Key findings of the report include:

* New starts in the top 30 US distribution markets totaled 54.2 million sf in the second half of 2004, up 33% from the pace seen in the first half.

* Commercial property developers saw construction costs climb 10% to 12% during 2004 due to higher steel and other commodity prices.

* The new starts continued to be skewed toward speculative projects, which accounted for 73% of total starts in the second half of 2004, compared with 56% of total starts in the previous 18 months.

Newly delivered bulk warehouses and distribution centers totaled 78 million sf for 2004, up 20% from the previous year, but still well below the cyclical peak in 2000-01. The 2004 completions represent a 1.7% increase in the total stock of distribution space.

"Given the strengthening demand that we saw in the second half of 2004, we are not surprised to see a pick-up in the supply of new space," Sahling says. "We are encouraged that the volume of starts is still well below the most recent cyclical peak, signaling a disciplined approach to new development."

Eight of the 30 markets continued to see sluggish construction activity in the second half of 2004. Last year's starts for Austin, Charlotte, Dallas, Denver, El Paso, Portland, the San Francisco Bay area and South Florida amounted to less than 50% of their average for 2000-03.