DENVER-A flood of new bulk distribution and warehouse product in the first half of the year increased vacancy and pushed down asking rates, according to two mid-year reports that released Tuesday by ProLogis, the world’s largest dealer in distribution facilities.

In its mid-year US Property Market Review, ProLogis said “weakness from the sluggish US economy has begun to spill over into the nation’s top distribution property leasing markets,” pushing the overall vacancy rate in the to 8.3% from 7.8% at the start of the year and knocking down asking rents for the first time in more than three years.

The good news is that demand for distribution space held up “surprisingly well,” according to the report, and that the development pipeline appears to be slowing to a trickle thanks to tighter lending standards, more cautious equity capital and more prudence on the part of the major, well-capitalized developers.For the top 30 markets, net absorption remained positive at 36 million sf during the first six months of the year, which ProLogis described as “a far better showing than real estate analysts had foreseen.” The net absorption means occupied space (or realized demand) grew at a 1.4% annual rate during the first half of the year, which compares to 2.5% annual growth for all of 2007.

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