In its mid-year US Property Market Review, ProLogis said"weakness from the sluggish US economy has begun to spill over intothe nation's top distribution property leasing markets," pushingthe overall vacancy rate in the to 8.3% from 7.8% at the start ofthe year and knocking down asking rents for the first time in morethan three years.

The good news is that demand for distribution space held up"surprisingly well," according to the report, and that thedevelopment pipeline appears to be slowing to a trickle thanks totighter lending standards, more cautious equity capital and moreprudence on the part of the major, well-capitalized developers.Forthe top 30 markets, net absorption remained positive at 36 millionsf during the first six months of the year, which ProLogisdescribed as "a far better showing than real estate analysts hadforeseen." The net absorption means occupied space (or realizeddemand) grew at a 1.4% annual rate during the first half of theyear, which compares to 2.5% annual growth for all of 2007.

In its construction pipeline report, it found completionsincreased through the first half of the year while new constructionstarts contracted sharply. New deliveries amounted to 77 million sfduring the first half of 2008 versus 68 million sf during thesecond half of 2007 and 56 million sf during the first half of2007, while new construction starts totaled 16 million sf duringthe second quarter of 2008 versus 29 million sf in the firstquarter and 40 million sf in the fourth quarter of 2007.