by the ISM is cause for some cautious concern in regards to the continued rise in warehouse space absorption and the continued drop in overall vacancy rates.”

Even though 8.9 million square feet of new industrial space was added to the market so far this year, overall absorption was positive for the third consecutive quarter. Absorption totaled a positive 38.1 million square feet year-to-date, up from the negative 12.9 million square feet from the year-ago period. In the second quarter of 2011 alone, 30.3 million square feet of industrial space was absorbed.

“Though there are some new projects that have been delivered, the majority has been on a build-to-suit basis, and strong leasing activity has demonstrated that the demand is there,” Dieter says. Approximately 15.8 million square feet is currently under construction, with 13.4 million square feet expected to be completed in the second half of this year.