Applied Analysis principal Jeremy Aguero says that whilevacancies remain elevated compared with the prior year and the lowswitnessed in late 2005, a more stabilized environment has prevailedin recent quarters, with the level of investor purchases andspeculative leasing slowing materially. With over 6.5 millionsquare feet of availability, he says users that require space inreasonably-accessible locations now have greater access andbargaining power—a condition not present 12 and 24 months ago. "Themarket reported a much more modest level of space underconstruction, suggesting runaway vacancy rates are unlikely in thenear term," Aguero says. "We expect vacancy rates to remain in themid to high single-digit range over the course of the next severalquarters. Pricing remains the X-factor for many users ascompetition within the southwestern United States remains fierceand development costs in southern Nevada remain elevated. Projectsentering the market may find it difficult to meet financial targetsshould lease rate growth remain soft."Applied Analysis is reportingthat the industrial market expanded by 1.5 million sf during thequarter while demand totaled approximately half of that total.Speculative space additions contributed to a rising vacancy rate,which hit 6.7%, up from 6.0% at the start of year and 4.5% thistime last year.

CB Richard Ellis says the first quarter marked the sixthstraight quarter of increasing vacancy. CBRE is reporting only a 17basis-point increase in vacancy during the quarter—to 6.1% from5.94%—but has a lower overall vacancy rate for this time last year,3.8%, which means both firms show a year-over-year vacancy increaseof more than 200 basis points.

Albeit differently from the other two, Grubb & Ellis also isreporting a plus-200 basis-point increase in the vacancy over thepast year, to 7.4% from 4.9%, including a 120-point jump this pastquarter.