TORONTO-While the industrial market is still slow across North American, an almost complete lack of new development across the continent has some experts at Jones Lang LaSalle believing that demand will start to return by the end of this year. The company recently released its first quarter industrial outlook report for North America.

Canada suffered throughout 2009 and today, in part because of weaker trade as exports of goods and resources remain dampened by the strength of the Canadian dollar, according to JLL. However, a limited supply of quality industrial product, particularly in the greater Toronto area, may spur earlier than expected speculative development as early as the Q2 2011, the company said.

“Tenants should continue to find good value, however, this is expected to change toward the end of the year,” said Fraser Plant, VP of industrial services in Canada, in a statement. “With a slow recovery underway, 2010 should be a better year for overall leasing activity.”

Mexico’s problems have worsened, as drug crime activity has significantly increased near the US border, according to Alfredo Asali, SVP of industrial services in Mexico. “As a result, these markets are still looking depressed,” he said in a statement.

Asali said there’s a good number of modern, empty spec buildings in most Mexico markets. Monterrey, northern Mexico’s principal industrial market, is starting to see a pick-up in demand, he said.

The Mexico industrial region is an emerging supply chain market and a manufacturing hub for the US. “Since there’s no new construction in process, prices could rebound in 12 to 18 months as developers scramble to build new space,” Asali said.

The United States isn’t doing that much better than its neighbors, according to JLL. The national vacancy rate climbed 30 basis points to 10.6%, though brokers throughout the country say that they’ve seen an increase in activity.

Craig Meyer, managing director and head of JLL’s Americas industrial services team, said that this year began with positive signs. “The thinnest construction pipeline on record, combined with a supply of large blocks of prime warehouse space that is slowly being eliminated over the past two years, could translate into a rapid and significant uplift in property fundaments once demand picks up in late 2011 or early 2012,” he said.

Demand activity has been generally uneven, Meyer said in a statement. Activity has improved notably in markets such as Inland Empire, Dallas and Harrisburg, PA, while interest has stalled in Atlanta, northern California and Seattle, he said. Areas with the lowest vacancy rates include Los Angeles (5.1%), Houston (6.4%) and Seattle (7.7%), and those recording the highest rates include California (20.9%), Phoenix (16.7%) and Charlotte (14.7%).

“Being cost-conscious remains the priority for industrial occupiers,” said Meyer. “Rightsizing and consolidations within supply chain networks has been a predominant trend across all geographies over the last two years and has continued into 2010,” he said.