Bulk Distribution Market Holding Up Thus Far, Says ProLogis Report

Despite the global credit crunch, the leasing market for bulk distribution space in the United States is holding steady, and the development side surged in the second half of 2007, according to a pair of semi-annual reports released today by distribution space powerhouse ProLogis.  ProLogis’s U.S. Property Market Review reports that the average vacancy rate for bulk space in the 30 largest U.S. distribution markets crept up from 7.6 percent at midyear 2007 to 7.8 percent at year’s end. Meanwhile, the second half of last year saw new construction starts swell to 79 million square feet, compared to 66 million in the first half, according to the other summary, the U.S. Construction Pipeline Report. The 145 million square feet of new starts in 2007 amounted to a 2.7 percent increase in the existing bulk distribution inventory.  “The outlook for 2008 is uncertain,” Leonard Sahling, ProLogis first vice president of research, said in a prepared statement. “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. The interplay between these two market crosswinds will determine the relative strength of the bulk distribution property leasing markets during 2008.”  Further highlights from the two reports include:  *  Net absorption totaled about 60 million square feet during each six-month period.  *  Asking rents rose at a 7.6 percent annual rate on average for all of 2007, though they increased at an 8.6 percent annual rate in the second half.  *  Demand growth was 2.4 percent in 2007, down from 3.2 percent the previous year. The world’s largest owner, manager and developer of distribution facilities, ProLogis has operations in 118 markets across North America, Europe and Asia. The company, headquartered in Denver, has $36.3 billion of assets owned, managed and under development, totaling 510.2 million square feet in 2,773 properties.