ProLogis Bullish on Industrial Construction

Sahling is the author of the group's US Construction Pipeline Report.Key findings of the report include:

* Newly started bulk distribution and warehouse projects in the firsthalf of this year were running slightly ahead of the pace in 2003. New starts in the top 30 US markets totaled 38 million sf, up just 2% from last year's pace.

* At their currently projected annual level, total new starts for 2004 would be nearly 40% below the cyclical peak reached in 2000.

* The increase in new starts through the first half of 2004 continued to be skewed toward speculative projects, which accounted for 70% of total starts in the first half of 2004, compared with 56% of total starts during 2003 and 45% during 2002.

* Newly delivered bulk warehouses and distribution centers totaled 35million sf in the first half of this year, which is 13% above those delivered during the first six months of 2003 but well below the pace that normally occurs during the early stage of cyclical upturns.

* Deliveries are on track to post a modest 11% increase in 2004.

Eight of the 30 markets reported volumes of new starts for the firsthalf of 2004 that were less than what they had been in 2003: Baltimore, Dallas, Denver, Indianapolis, the L.A. Basin, Las Vegas, Phoenix and Reno. Four of the 30 markets reported no new starts at all during the first half of 2004: Austin, El Paso, Miami and Portland.

"Contrary to the normal seasonal pattern for new construction, we expect to see proportionally more new starts in the second half of this year than what we've seen in the first half," Sahling says. "It won't be significantly more--we're estimating 51% compared to 49%--but it's a good sign as we head into 2005."